"Preparing and presenting financial statements is the responsibility of the company's board of directors and management. The annual financial statements are audited by external accountants, and in this case, the company's financial statements were also transferred to the Government Companies Authority, which received clarifications from the company's accountants, published some of them on its website, as well as the summary of the reports, as stated above."
Therefore, it would not be correct to accept the plaintiffs' argument that at least some weight should not be given to the interpretive position of the Authority as a regulatory body with professional expertise (High Court of Justice 5474/23 Israel Postal Company in Tax Appeal v. Minister of Communications, paras. 2, 39-40 [Nevo] (March 7, 2024)). The knowledge of the state, and in particular of the Government Companies Authority, of what is happening at Agrexco must be taken into account when assessing the reasonableness of the defendant's professional judgment and the scope of the defendant's duty of care.
- Barlev's opinion also indicates that the investors did not know that "in all four banks, mainly in Discount and Agrexco International, Agrexco is unable to raise long-term credit...", which may have caused them to withdraw from this investment. There are significant parties here - CEO Tirosh and Midroog - other than the accounting firm, who may have concealed this information, ignored it, or did not give it sufficient expression in the representations made to the market. Information regarding the refusal of banks, which are sophisticated actors with the ability to assess risk, from providing credit to the company, could serve as an independent indication of the level of risk;
- At the time of the IPO (as stated on page 19 of the Barlev opinion, in section E), the state's being a controlling shareholder was an important and even central element in the investors' considerations regarding the question of whether it is appropriate to invest in Agrexco;
- After the IPO was launched, it appears that Midroog still holds the expectation that the state will bailout the company, and accordingly the model used by Midroog for the valuation of the bonds is based, as a main layer, on "assuming support from the state in times of distress";
- And finally, when Agrexco's credit rating has already plummeted, Midroog believes that the rating that has declined significantly "does not reflect an estimate of an economic loss, based in part on the expectation of capital infusion by"
- Therefore, it is doubtful that the company would have ceased operations sooner. The plaintiffs, who had the burden of proof, did not bring an affidavit or testimony of any of Agrexco's creditors, to prove that the creditors relied on the work of the auditor, or at least did not rely exclusively on the state's support for the company "by fire and water", which works to their detriment (Civil Case (Tel Aviv District) 23346-09-19 Shipka in the Arava in a Tax Appeal v. Kost Forer Gabbay & Kassirer, Verse 76 [Nevo] (February 27, 2025) (hereinafter: "the Shifka case")).
- To this, it should be added that this policy was not solely the opinion of the accountants, and senior officials in the company knew about it. The investigation of Mr. Yuval Oren, Chairman of the Company's Board of Directors, indicates that he knew about the accounting policy in question at least in October 2010. Thus, in his interrogation, he testified that he recognized that this was the company's accounting policy (Minutes, p. 814, S. 18 to P. 815, S. 3):
"Adv. Leibowitz: Sir, my question is this, now I understand from you, that we will soon see if you really remember correctly or if you need to refresh your memory, but for now. At the moment, what I understand from you is that when you signed the median financial statements for 2010, did you already know about the fact that they are recorded, or that they are not recorded but are recognized in them, payments that do not have to be returned? They are recognized as advances or as an obligation that ostensibly must be repaid. You already understood this when you signed the financial statement in 2010.