In this context, it was claimed that in Shemen's report dated March 27, 2014, an update of the resources report was published, in which it was determined that the pores rate was between 2% and 6%. It was argued that this report by Shemen, which was also submitted by the plaintiff (P/1), constitutes conclusive evidence that the pore data that became clear after the electrical logs tests, amounted to a material deviation from the data that was expected. It was argued that this report is inconsistent with the claim that it was not a material change that necessitated immediate reporting at the time of discovery.
- It was also claimed that in addition to the problems with the pores, problems were also discovered in conductivity, i.e., in the cracking figure. This is evident from the words of the expert who hired oil, Chuck Domer, at the board of directors meeting on September 7, 2013, according to which not many fractures were found that could have a positive effect on conductivity. Hence, the data showed that the conductivity would not be able to compensate for the low porosity and the board members knew about this prior to the publication of the report. Despite this, the board of directors did not order an examination of the level of cracking, and Levy's statement that there was not enough time to do so because the test takes three months is another material fact that the defendants should have reported when a problem with the pores was discovered. It was also claimed that Ashkenazi also claimed at the board meeting of September 7, 2013, that there were question marks and that some of the data obtained from the logs were problematic.
- Evidence of the materiality of the data that was clarified in the electrical logs tests is that entities that were informed of the data that were clarified in them refrained from that date onwards from investing in the company. In this context, the plaintiff attributes the use of insider information to Levy and Ashkenazi. According to him, the data that became clear about the pores and conductivity amounts to insider information, and after Levy and Ashkenazi received them, they refrained from exercising the options they had. It was argued that evidence that the reason for the non-exercise was the latest data was found in the fact that the trust company that held the options for Levy and Ashkenazi contacted them as early as August with a request for instructions to act before the options expired, but they responded to its request only on September 10, 2013. This was when they already knew the problematic data that became clear in the electrical logs tests. In this regard, it was argued that Levy and Ashkenazi's explanations were puzzling, and it appears that they took care of themselves, made use of the inside information they had, and therefore refrained from exercising the options. It was also claimed that by not exercising the options, Levy and Ashkenazi were harming the company, since exercising the options would have brought money into its coffers.
- The plaintiff further claims that Levy and Ashkenazi were employed on a personal contract and therefore had an interest in making a decision on production tests even in view of the risks since they might have benefited from it, while refraining from risking their money and risking only the investors' money. Even after five days of production tests, it became clear that there was no point in continuing the activity, the defendants did not see fit to use the money they had left in their hands to compensate the investors. This is despite the fact that the plaintiff claimed that money should have remained in the company's hands, since the production tests were planned in advance for 30 days at a cost of $24 million.
- Another indication that it was clear that the data that emerged in the electrical logs tests showed serious problems in the "Yam 3" drilling, the plaintiff finds that Delek Energy received the results of the electrical logs tests from Levi and decided, after reviewing them, not to invest in the production tests. If the information were also in the hands of the other investors, then they too would be able to finance their steps safely.
The plaintiff claims that despite the aforesaid, the defendants prepared, in advance, a "pompous" report to the public in order to present a positive picture and attract investors to invest in the company's shares. This was done while hiding and keeping secret the problems discovered in the drilling. Levy and Ashkenazi pressured the board members to approve the pre-prepared version. It was claimed that Levy and Ashkenazi asked those present at the board meeting to keep the data relating to the results of the electrical logs tests confidential.
- In addition, Shemen published misleading and unimportant information as part of "false overreports" that concealed the problems that were discovered and were intended to encourage investors by reporting "significant oil signs." It was argued that there is no doubt that the defendants deceived the public as well as the plaintiff, by presenting positive data that in retrospect turned out to be devoid of content and whose purpose was to "inflame" the public.
The plaintiff also referred to the defendants' claim that their conduct is supported by the ISA's position that in reports relating to oil drilling, there is no room to report any parameter, including the data of rock pores. It was argued that in our case we are dealing with material information about problems in the drilling. The Israel Securities Authority clarified that even if in normal circumstances there is no obligation to report certain parameters, where there is a problem with the parameters that affect the drilling, and there is a deviation from the resources report, this is a material event that is subject to reporting (Administrative Petition (Tel Aviv District) 48344-07-14 Halfon v. Tel Aviv Securities Authority [Nevo] (November 19, 2014)). It was argued that given that Levy's affidavit also indicates that the defendants reported overreports, it is clear that the defendants had discretion as to which reports to report, even where these are parameters that are generally not obligated to report.
- In addition, according to the plaintiff, the defendants' position is that the reports were made after consultation with the Israel Securities Authority and in accordance with its instructions, but this claim was not backed up by evidence. The lawyers who contacted the ISA did not submit affidavits, it is not known who they spoke with, and it was even clarified that this was the position of the representative and not the position of the ISA. Refraining from summoning the lawyers who, according to the claim, spoke with the Israel Securities Authority, acts in accordance with the defendants' obligation.
- As to the causes of action, it was claimed that the defendants violated the provisions of the Securities Law and the regulations enacted by virtue of it when they acted fraudulently and did not disclose material information, in contravention of the duty of disclosure, which is at the foundation of securities law. In the plaintiff's summaries, an argument was added that the defendants did not emphasize the factors that should be treated as being likely to lead to the fact that forward-looking information would not materialize, even though the defendants knew that it would not materialize. The defendants breached the fixed duty of disclosure In section 36(a) of the Securities Law and the regulations enacted thereunder, and which also violated the specific duty of disclosure in the matter of "material event in trial drilling" (the fixed duty In section 7 to the Eleventh Addendum to the Securities Law). It was argued that Sections 31, 38B and C(a) establish liability for damage due to a misleading detail, and Section 35 states that an investor who relied on a misleading detail is entitled to cancel the purchase and demand the return of the money he paid. Section 52K relates to the liability of an issuer for damages caused to the plaintiff due to a violation of the provisions of the law. It was argued that in our case, the defendants also deceived and manipulated the investors to invest by concealing material facts. According to him, they did so because they needed the funds to finance the production tests, and therefore did not include the problematic data. It was also claimed that Levy and Ashkenazi used inside information, which indicates their lack of good faith. In addition to the claims by virtue of the Securities Law, the plaintiff claims that there is also a cause of negligence in his case according to Article 35 of the Torts Ordinance [New Version] (hereinafter: The Torts Ordinance).
It was further claimed that with the false reports, the defendants violated "the plaintiff's autonomy of free will" and prevented him from making an informed decision when he had all the information in his possession. Had they provided him with the material information regarding the low findings regarding porosity and conductivity, the plaintiff would not have purchased the shares and would not have suffered financial damage.