Criminal Case (Tel Aviv) 61890-12-21 State of Israel v. Ayala Sharach Cohen - part 3

Naturally, criminal punishment, including imprisonment behind bars or community service, is burdensome and harsh; Personally, familially, financially.

However, this is a necessity of reality, it is the commandment of the legislature, and this is what the case law instructs: to be harsher in the punishments of white-collar criminals, including those who make use of insider information...

The legislature's approach, which is gradually becoming more stringent, has been gradually assimilated into case law, step by toe, in order to eradicate the tempting obstacle, the offense of using insider information; Its damage is bad to the capital market, to individuals and to the public.

Considerations of retribution and deterrence, along with consideration of personal circumstances and a degree of mercy, justify the outcome.  The penalties imposed by the District Court on the appellants are moderate.  Indeed, the conviction is oppressive, but it is necessary.  A counterweight is required to the temptation to make use of insider information, "a barrier to calamity" (Mishna, Avot 4:11)" (emphasis added).

75. Finally - the petition to cancel the conviction is rejected, as aforesaid, however, all of the data detailed above will be weighed and taken into account in the framework of the set of considerations relating to the determination of the defendant's sentence.

Setting a penalty area

76. The appropriate punishment range is determined in accordance with the guiding principle of punishment, i.e., the existence of an appropriate relationship between the severity of the offense in its circumstances and the degree of guilt of the defendant and the type and degree of punishment imposed on him, taking into account the social value that was harmed, the extent of the offense, the circumstances related to the commission of the offense and the customary sentencing policy.
77. In this case, one punitive event will be determined in accordance with the manner of the parties' arguments and the test of the close relationship (Criminal Appeal 4910/13 Jaber v. State of Israel (October 29, 2014)).  As is well known, even when a single punitive event is determined, the court must consider all the acts and offenses in its framework (Criminal Appeal 688/17 Shirazi v.  State of Israel (December 10, 2018)), and will do so when determining the scope of punishment.
78. As for the values protected by offenses of using insider information, it should be mentioned, as detailed above, that this is a type of offense that severely harms the general public, a public that invests its capital in the capital market. The need to protect the integrity of the capital market, and its efficient and reliable functioning, is essential, as is the need to maintain equality and fairness among investors, while preventing the exploitation of an unfair advantage.  As stated, the offense in question is intended to deal with the inherent priority of those close to the company's activities over ordinary investors, and points to the importance that the legislature found to prevent the existence of transactions based on the excess of information, which is not in the public domain.  This is for the purpose of protecting the moral purpose - respecting the duties of trust between the corporation and the investors, and the practical purpose - maintaining the capital market as an efficient and reliable space.  Permitting the unfair use of insider information will damage the trust that investors acquire in the capital market and its image, and will lead to the exclusion of those investors from it (see: the Kadetz case and the reference to the Criminal Appeals Authority 5174/97 Moshe Keren v.  State of Israel (April 28, 1998); and Criminal Appeal 4675/97 Rozov v.  State of Israel, IsrSC 35(4) 337 (1999)).
79. The severity of the offenses and the need to protect those protected values that have been mentioned are reflected in the legislative amendments that have been implemented over the years in the Securities Law and have increased the punishment inthis type of offense. Thus, in 1998, the sentence for committing the offense was increased to one year in prison, and in 2011 it was set at two years.  As the accuser claimed, the trend of aggravation in economic offenses, including the offenses of the use of insider information, even arises from the Supreme Court's ruling, and also when it comes to those who are not repeat actors or professional offenders (see, for example, the Kadetz case and criminal appeal 8465/15 Ben Zaken v.  the State of Israel (September 12, 2016), which is the normative determination of the President (as she was described at the time).
80. The circumstances of the commission of the offenses in this case were detailed in detail in the chapter dealing with the petition to overturn the conviction. In summary, as I noted above, it appears that the defendant took advantage of a communication channel with Birnbaum, the insider at SodaStream, who was in her possession by virtue of a connection between the two, and carried out purchases and sales of shares that were timed according to the information she received, and on a very large scale.  The repeated pattern of actions and their sophistication, activity, sophistication, and the actions she took to maximize her profits intensify the level of severity, as does the fact that the activist periodically pressured Birnbaum to provide her with information.  The aforesaid shows that the defendant's actions caused a considerable harm to the values protected by the offense.  The degree of harm is moderated to some extent by taking into account the age, experience, and knowledge gap between Birnbaum and her, as she is a young woman with no previous experience or professional background in the capital market, and the distress behind the commission of the offenses.  The circumstances of the commission of the offenses in the second indictment were also conditioned to some extent by Birnbaum's influence on her at the time of their commission, and the fact that he urged her to commit them, when, according to the facts, under his direction, even acted to obscure and conceal the commission of the offenses.
81. When determining the scope of punishment and punishment for the defendant, before reviewing the general customary punishment, consideration should be given to Birnbaum's case, to which counsel for the parties also referred. As detailed at the beginning of the sentence, Birnbaum's case ended in a plea bargain in which a sentence was agreed upon after a mediation process.  The court adopted the plea bargain and sentenced him to 60 days in prison, 5 months of conditional imprisonment and a fine of ILS 50,000 (the amount of the fine took into account Birnbaum's declaration to make an additional donation of ILS 50,000).  Birnbaum was convicted, in accordance with his confession in an indictment that was amended as part of the plea bargain, of a single offense of using inside information by an insider, which is more serious than the offenses committed by the defendant and a sentence of 5 years in prison, for inside information he provided to the defendant during the period he served as the company's CEO (for facts similar to those in the second charge against the defendant for which she was convicted of two offenses).
82. The verdict indicates that the plea bargain is the result of an intensive and lengthy mediation process, and the discourse dealt with, among other things, issues related to the evidence and "a complex and unique set of issues that characterized the circumstances of the provision of information." According to the verdict: "Most of these considerations were merged and weighed into the amended indictment and into the punitive agreement, and from an overall perspective, it is good that the parties did so." The court noted the totality of the circumstances that characterized Birnbaum's case, including his senior position in the company, the nature of the information he provided, and the financial profit obtained through it. In summary, he was convinced that the plea bargain gave proper expression to the public interest and found it to be respected.
83. As part of the amendments to the amended indictment against Birnbaum, the first charge (which was not deleted in the case of the defendant) was deleted in Birnbaum's case, and some of its facts were detailed in the general part, without Birnbaum being accused of committing an offense in those circumstances. In addition, the third charge against Birnbaum , which concerns obstruction of justice, was deleted (which was also deleted in the case of the defendant as part of the amendment of the indictment against her).  Some of the facts of the general part and the charge to which Birnbaum pleaded guilty are similar to those in the general part and in the second charge in the defendant's case, but the circumstances were softened in his case.
84. With regard to the general part, the amended indictment in Birnbaum's case was deleted the fact that it is also detailed in the general part of the indictment, in which the defendant admitted that "Cohen had a very basic understanding of the capital market, and the few trading actions she carried out were carried out after consulting with Birnbaum or on the basis of information she received from him."
85. In addition, the fact that the defendant exerted pressure on Birnbaum from time to time to provide her with information about the company that would maximize her profits was deleted. In addition, the fact that "although for the most part he tried to dissuade her (the defendant - D.A.) from trading in the company's shares for fear that its activity in the stock might complicate him, disclosed information about the company and its business course to it, even though he was concerned that Cohen (the defendant - D.A.) might not respond to his requests and make use of the information he gave her." Instead, it was stated that Birnbaum disclosed to the defendant information about the company and its course of business, and that from a certain date he was aware of her great interest in the purchase of SodaStream shares and her desire to benefit from the information in his possession about the company and its businesses.  It was noted: "Birnbaum tried to dissuade Cohen (the defendant - D.A.) from trading in the company's shares, and warned her not to trade for fear that her activity in the stock might complicate him" (paragraph 5 of the amended indictment and paragraph 6 of the original indictment in Birnbaum's case).
86. As for the substance of the indictment in the amended indictment that Birnbaum confessed, which concerns the second charge against the defendant: The amended indictment against Birnbaum states that between July 15-16, 2018, shortly after the meeting with Pepsi representatives, when he was "under the influence of alcohol," Birnbaum told the defendant "that if she has the money to spare it, it's a good time to invest in SodaStream shares." This is in contrast to the facts of the original indictment in his case (and the facts of the second indictment to which the defendant confessed), according to which on that date the defendant "accelerated" the defendant "to invest all of her savings in SodaStream shares immediately" during a joint vacation abroad.
87. In addition, the amended indictment in which Birnbaum admitted deleted the fact that in order to obscure the unusual trading that the defendant had made in SodaStream shares and to conceal the offenses they committed, Birnbaum instructed her to purchase, close to the purchase of SodaStream shares, additional shares with which he was not connected, and she acted according to his instructions, and also purchased Amazon shares on his recommendation. Although these facts were deleted from the indictment in Birnbaum's case, these facts are, as stated, part of the facts of the second indictment to which the defendant confessed, and I found them to be of great significance when examining the circumstances.  Moreover, further to the aforesaid, the amended indictment against Birnbaum states that Birnbaum made use of inside information when he knew "or when he had reasonable ground" that the recipient of the information would make use of it - this is in contrast to the original indictment, where it was stated that he made use of inside information "when he knew that the recipient of the information would make use of it" without the addition detailed above.
88. There is reason for the defense attorney's argument that an equal sentence should not be learned from the sentence imposed on Birnbaum in the circumstances. First, it is a plea bargain with an agreed punishment as aforesaid, following a mediation proceeding.  Second, eventhough the indictments against Birnbaum and the defendant were originally a mirror image of each other, as part of the plea bargain with Birnbaum, lenient amendments were made in his case so that the degree of guilt attributed to him was reduced.
89. However, since it is not possible to ignore Birnbaum's sentence when determining the defendant's sentence and the scope of punishment in her case by virtue of the principle of uniformity of punishment, the sentence imposed on him also comes into consideration, while making the necessary adjustments and giving weight to the fact that this is an agreed punishment on the basis of circumstances different from those detailed in the indictment in her case. It should be clarified that when comparing Birnbaum to the defendant, the circumstances were examined as detailed in the indictment to which the defendant confessed, and not in the amended indictment against him.
90. As for the general customary punishment: A review of the case law shows that the penalties are influenced, inter alia, by the scope of the offenses, the defendant's proximity to the insider, and his connection to the capital market, including his status. In addition to these, there are other considerations that vary according to the specific circumstances of each case.
91. In the Cohen judgment, the appellants, Roy and Tal Cohen, were convicted, after an evidentiary proceeding, of offenses of using inside information originating from an insider (Tal was convicted of 2 offenses and Roy 2 was convicted of 6 offenses). Tal took advantage of his connections with an insider to obtain inside information.  Tal gave the information to Roy and other parties with the intention that they would use it to make a profit, and with the conclusion that some of the profits would go to his pocket.  According to the ruling, after the publication of the information, and in its aftermath, the share price rose by about 36.3%.  Roy invested ILS 244,582 and earned ILS 114,073, of which he transferred ILS 13,000 to Tal.  In Tal's case, the District Court set a sentence ranging from 9 to 18 months in prison, and in Roy's case, it set a range of 3 to 9 months in prison, and imposed penalties on them at the lower threshold of the compound set in their case, forperforming community service, after rejecting their petition to cancel the conviction.  The Supreme Court rejected the appeals filed against the severity of the sentence.
92. Criminal Case (Tel Aviv Economy) 57633-06-19 State of Israel v. Kalimi (January 31, 2021) - In which three defendants were convicted, on the basis of their confession as part of a plea bargain, of offenses of using inside information originating from an insider (defendant 1 was convicted of 3 offenses and the other two defendants were convicted of one offense each).  Defendant 1 was the one who received the information from the insider, and gave it to others, and the three invested in the company's stock on the basis of the use of the information.  Defendant 1 invested about a quarter of a million shekels and made a profit of about ILS 78,000; Defendants 2-3 each invested about ILS 700,000 and raked in a profit of about ILS 200,000.  As part of the plea bargain, the accuser limited her punitive petition in the case of Defendant 1 to 9 months imprisonment with community service and in the case of the others to 6 months in the case of community service.  In its ruling, the court set the following punishment ranges: in the case of Defendant 1, a range of 12 to 24 months in prison; in the case of Defendants 2-3, a range of 3-9 months in prison.  Defendant 1 was sentenced to 9 months in prison with community service, a suspended sentence and a fine of ILS 150,000.  His sentence was determined while deviating from the scope of the punishment and adopting the plea bargain; Defendants 2 and 3 were sentenced to 3 months in prison to be served with community service, suspended sentences and fines of ILS 400,000 and ILS 300,000, respectively.  An appeal filed by Defendant 3 to the Supreme Court against the severity of the sentence was rejected on the court's recommendation (Criminal Appeal 1697/21 Shlomo Barak v.  State of Israel (December 15, 2021).
93. In Criminal Case (Tel Aviv Economic) 40664-11-21 State of Israel v. Sharon Adiv et al.  (July 7, 2023), Defendant 1 was convicted of two offenses of using inside information by an insider, by providing inside information to Defendant 2, who was his close friend; Defendant 2 was convicted of two offenses of using inside information originating from an insider, by making use of inside information and making a total financial investment of approximately ILS 52,000.  which generated him a financial profit.  Defendant 2 was in direct contact with Defendant 1 and made active and direct requests to Defendant 1 in order to receive the information, taking advantage of his proximity to him; Defendant 4 was convicted of the offense of using inside information originating from an insider, by making use of the inside information and making a financial investment in the sum of approximately ILS 250,000.  Defendant 4 was not in contact with the insider and did not receive the information directly from him, but from defendant 3 with whom she was in contact, and he was the one who instructed her in executing the transaction.  The court adopted a plea bargain that included a punitive agreement in the case of defendants 1 and 2 and sentenced them to serve community service for periods of 9 months and 4.5 months, respectively, along with an accompanying punishment.  As for defendant 4, counsel for the parties jointly petitioned to refrain from convicting her and to suffice in her case with the imposition of an injunction alongside a donation of ILS 80,000.  The court decided not to adopt the agreements regarding the conviction, ordered her conviction and imposed a 250-hour restraining order.  An appeal filed by the defendant to the Supreme Court was accepted, with the consent of the state, and her conviction was overturned (Criminal Appeal 6619/23 Alloush v.  State of Israel (May 8, 2024)).
94. In summary, taking into account the offenses and the circumstances in which they were committed, inter alia, the scope of the offenses, the exploitation of the connection with Birnbaum and its essence for the purpose of obtaining an advantage, and the active execution of the investments; and at the same time, taking into account the mitigating circumstances detailed above, including the age and knowledge gaps between Birnbaum and the defendant, and the fact that, according to the indictment in her case, he was the one who urged her to commit the main offenses (in the second indictment) and instructed her to act to obscure the unusual trading she carried out and to conceal the commission of the offenses, As well as in the agreed sentence that was imposed on him as an insider, I found that the range of punishment in the defendant's case ranged from 3 months imprisonment, which can be served with community service, subject to the opinion of the supervisor, to 9 months in prison. It should be noted that if it were not for the agreed punishment imposed on Birnbaum (while considering the distinction between imprisonment behind bars and serving a sentence of community service), it would have been appropriate to increase the scope of the punishment to some extent.

Determining the appropriate punishment for the defendant

95. In the case of the defendant, I did not find justification for deviating from the scope of the sentence that was determined. The defendant was born in 1988, and her life until now has been complex and fraught with considerable difficulties.  When determining her sentence, I considered all of her personal facts that were reviewed before and after and the evidence for the sentence.  I have put before me the passage of time since the commission of the offenses, and that apart from what is described in the indictment, the defendant has no criminal record, is not characterized by marginal patterns, and leads a productive and functional lifestyle, and has made and continues to make great efforts to maintain this path even when the circumstances of life did not brighten her face.
96. The defendant confessed to committing the offenses and expressed remorse, thus saving precious judicial time and waiving the claims she had made in the framework of the trial of the juvenile, while taking responsibility for her actions. The Probation Service's assessment is that the legal process in itself has a deterrent effect on it.  I considered the difficulty she experienced in the course of the proceeding, including the trial, the interrogation and the search (without implying that I found faulty in the conduct of the investigation and search).  The subjective manner in which the defendant experienced the interrogation proceedings was also expressed in her testimony in the course of the junior trial.  I also considered the defendant's condition, the medical procedures she underwent and her condition following the legal process and its implications.  In addition, the difficulty for her family members from the conviction is also before my eyes when determining her sentence.
97. I will also note the defendant's efforts to improve her condition through a channel of progressive treatment and her willingness to continue to persist in long-term treatment that matches her needs, for which we should be congratulated. The good qualities of the defendant, which are well reflected in volunteer activity that appears to constitute an integral part of her lifestyle (D/6), are also considered among my considerations.  Her work for the benefit of the other is welcome and deserves great appreciation and consideration when sentencing.
98. In the general and special circumstances of this case, and without ignoring deterrence considerations that have weight and importance in this type of offense and take precedence over personal circumstances, I found that the defendant's sentence should be placed at the bottom of the punishment range that was determined - and so it will be determined. At the request of the defendant's counsel at the time of the reading of the sentence, before a decision is made regarding the forfeiture and the fine, she will be granted an additional extension in order to present documents proving her claim that the defendant paid an amount equal to the amount of the offense in the framework of a related civil proceeding.  Therefore, the sentence of this hearing is partial - and will be completed in relation to forfeiture and/or a fine after the date of presentation of the documents - on February 20, 2025.
99. Finally, on the basis of the above reasons, I sentence the defendant to prison sentences as follows:
    1. Actual imprisonment for a period of 3 months to be served by way of community service according to the opinion of the Commissioner of Public Service at Beit LaShova, 18 Chelnov St., Tel Aviv. The defendant will report on May 12, 2025 at 8:00 A.M.  at the Barkai Unit, Public Service Works, Central Branch, 53 Salame St., Tel Aviv (Ministry of Interior Building) (in light of the parties' agreement in the minutes from today).  It is clarified that there may be changes in the workplace and working hours as detailed in the opinion of the Commissioner of Service Works.  The meaning of failure to perform community service was clarified to the defendant.
    2. Suspended imprisonment for 5 months, for a period of 3 years, and the condition that the defendant does not commit the offense of which she was convicted.

The right to appeal to the Supreme Court within 45 days.