Criminal Case (Jerusalem) 54589-02-17 State of Israel v. Oshri Sharon - part 217

The remaining defendants in this indictment, the companies Wei and Harel, are charged with the offense of a party to a restrictive arrangement under section 47(a)(1) of the Law as drafted at the relevant time, together with sections 2(a), 2(b)(1), 2(b)(3), 4 and 55a(b) of the Competition Law, as well as the offense of fraudulent receipt under aggravated circumstances, under section 415 of the Penal Law, together with section 23(a)(2) of the Penal Law.  In the indictment, Oshri was attributed the responsibility of officers by virtue of Section 48 of the Competition Law.

Discussion

Overview

524. The indictment under discussion concerns Maman's request to receive quotes for the purchase of five storage systems from IBM. These are net-made storage systems that are also sold by IBM, through IBM's suppliers, under the name of IBM's N-Series (Menashe, p. 1490, s. 8 - p. 1492, s. 8; and see also in general in paragraph 186 above (Mordechai's testimony); in paragraph 434 (testimonies of Naveh and Noy); and in paragraph 467 (testimony of Lived)).  Maman sought to purchase storage systems of a relatively old model, in accordance with what was apparently supplied in the past and which could still be purchased (P/175).
525. With regard to the facts relating to the indictment in question, they testified, inter alia: Menashe, that as we saw above, he was a veteran procurement person at Maman, who was responsible for the procurement of storage and backup products at Maman, and Leshem's assistant, a procurement manager from Maman. Menashe was the one who issued Balam Storage Systems on behalf of Maman, and he is the one to whom the proposals were submitted.  In their summaries, the parties also referred to parts of the testimonies of other parties from the civil appeal that related to the indictment in question.  In relation to the indictment in question, both Shahar and Labid of IBM testified, among other things.

Procurement Procedure and Coordination Arrangement

526. On January 9, 2012, a procurement committee was held at Elta, in which it was decided to hold a "competition between suppliers" for the purchase of storage systems from IBM for the MPR project  (P/172; See p. 1500, paras. 20 - p. 1501, p. 4, the accuser's agreement that the proposals carry storage systems in accordance with P/172; Although in accordance with the letter of appointment, Peretz was appointed to conduct the negotiations between the suppliers, in practice it was Menashe who issued the CBM, p. 1393, paras. 3-5; See also the testimony of Menashe, p. 1495, paras. 10-11, which usually allowed Peretz to handle such transactions; At the beginning of the letter of appointment, the suppliers V and Triple C were mentioned as suppliers with whom negotiations would be conducted (according to the supplier's codes); On the second page, the suppliers Harel and Dorcom were also mentioned, and here no Wii was mentioned).
527. On January 11, 2012, Menashe contacted Shahar and Gilad with a request to receive a price quote for five IBM storage systems in accordance with the configuration he attached to the application (P/173, P/369, P/174; the configuration sent by ELTA referred, inter alia, to a 750GB disk). Menashe testified, in a manner consistent with the documents, that he contacted Levi and Harel, who were relevant suppliers of IBM and NetApp equipment (p. 1490, s. 15 - p. 1492, s. 8, p. 1504, s. 18-20; p. 1394, s. 17-24).

Shortly before the publication of the BMM, Menashe asked Levid from IBM which of the marketers (IBM) could respond to the BMM, and Lvid replied to Menashe that Menashe could contact Levi and Harel (N/130).  At the same time, Labid contacted IBM, which returned to Lvid for the required configuration (N/134; in one component, the disk volume,  1TB  was noted instead of 750GB; as we shall see below, Menashe estimated that this was a non-significant change, p. 1524, paras. 12-13).  Lavid forwarded the chain of e-mail correspondence mentioned to Shachar's attention (P/130; B-N/134 Lavid drew Shachar's attention that this was a configuration for a single system and that it should be inserted by hand on five, in a manner consistent with the requirement of the Commander-in-Chief; the arguments raised by the defense on the basis of transferring the correspondence from Lvid to Shahar should be required separately).

528. On January 12, 2012 – the day after he received the VM – Gilad asked Menashe a question regarding the model of the required storage systems. Gilad wrote to Menashe: "You probably know that this is an old hardware that is doubtful that it can be supplied today.  Is it possible to offer a current model? Since I'm guessing the answer, I'm checking availability and price for this model.  In any case, please get back to me with yes or no" (P/175).  Menashe replied to Gilad on the same day: "I understand that it is possible to order this hardware until February 24 of this year.  The project is aware that the hardware is old but it wishes to purchase it" (P/175, see Menashe's testimony, p. 1397, s. 18 - p. 1398, s. 2).  Gilad's request to Menashe contains at least a representation that Harel is interested in competing and proposing a proposal within the scope of Balam Storage Systems.
529. On January 23, 2012, when he had not yet received price quotes, Menashe contacted Labid of IBM with a request to expedite Harel and Wii and noted that it would soon be no longer possible to order the systems (N/132). Menashe testified that he approached Lavid and not the suppliers, perhaps because he thought that it was Lavid who was holding them back and that he had not yet given them a purchase price from IBM (p. 1502, paras. 13-19).  Lavid replied to Menashe that he would make sure that Menashe received offers today (N/132) and later assured Menashe that he had indeed received offers from Vi and Harel (N/257; "Did you get it or do I have to bring it to my head?").  Lavid testified that as an IBM salesman, which operates through partners-suppliers, his job is to push the suppliers and expedite them to submit bids so that IBM will sell (p. 6453, paras. 21-26, p. 6454, paras. 1-5, p. 6494, paras. 17-19; this testimony must be accepted; the arguments raised on the basis of Lavid's involvement will be addressed separately).
530. The coordination correspondence and the proposals submitted - on January 23, 2012, Shachar sent Gilad an e-mail message in which he wrote to Gilad, "Send to Avi Menashe please." To the e-mail, Shachar attached a price quote for five storage systems that bear the subject of the unmanned aerial vehicle, for a total  of $109,485 (P/179, Shahar's testimony, p. 2920, paras. 4-6, that he had sent to Gilad to submit to Menashe).
531. On the same day, 23 January 2012, Shachar submitted to Menashe the offer of V to the BMC in the sum of $80,000 (P/176; Menashe, p. 1399, paras. 17-20; regarding the date of submission, see also Menashe's email correspondence dated 23 January 2012 at 17:46 in the scope of N/257; and P/178, where the date of the offer is indicated).
532. The next day, on January 24, 2012, Gilad sent Menashe Harel's offer to Balam Storage Systems in the sum of $109,485 (P/177, P/177A; Menashe, p. 1399, s. 22 - p. 1400, s. 3).  In other words, Gilad submitted Harel's offer at the exact price that Shahar asked him for, which was higher than the price of Wie's bid (Wie's and Harel's proposals related to the configuration as requested by the WM, except for changing the disk size from 750GB to 1TB).
533. If her bid was cheaper, it was she who won Balam Storage Systems (Menashe, p. 1400, paras. 16-17; p. 1401, paras. 23-1402, s. 4), it is reasonable to assume that if Harel's proposal had been cheaper, he would have chosen Harel, if the decision was based on price; p. 1523, paras. 11-13; see also p. 1397, paras. 1-5, where he estimated that the parameter for selecting the winner was the price, even though this was not always the case).
534. On January 30, 2012, Maman issued an order for the purchase of the storage systems in question from Wei in the sum of $80,000 and on the basis of Wee's offer (P/178, P/370; a few days earlier, he had asked Menashe when an order would be issued, P/133).
535. The picture that emerges from the documents from real time is clear and unequivocal: Shahar and Gilad coordinated the price of Harel's bid so that it would be higher than the price of Wee's offer, which would provide to finance the storage systems. The coordination arrangement was even carried out in practice when Gilad submitted an offer to Mamen at a price that matched.  In this context, it should also be noted that Shahar's testimony, contrary to the interest, according to which if Harel had submitted a cheaper price quote than Wee's, a civil appeal could have appealed to Levy and asked her to lower the price (p. 2921, paras. 16-20; for additional statements made by Shachar and to which the defense referred, we will discuss below).
536. In the indictment, the defendants were also charged with the offense of fraudulent receipt.
537. Shahar and Gilad did not disclose the coordination between them and financed and made a false representation as if they had submitted independent and uncoordinated proposals (see, for example, P/175 where Gilad wrote to Menashe that he was checking the availability and price for the storage systems that were the subject of the Storage Systems, in a manner that at least amounted to the impression that Harel was interested in competing and making an offer to the Maintenance Systems).
538. Menashe – he was the one who issued the CBM and to whom the proposals were sent – testified that he did not know about the coordination correspondence between Shahar and Gilad and did not know that Gilad received from Shahar the price at which he submitted Harel's proposal (p. 1401, paras. 1-13). Menashe further testified that if he had known about the coordination he would have been "very angry", he would have brought it up for discussion with the head of the administration, Leshem, and it is possible that he would have asked to work with other suppliers (p. 1402, paras. 12-24; Later on, he referred to the possibility of stopping working with the suppliers involved, even though he doubted that this would have been done, while noting the difficulty in changing suppliers at IAI, p. 1403, s. 1 - p. 1404, s. 4).  Menashe further testified that when he first saw the correspondence between Shahar and Gilad during his interrogation, he was "very angry" and felt that "apparently they were making money on me...  that their prices are higher than they should have been, that I could have bought" (p. 1404, s. 13-21, p. 1405, s. 2-6).  This testimony was not concealed.  It must be accepted (and this is also the case with Shem, who was Menashe's supervisor, testified that he did not know about the correspondence between Shachar and Gilad, and that if he had known about it, he would have stopped the process at that moment and would not have agreed to it, p. 2116, paras. 21-23, paras. 6-7).  This is also joined by Shachar's testimony that no one in the civil appeal told him to coordinate with Gilad, to talk to a competitor and to submit a price quote (p. 2920, paras. 4-8).  This is testimony contrary to the interest that should be accepted.
539. In these circumstances, the elements of the offense of fraudulent receipt also exist: fraud by submitting proposals in a tender proceeding while failing to disclose the coordination of the proposals and by misrepresentation (see paragraphs 27-28 above); Acceptance of the matter – Maman's assumption regarding the validity of the bids and the proceeding and the winning of Wei (see paragraph 29 above), where the causal connection arises from the above testimonies that show that had it not been for the concealment, the procurement entities would have acted differently. Since the acts of fraud are based on another offense – a restrictive arrangement – while harming the competitive process of a public body and public funds, and in view of the systematic nature of the acts, these are aggravating circumstances, in accordance with the criteria set out in the case law (see paragraph 31 above).

Reference to the defense's arguments

540. The defense also argued with respect to the "fictitious" WI (g., para. 546 of the Wee Summaries). In this context, it was argued, inter alia, that it was a project of Wei to begin with, that Levi was a clear priority that was known to all involved, and that in such a situation there is no logic in pricing (for example, paragraphs 709 and 718 SIFA of Harel's summaries, paragraphs 546 of Wee summaries); Because the price was closed in advance: once it was claimed that it was closed directly between IBM and a civil appeal (for example, section 544 of the Wii summaries), once it was claimed that it was closed in advance between Shachar and Menashe, and even before the application to Harel (for example, paragraphs 548 and 550 of the Wii summaries, paragraph 711 of the Harel summaries); that IBM determined who would be the supplier of the storage systems for the project and that it controlled the process (for example, paragraphs 710 and 719 of Harel's summaries; paragraphs 545 of the Wii summaries); that the civil appeal applied for proposals only because of the procurement procedures and "in order to settle the case" (in procurement) and that IBM pressed the submission of the bids only for that purpose (e.g., paragraphs 545 and 549 of the Wee Summaries, paragraphs 722, 727-728 of the Harel Summaries).
541. I am unable to accept the arguments. No real evidentiary basis was laid for them.  Some of them relied on speculations and statements of a general nature that the defense found in the testimonies of Menashe and Lived, which did not relate to the charge at hand.  There is no basis for the evidence that the civil appeal or IBM knew about the improper coordination or that anyone on their behalf was involved in it in any way.  In any event, the arguments do not justify or legitimize the coordination of the bid price.  We will discuss the main points.
542. At the outset, Menashe testified that he did not know about the coordination of the proposals, that he was angry when he learned of the matter during his interrogation, and that he felt that "apparently they are making money on me... that their prices are higher than they should have been, that I could have bought" (see paragraph 938 above).  We have seen that this testimony should be accepted and that no evidence was brought to contradict it (ibid.).  It will also be recalled that Shachar testified that none of the civil appeal told him to speak with a competitor who would submit a bid (ibid.) and that an independent offer by Harel, the cheaper it was, could have led, at the very least, to a demand of a civil appeal against Wei to lower the price (see paragraph 935 above; and this without even addressing what he said in the interrogation regarding the possibility that the civil appeal would have decided to purchase the storage systems from Harel).  P/557(1), S. 828-837; See also Menashe's testimony that the cheaper Harel's offer was, the more likely it was that they would have purchased from her; in paragraph 933 above).  The evidence clearly shows that Menashe asked to receive real offers in response to Balam Storage Systems, and that Harel's true offer could have had an impact.  This is enough to undermine the defense's arguments.  To this, it should be added that even separately from the aforesaid, we are dealing with improper coordination that falls within the scope of absolute possessions, and that the defendants did not point to any legitimate reason for acting to coordinate, and it was not explained why they did so, insofar as everything was closed in advance and to the extent that Wee's win was guaranteed as claimed.
543. We will now address the defense's arguments in more detail.
544. The defense argued that this was a "Wei project" to begin with, that the storage systems that are the subject of the UAV in question are expansive, that Levi was a clear priority and that – this is the essence of the argument – that it was known in advance that it would carry it out (referring, inter alia, to the testimony of Lavid, p. 6458, para. 28 – p. 6459, paras. 1-5, pp. 6465-6463; P/131).

These claims were not supported by evidence and in any event do not qualify coordination.