First of all, I will mention that the Petitioner does not claim that Ness, any of its shareholders, or any of its senior officials, are included in one of the categories specified in clause 1.5.4(c) of the tender, which are categories that represent clear cases of direct and severe conflict of interest. If these were included in one of the aforementioned categories, then the stringent provision of section 1.5.4(c) would apply in the case of Ness, according to which "as a rule" a bidder who he, one of his shareholders or a senior official in it, falls into one of the categories: "shall not be entitled to submit a bid in a tender".
And secondly, as stated, the Petitioner does not claim a direct connection between Ness itself and the institutional bodies. The Petitioner's argument is that Ness M, which is a shareholder in Ness, has extensive business relationships with the institutional bodies (paragraph 5 of the Petition). In this context, the Petitioner refers to the fact that on its website, however, Ness states: "Ness's provident system constitutes an end-to-end core solution for managing the rights of HMO members and advanced study funds for large manufacturers" (paragraph 125 of the petition); that Ness M boasts a list of clients that includes many institutional entities (paragraph 126 of the petition); and that in a public relations article intended to promote a strategic partnership between Moody's and Phoenix, which, of course, is a large institutional body, the deputy CEO of Ness M clarified that: "The partnership with Phoenix is long-standing and wide-ranging" (paragraph 133 of the petition). The Petitioner argues that even if Ness's clarification is to be accepted, according to which Ness's revenues from a single institutional body or from a single group of institutional entities do not exceed 5% of its financial turnover, then this is a very significant income that amounts to ILS 20-50 million per year (paragraph 136 of the Petition). Another connection between Ness Am and institutional entities referred to by the Petitioner is rooted in the activity of Danel, which is a subsidiary of Ness Am and a sister company of Ness. According to the claim: "Danel provides extensive business services to institutional entities" (paragraphs 15 and 141 onwards of the petition). In this context, the Petitioner noted that Danel's CEO serves as a director of Ness, and that in the framework of her proposal, Ness clarified that in order to receive the service from her in the framework of the tender, the institutional bodies would have to use Danel's software (paragraph 145 of the petition). I will reiterate once again that the issue of the tenure of Danel's CEO was dropped from the agenda after it was clarified that Danel's CEO is no longer and will not be, a director of Miracle (transcript of the hearing in the petition at p. 28, para. 31 onwards). The issue of the use of the Danel software was also taken off the agenda after paragraph 232 of Ness's response clarified that: "Ness Fair Value winning the tender does not obligate the institutional entities to purchase the Danel software. Any institutional body can continue to use the software it uses today..." (emphasis in original). The Petitioner further argues for the connections between Ness's "grandmother company" - the Hilan Company, which is the shareholder of Ness M - and institutional entities (paragraphs 110-112, 123-124 of the petition), and Ness Am's partnership with Moody's, which is itself a business partner of institutional entities (paragraphs 151 of the petition). All of these arguments reveal a concern about the existence of a conflict of interest, but this concern is based not on Ness's direct connections with institutional bodies, but rather on its indirect connection to institutional bodies stemming from the connections of Hilan, Ness Am and Danel with these bodies. Naturally, the fear of a conflict of interest that establishes such indirect ties is weak in strength compared to the fear that would have stemmed from the existence of direct ties between Ness and the institutional bodies, and the reason for this is twofold. First, it is the nature of things that a corporation, and those who operate within it, are first and foremost close to themselves, and only then should other corporations and entities that are indirectly connected to them. and second, as we shall see below, in the circumstances of the case, the ability of Hilan, Ness Am and Danel to influence the activity of Ness in the framework of the tender is limited.
- The ability of Hilan, Ness Am and Danel to influence the activity of Ness
Hilan, Ness Am and Danel have ties to institutional bodies. However, the ability of the aforementioned companies to influence Ness's activity in the framework of the tender is limited. These are companies, each of which is a separate legal personality from Ness, which is also an independent legal entity. Ness M holds 50.01% of Ness's shares and is therefore a controlling shareholder in it. However, at the same time, Ness shares are also held by S.N.L. Financial Services (2023) inTax Appeal (39.99% of the "Ordinary A" shares and 45% of the capital shares), which is a company owned by Prof. Neumann of the Hebrew University, which has no claim of a material connection with Ness M, and Fahan Kana Consultants, which is a subsidiary of the accounting firm Fahan Kane & Co. and the parent company of the "Interest Rates" company, which in the past provided the services according to a previous tender (paragraphs 59-61 of Ness's response). There is an agreement between the shareholders of Ness (Appendix 8 to Ness's response), in which provisions were set out that limit Ness or Miracle's ability to control. Thus, the agreement stipulates that certain decisions will be made only by a majority of 85% of the shareholders (clause 7.2.6 of the agreement); The CEO of Ness may be elected by a regular majority, provided that he is not connected to Miracle M (clause 7.3.1 of the agreement); Decisions regarding engagements with shareholders in Ness or with entities related to them will not be made by a regular majority (paragraph 7.3). The officers of the different companies are not the same. The project manager on behalf of Ness for the purpose of the tender that is the subject of our discussion is Prof. Neumann (paragraph 60 of Ness's response), in respect of whom no claim was made regarding the fear of a conflict of interest. All of the above, together with the provisions of the law and case law, on the criminal and civil levels, which impose duties of care and fiduciary duties on officers of corporations, show that there are not negligible limitations on the ability and right of Hilan, Miracle Am and Danel to influence the business of Miracle in general, and on miracle actions in the framework of the tender in particular.
- The Motivation to Skew the Value of a Concrete Property
Ness's motivation to skew the value of a certain asset in favor of an institutional body in which it is indirectly connected and whose desire to visit it is also limited. In the hearing that took place before me, it was clarified that the pool of assets requiring valuation according to the tender includes quite a few assets held by a number of financial entities (pp. 32, 24 ff.). Naturally, Ness's motivation to skew the value of such assets is low compared to the motivation to skew the value of an asset that is held exclusively by an entity that Ness wishes to visit. In addition, no real infrastructure has been laid to show the extent to which the valuation bias of a particular asset can have a positive impact on the business of the institutional entity that holds it. In the course of the hearing of the petition, the court asked the Petitioner's representatives to illustrate, even if in a rather crude manner by means of a kind of actuarial calculation, the extent to which a valuation bias of X of a certain asset with a value of Y can affect the business of the institutional entity holding it (pp. 22, 18 ff.). The plaintiff's expert, Prof. Weiner, replied in general that the institutional investors operate in a very competitive environment, and that the returns presented by the various entities are relatively similar, and therefore yield differences of fractions of a percentage can give an advantage to a certain institutional entity over others (pp. 23, 6-24). In the end, however, he honestly stated: "I do not have a quantitative measure" (p. 23, 22-23). A representative of Ness, Prof. Neumann, said similar things: "I don't have a direct answer as to how much an institutional body will benefit" (pp. 23, 31). In addition, Prof. Neumann emphasized that in any case, the activity of value bias is limited in time, since some of the assets held by the institutional investors are debts owed to them by various entities, and these debts become absolute and known by the time they are repayed. Therefore, to the extent that the value of these assets is "inflated" along the way, at the end of the road the institutional body will pay a price for it (pp. 23, s. 35 - p. 24, s. 11). If so, it can be said that there is no certainty as to the degree of benefit that is expected to grow, if any, to an institutional entity in which an asset in which it holds an exclusive property will be valued more than its value. To this, it should be added that Ness is not an institutional entity, and it is not directly connected to the institutional bodies, but only indirectly, and hence the profit that may accrue to it as a result of the bias in the value of an asset is completely uncertain. In light of the above, I am of the opinion that even if a bias in the value of an asset held by an institutional entity can benefit it, Ness's motivation to participate in such a move is not very high due to the somewhat vague benefit that may arise from it.
- The risk and expectancy of risk associated with an asset's valuation bias
In contrast to Ness's motivation to skew the value of assets, which in my opinion is somewhat limited, the risk involved in such a move and the expected risk must also be taken into account.