Former finance minister Moshe Kahlon was found guilty on Sunday of failing to ensure that major financial irregularities at UnetCredit were properly disclosed to the public during his tenure as company chairman.

The conviction resulted from a plea agreement reached by the parties involved.

The agreement was submitted together with a wider indictment in the UnetCredit matter, which ranks among the notable corporate failure cases arising from Israel's non-bank credit sector in recent years.

UnetCredit operated as a public firm offering non-bank credit with shares listed on the Tel Aviv Stock Exchange. Prosecutors point to a pattern of concealment, circular financing, and improper use of company funds by controlling shareholders and senior executives.

Under the plea deal, Kahlon admitted to breaching reporting obligations set out in the Securities Law. The parties will request a suspended prison term, a NIS 180,000 fine, and an 18-month ban on serving as an officer in any public company. The agreement still requires court approval.

Kahlon, who earlier held the post of finance minister, chaired UnetCredit Financial Services from June 2021 until stepping down in June 2022.

The 2020 share allocation deal

The case focuses on a 2020 share allocation transaction. The indictment states that the publicly traded UnetCredit entity issued two million shares valued at NIS 50 million to a private firm owned by its controlling shareholders and to several advisers.

The transaction was presented to company bodies as though funds for the shares would come from outside sources linked to the controlling shareholders. Prosecutors claim this did not occur. Instead, the public company's own funds were moved through a circular deal that created the false impression the private firm had paid for the shares. In reality, prosecutors say, the public company financed the purchase of its own shares, allowing controlling shareholders and others to obtain shares worth tens of millions of shekels through fraud.

The indictment describes the matter as an instance of blending the controlling shareholders' private interests with the public company's operations while hiding key details from the board, committees, and shareholders.