A Bank Will Compensate Diamantaires for ‘False Representation’
February 11, 09
An Israeli bank was ordered to compensate five diamond firms after a court ruled that the bank misrepresented the financial soundness of another trader they considered doing business with. That sixth firm later collapsed leaving debts in excess of $15 million.
According to court documents, the five firms - I. Kronfeld, Tirosh Diamond Lasers, Ducas Diamonds, Eliaz Diamonds and Yitzhak Levavi - asked the First International Bank in 2000 about its client A.V. Einhorn, a common practice among diamond companies before executing a large deal.
Despite having large debts, the bank informed the traders that the firm was financially sound, and could execute deals that require high credit levels.
About two months later, in June 2000, A.V. Einhorn entered into receivership. The five firms filed a suit against the bank and its diamond exchange branch Manager Rachel Kagan for
County Court Judge Ester Shtemer ruled on February 4 that the information the bank gave the plaintiffs was not accurate and that it knew that A.V. Einhorn was in difficulties. In addition, the judge ruled that the traders entered into business with the company based on the misrepresentation and were harmed by it.
The court awarded the plaintiffs $1.5 million.