IN-DEPTH FEATURES
With Their Body and Soul -- and Their Money -- or -- What Goes Around Comes Around

Part I

Major battles against grave desecration began just over eight years ago in Iyar 5754.

For an entire year a relentless campaign was waged against leading figures in business and government who shared in common an interest in razing an ancient cemetery--the resting place of early Yaffo dwellers for over 2,000 years--down to the ground.

Tel Aviv real estate company Ilan Gat and its owner, businessman and insurance magnate Udi Ilan of Savyon, adamantly rejected every compromise solution proposed by the chareidi sector and even by the Chief Rabbinate to engineer their planned project differently.

Protest vigils and dozens of demonstrations, some of which drew over 50,000 people, were unable to stop the destruction of the graves and the smashing of skeletal remains.

Scores of boxes containing human bones and even whole skeletons where cast into garbage dumps like dung.

The kisvei cherem issued by leading botei din in Bnei Brak and Jerusalem, unprecedented in the harshness of their language, said those involved in the project would not be exonerated for this sin and "the hand of Hashem would be upon their body, soul and financial resources." In his holy handwriting Eida Chareidis Av Beis Din Rav Moshe Aryeh Freund wrote, " . . . and let it be known that there is a Judge and there is Judgment."

With Their Souls and With Their Funds

Two weeks ago the Andromeda Hill luxury housing project in Yaffo, built on the ruins of an ancient cemetery, proved to be one of the biggest flops the Israeli real- estate industry has ever known.

In a laconic notice sent to the Securities Exchange Commission in Jerusalem, Ilan Gat management announced that the veteran company would soon be sold to a private businessman for the price of one shekel!

The brief letter did not detail any reasons or explanations for the unusual sale, but a quick examination of the company's financial reports tells the story quite clearly: Ilan Gat is being crushed by enormous debts amounting to approximately NIS 160 million ($35 million). The company's own net worth has long since deteriorated below the zero level and now stands at minus NIS 35 million ($7 million).

In other words the company faces a capital deficit to the tune of tens of millions of shekels due to large losses that are growing larger and accumulating from year to year.

In such a severely strained financial situation the company's ability to meet its obligations to banks, suppliers, contractors and employees is highly questionable. Within a matter of days or weeks it could decline to the point where it would have to appoint a liquidator or a receiver.

Under pressure from banks the company was sold for a single shekel to a financier who specializes in rehabilitating failing companies. According to published speculation, the banks gave the new buyer guarantees that they would erase the lion's share of the debts provided a certain level of cash flows into company accounts. The banks prefer this option in order to avoid having to appoint an investigating liquidator liable to embarrass various figures embroiled in the affair.

Tremendous Potential

In an interview he granted a real estate magazine in November 1996, Udi Ilan said, "I suggest that all people of refinement come here to see how much we've invested, the fabulous sea view, the picturesque homes, the fabulous tranquility at sunset overlooking the sailboats docked in the harbor. There is nothing like Yaffo and nothing like Andromeda."

Later in the interview he said, "This is an expensive project, a complex project, but I believe in it with all my heart. I am here every day, almost all day, and devote the better part of my time and efforts to this project because the potential is tremendous," he explained wistfully.

"We began selling at a rate of $4,000 per meter including VAT ($400,000 for a small, three-bedroom apartment) and today we are selling at $5,000 per meter. A price increase of 25 percent compared to the bank's forecast. The last buyer purchased a penthouse for $1.4 million. So as far as the bank and the bankers are concerned, we have beaten the forecasts.

"This is one of the most beautiful and rare projects Israel has to offer, with the highest standards of finish and specifications in the country."

To his many clients and friends Udi Ilan has a reputation as a reliable businessman who comes from an established family of builders. He did not lie in the interview and did not pull fictitious figures out of his sleeve. The Andromeda project really seemed slated to be an exceptional success story.

The project was joined by top professionals in the fields of real estate, construction, planning and finance. Attorney Yigal Arnon, for example, the number- one networker among the country's leading lawyers and legal counsel for the most exclusive real estate firms, was considered a top expert on complex real estate issues.

Financiers Boaz Adini and Tzvika Birn, owners of one of the largest and best-known investment companies in the country and of course the managers of the longstanding Ilan Gat construction company, were selected to tackle the professional challenge of building a unique project with standards previously unknown in Israel.

Udi Ilan managed to recruit two foreign investors with large amounts of capital and international standing: Swiss banker Stephen Pooper and Jewish diamond merchant, Philip Mahate, then one of the world's leading diamond dealers. Each of them committed to cover one-third of the investment in the project, while Ilan Gat covered the remaining third, in addition to its task of overseeing construction.

At Least $35 Million in Profit

Ilan and his partners had little trouble raising most of the initial investment funds for the purchase of land--$12 million in long-term loans on favorable terms offered by Bank Hapoalim, the largest and most professional bank in Israel in the area of financing real estate ventures. Thoroughly convinced the undertaking would succeed, the bank's experts did not even require high personal capital before agreeing to back the construction project. It provided comprehensive credit frameworks of $50 million, money it will now probably never be able to collect.

One way or another the project's entrepreneurs and the bankers forecast at least $35 million in profit, an average of approximately $150,000 per unit.

These predictions were not fantasies generated by neophyte businessmen but were based on realistic projections: the cost of land, $23 million (including the cost of rebuilding a church that was located on the site, as part of the combination deal), plus the cost of construction, $28 million, including infrastructure and financing. A grand total of $50-55 million to be invested in the project.

The total income from the project was projected at $90 million (even after deducting one-third of the apartment units, which were to be given to the church in payment for its land), based on a realistic forecast of $4,000 per meter, not including VAT. The total projected profit: $35-40 million.

Ilan Gat and its owner Udi Ilan stood to gain a large share of the earnings since the company was also to receive a fee of $3 million for construction services. Thus Ilan expected to rake in some $17 million or more.

This is what Ilan was referring to in the above interview when he said, "As far as the bank is concerned we are ahead of the forecasts. We began selling at a rate of $4,000 per meter including VAT and today we are selling at $5,000 per meter."

A side note: Every increase of $500 per meter translates into increased earnings of over $10 million, since costs remain fixed. The Andromeda project was thus, at the time of the interview, expected to exceed the bankers' expectations by posting a $60 million profit.

The Most Desirable Location in Yaffo

For the most part Udi Ilan neglected his original insurance business, which generated a steady income, and immersed himself in the grand project. He saw it as a chance to realize his long-time dream of stepping into his father's shoes and making a breakthrough for the entire group.

Every day he arrived at the lavish sales office built at the construction site. The office was designed in the style of a magnificent building of the Yaffo of yore, furnished with expensive decor and state-of-the- art visual and sound equipment to present the project to prospective buyers. As proof of the project's success Udi Ilan convinced 15 of his friends, customers and business colleagues to purchase apartments at the opening prices of $4,000 per meter. Two years after the building plans received approval, digging commenced at the large construction site, which stretches over 20 dunams (five acres) of hilltop property facing the open sea, at the most desirable location in the new section of Yaffo.

In recent years all of Yaffo has risen in demand as a choice location for sea-view apartments, and prices for other housing projects near Andromeda are skyrocketing. Architects, lawyers, Bohemians and society people see Yaffo as an ideal location for the purchase of an apartment, due to its proximity to downtown Tel Aviv combined with the area's unique ambience.

Whose Land is It?

The first demonstration took place on the 13th of Iyar 5754 after activists involved in preventing grave desecration were summoned to the site where, to their dismay, they discovered a cemetery with dozens of skeletons in burial caves that had remained surprisingly intact. The sight they beheld was ghastly.

"The desecration of the graves that took place at Andromeda was particularly shocking," recalls Rabbi Ayal Porat, then chairman of the Public Committee to Save the Ancient Cemetery in Yaffo and today one of the heads of the Society for the Prevention of Grave Desecration. "Whole skeletons that had been preserved unharmed for thousands of years were tossed, with horrible brusqueness into boxes under the cover of darkness.

"We met with top officials at Bank Hapoalim, which had provided funding for the project. We explained to them that there would be demonstrations against the project throughout the Jewish world and that traditional Jews from abroad--a very important target group--would not purchase apartments at such a location. We reminded them of the Yafet Affair at Bank Leumi and what happened to this man after he desecrated graves in Tiberius. But we encountered only closed doors. All attempts at dialogue and compromise were of no use; strong economic forces, the economic elite of Israel in cooperation with Tel Aviv Municipality heads, banded together with almost unlimited financial resources at their disposal. Nothing could stop them."

Leafing through a bulging leather bag containing dozens of testimonies, protocols, photographs and correspondences, Porat continues: "The issue of ownership of the land in general is something that should be under police investigation. We have possession of an official document indicating that in the 1960s the City of Tel Aviv decided to build a large public park at this location.

"At the time the Greek-Orthodox Patriarchate sent a letter to the City and warned it not to perform any work at the site because there was an ancient cemetery there that had been used for generations upon generations.

"The question is, if there is an ancient cemetery in question, where is the evidence that the area belongs to the Patriarchate? The site is located several hundred meters away from the church. And anyway, why did the Patriarchate warn the City not to build because there is a cemetery there? It would seem they have a much stronger claim: this is private property owned by the Church! Would it ever be conceivable for the City to build a public park on property belonging to Dormition Church in Jerusalem?

"I have a feeling very large sums of money had been laid down here. Lawyers and some of the people with the best connections in the country fought over this project, and their efforts were not in vain."

Ancient Cemetery

Soon protesters taking an active part in the struggle realized the project's promoters and heads of the City of Tel Aviv's Planning and Engineering Administration were aware in advance of the fact that there was an ancient cemetery at the site. "The above plot (Plot 80, Section 7020) belongs to the Greek-Orthodox Patriarchate and there is an old cemetery there. According to the community's religious tradition, cemeteries may not be converted into parks or used for any other purpose," wrote the Patriarch in a letter to the City dated 1960.

The municipal building plan for the project, approved in 1992, clearly states that part of the lot had been declared an antiquities site. Paragraph 6.4 of the city building plan reads: "If the remains of graves are uncovered, construction must halt immediately until reported and checked by the local planning and construction committee and all necessary steps have been taken."

Today those active in the struggle say the land deal between the Church and the project's entrepreneurs would have never taken place were it not for the replacement of the veteran Patriarch by someone "who was willing to consent to a generous monetary offer, disregarding the Patriarchate's official stance."

An area map found in the City of Tel Aviv archives clearly showed a cemetery at the site, but after digging was underway, at some point the word "cemetery" was erased. A photographed copy of the original map is kept on file by the Committee for the Prevention of Grave Desecration.

The project file itself with all of the planning and construction documents disappeared from the City Engineering Administration archives a short time after activists made copies of numerous documents.

The Antiquities Authority, then run by General Amir Drori who was very hostile to the religious community, ignored the protests and outcries, continuing with the mass-scale destruction of the graves and skeletons. The builders met the extraordinary monetary demands made by the Antiquities Authority, depositing a sum of NIS 3 million into its coffers, payment for "rescue digs" performed by five or six of its workers. The project promoters believed the Antiquities Authority would buffer them from heads of the chareidi sector and would do the dirty work for them.

During one of the meetings held with him, Udi Ilan confessed that he had never imagined how much the year- long public battle to stop the project would escalate.

From Ilan's perspective, the struggle reached its peak when Bank Hapoalim management notified the builders it would have to withdraw project funding because some of the bank's major clients in Belgium and the US announced they would honor the boycott to be imposed on the bank if it continued to fund the project.

At that point the banks raised their concerns over the fate of the project, claiming secular buyers and prospective buyers might also be reluctant to purchase apartments built over a cemetery.

Ilan and his partner in the company, Rafael Gat, responded by purchasing four apartment units with NIS 6 million of their own money. "We have no worries whatsoever," they told the banks and contacted Amnon Rubinstein, asking him to threaten the bank with a counter-boycott by left-wing customers.

The Financial daily Globes remarked that such a boycott would have no value because only the chareidi public is known to make such threats and carry them out.

On the 20th of Iyar 5754, seven days after the first demonstration by avreichim, the Badatz Eida Chareidis of Jerusalem issued its first proclamation, calling for demonstrations and protests against the tremendous desecration of graves taking place in Yaffo. In Jerusalem a mass demonstration was organized outside the Education Ministry, the government body responsible for the Antiquities Authority.

In Yaffo activists and avreichim continued their efforts to thwart continued work on the project, but had limited success.

Policemen were quickly dispatched to the site every time the avreichim tried to physically block grave desecration. Shattered skeletons were rapidly loaded onto trucks carting off tens of tons of dirt mixed with human bones.

Truck drivers, waiting for their trucks to be filled, told the avreichim, "We don't relish being put in this situation. We have problems with it, but we have our instructions. A driver who objects to working here gets fired on the spot."

A Financial Failure

In August 1996, about two years after the foundation work in Yaffo, Bank Hapoalim was forced to appoint a receiver for Y.M.Y. Engineering, Inc., the company hired to clear dirt from the Andromeda site.

The company that had rapidly risen to become one of the largest land-clearing companies in Israel with 150 workers, a fleet of 40 modern trucks and contracts worth tens of millions of dollars, suddenly folded, leaving behind NIS 35 million in debts.

In January 1996 the owner of the company granted a financial newspaper an interview. Commenting on his company's financial problems the owner said, "The banks are not worried over us . . . We have securities, everything's in order. Not a single check written by Y.M.Y. has bounced and none will." Eight months later the company collapsed.

End of Part I