By Ben Zion Citrin

The management committee appointed to run Co-Op Blue Square Consumers' Cooperative Society yesterday announced it will sue former Co-Op chairman Benny Gaon for $2.4 million. The society wants Gaon to restore financial gains he made from stock options he received when

Blue Square Israel

(NYSE:BSI) went public in New York in mid-1996.

The society also means to claim damages from Gaon.

In 1999 Gaon made $2.36 million from selling his block of securities to _

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Ampal American Israel Corporation

(Nasdaq:AMPL). Then president and CEO of the Co-Op, Jacob Gelbard, collected $3.94 million.

The arrangement was not made public. It first came to light when society member advocate Eliezer Levitt started investigating.

His revelations induced the Registrar of Cooperative Societies, Uri Zeligman, to order a full probe. The probe concluded that the money should be returned.

The present management team replaced the management panel that was ousted after a round of elections in November 1999 was ruled null and void after another investigation.

Gaon's representative has advised the management committee that Gaon will not return the money.