The collapse of the Peled-Givony group began way before July, which is when the Israel Securities Authority raided the companies purchased by Rafi Peled, Arie Givony, David Haby and Tal Jaegerman.

Looking back, it began in August 2001, when the capital market first raised an eyebrow at the group's outlandish dealings. At one deal in particular, that is, a deal that seemed totally devoid of economic rationality, a deal that was apparently brought from conception to implementation solely due to the personalities involved. The greater good of the companies involved was certainly not a factor.

Yet somebody is missing from the list of people being investigated over the Peled-Givony collapse, from former top cop Rafi Peled to his erstwhile partners. That person is Meir Chen, who, as we shall show, played in an integral part in the Peled-Givony wheeling, dealing and reeling.

In August 2001,

Feuchtwanger Investments (TASE:

FUTIN

) granted Meir Chen, the manager of Altsholer Underwriting, a put option that could force the company to buy his shares in

Iscal (TASE:

ISCL

) for NIS 65.6 per share. That was roughly double Iscal's share price at the time.

Too high? That can always be explained by rosy expectations of the company's future. But the high price that Feuchtwanger Investments undertook to pay for Chen's Iscal shares was not the main reason suspicions arose, and are now being discussed in the courts, regarding the legitimacy of the deal. Chen, according to reports delivered to the Tel Aviv Stock Exchange, bought the Iscal shares a few days earlier at an average price of NIS 58.4 per share. Within days, therefore, he had earned NIS 3 million, on paper.

One suspicion raised by

Computer Direct (TASE:

CMDR

) in a letter to the TASE is that the Peled-Givony group was trying to conceal a deal by interested parties through Meir Chen, who served as a pawn.

To describe the deal without delving into its full complexity,

Hayl Holdings (TASE:

HAYL

), which had been acquired by the Peled-Givony group and which held Iscal shares, sold its shares in Iscal to Meir Chen, so that Feuchtwanger Investments, which Iscal had bought, would buy the shares from Chen at a later stage through that put option.

If the deal hadn't been carried out through Chen, it would have been defined as a deal by interested parties, and thus required the approval of shareholders, an approval that Peled, Givony et al evidently hoped to avoid seeking. In urgent announcements by Hayl and Feuchtwanger to the TASE, they did not even hint at involvement by shareholders. At a later stage, when Chen and the Peled-Givony group were taking arrows, the group said it had meant to define it as a shareholders deal from the get-go.

Feuchtwanger Investments even announced, at a later stage, that it saw the deal as between shareholders, and this requires the approval of the company's general assembly of shareholders and auditing committee. Such approval was never forthcoming, yet Chen received NIS 29 million, without Feuchtwanger Investments getting any shares at all.

Meanwhile, Iscal stock dropped to NIS 0.74 each. That is substantially below the price Feuchtwanger Investments was supposed to pay Chen, which as said was NIS 65.6 a pop.

Lately, another factor involving Chen's involvement with Peled-Givony came to light: It turns out that the Altsholer-Shoham group, in which Chen serves as a manager, holds 35% of the bonds of Hayl Holdings, which will apparently be tabled for immediate redemption given the collapse of the Peled-Givony group.

Chen has therefore played a dual role: one as Hayl creditor by virtue of Altsholer-Shoham's bond holdings, and the other as debtor. The debt is no 29 million to Feuchtwanger Investments, in which Hayl holds a 36% interest.

Feuchtwanger Investments' trustee, Dr Shlomo Ness, even demanded that the court place liens on Chen's assets, in order to regain those NIS 29 million that the company had paid, only to receive nothing in return.

Liens and court cases are nothing new to Chen, who was detained by the Israel Securities Authority back in August 2001 on suspicions of using insider information. He was suspected of advising a crony to buy shares in Oz Investments, knowing full well that the company was negotiating a takeover. Chen held 7% of Oz's shares, which jumped more than 50% on the day after the takeover was made public.

For now, Chen can be pleased with his Peled-Givony dealings. He has NIS 29 million, while to get it back, lawyers have to slog through his assets portfolio and track down the spoor of the millions that left those public companies, only to wind up in his account.