What walks like a lame duck, quacks like a lame duck and looks like a lame duck?

It's the Peled-Givony group, of course! The group of companies cobbled together by Rafi Peled, the former police chief of Israel, who also served as the director-general of the Israel Electric Corporation, and director-general of the Prime Minister's Office.

A year ago Peled took the Israeli financial scene by storm, snapping up one public company after another using massive leverage from the banks. Now Israel's former top cop finds himself being interrogated by the Israel Securities Authority and having to pony up NIS 1.6 million in bail.

The astonishing part of the rise and fall of Rafi isn't his grilling at the ISA on Tuesday, or the allegations that his group improperly withdrew millions using various sophisticated financial tricks.

The astonishing part is that it was crystal clear to everyone, but everyone, from the moment that Peled, his partners and advisers began to build their pyramid of companies a year ago, that they were taking a tremendous financial risk that could end in a thunderous crash.

The writing was on the wall, the information was out there in the capital market and was even evident in official reports of the companies involved to the Tel Aviv Stock Exchange.

The whole affair shrilled "Watch out!" The transactions made no sense, the prices looked insane and the whole thing stank to the skies but until a few weeks ago Peled, his partners and lawyers managed to bedazzle the entire business sector, and mainly, the banks.

Now the banks are contending with diving profits as their provisions for doubtful debt mount, because of the piles of dreadful deals that they financed.

The banks have plenty of excuses for most of their deals that soured: the hi-tech crash, the recession, the heavy cost of the

intifada

, the telecom debacle. They note that American financial institutions are writing off trillions so it's only natural to have some collapses and writeoffs here too, and so forth.

But then a group like Peled-Givony crumbles, proving that much of the blame belongs to the banks, not the market or the slowdown.

The house that Peled built carried out a whole bunch of tricky transactions, with overt and covert layers. But they had a common thread, which every analyst covering the market recognized: to create an infinite chain that soaked up money from the banks and the companies' minority shareholders, to use in a dangerous financial gamble.

The underlying idea was simple. If the gamble succeeded, then the initiators including Peled, who risked almost none of their own money would cut fat coupons. And if not, and there was every chance that it wouldn't? Well, then the banks and minority shareholders of the group companies would lose their money.

When it became apparent that the gamble had failed, pressure grew on the group to avert the collapse. Then, it is suspected, the group companies began to shift money between themselves in an effort to hide their true situation. That is the part that the ISA is investigating.

But the really interesting thing is that Peled didn't begin to build his pyramid of companies five years ago during the boom, nor even three years ago he began a year and a half ago, at the height of the crisis. Yet, even as the market around him deteriorated, he managed to raise over half a billion dollars from the banks to finance his bizarre deals.

In October 2001 TheMarker.com wrote about the Peled Group's dealings with Formula Systems (Nasdaq:FORTY). TheMarker.com wrote about the tens of millions of shekels Formula chairman Danny Goldstein managed to make on the deals without risking a thing. Assuming that there is no such thing as a free meal, we proffered an explanation: that the losers from the deal would be the banks and minority shareholders.

Goldstein, who did not want to join the group, himself admitted that the deal, in which he was assured of hefty profits while others assumed the risks, was very odd.

In October 2001, we baldly asked, do the banks understand what they are doing? Did Peled understand what he was doing? We never received official answers, but the developments speak for themselves: Peled led more and more peculiar deals and the banks continued to provide the group with backing.

We may assume that since we are discussing a company with such vast public exposure, the bank chiefs were aware of the loans that their credit departments approved for Peled.

The ISA has been investigating the Peled group for weeks, and yesterday released the group leaders on bail. As its probe progresses, the watchdog may find yet another resemblance to ducks: when seen from above, they seem to be effortlessly sailing along, but when seen from below, under water, their frantic paddling becomes evident.

But just like the banks that are frantically trying to regain their money as the Peled group approaches bankruptcy, thus too the ISA has woken from its torpor far too late. The stable doors are yawning wide, the horses are gone, and the corpses of the publicly traded companies that Peled and his gang took over are littering the landscape of the Tel Aviv Stock Exchange.