Dankners in the dock

THE situation of Nochi Dankner, one of Israel’s most prominent businessmen, went from bad to worse this week. In December he lost his grip on his heavily indebted business empire, IDB Holding Corporation, when a court approved a rescue plan supported by the group’s creditors that handed control to two rival entrepreneurs. On June 30th prosecutors indicted Mr Dankner for securities fraud, accusing him of manipulating the stockmarket to ensure the success of a sale of shares in the group in 2012. He denies wrongdoing.

In May Dan Dankner, a cousin of Nochi, got a three-year jail sentence for bribery and money laundering. That Mr Dankner is a former chairman of Bank Hapoalim, Israel’s biggest bank, and a director of his family’s salt-mining company. He was convicted for his part in a scheme in which Holyland Development Company, a property firm, paid bribes to politicians, including a former prime minister, Ehud Olmert, who was sentenced on the same day. Two Holyland executives, as well as other politicians and officials, also got jail terms.

These legal moves should help to assuage the anger of those Israelis who took to the streets in 2011, in mass middle-class protests against the business elite. Indeed, the judge in the Holyland case used similar language to the protesters, denouncing the defendants’ “covetousness”, “swinishness” and “betrayal of public trust”.

The courts may be doing their part, but the current prime minister, Binyamin Netanyahu, has yet to deliver fully on his promise to break the grip that a narrow group of “tycoons” have on the country’s domestic economy. The cost of living—the focus of the protests in 2011—remains high. Social-media sites are full of kvetching about how much cheaper things are in America and Europe.

People blame the power of around 20 family-controlled conglomerates with fingers in many pies. IDB is into everything from mobile telecoms and supermarkets to property and insurance. Typically, the groups include a financial arm that provides credit to the rest. This especially worries Mr Netanyahu: “One percent of the businesses receive an inordinate amount of the loans,” he said in April, “That means that a lot of other businesses that could have been successful didn’t receive loans.”

To change all this, and give new competitors a chance, in December the Knesset passed a “concentration law”, which will force the conglomerates to separate their financial and non-financial arms. It will also stop the tycoons using “pyramid” shareholding structures, in which their holding companies own stakes in a cascade of intermediary firms, letting them keep control with a minority of the equity. But the law is being phased in over six years, and it will still leave 60% of the banking market, by assets, in the hands of two institutions, Hapoalim and Bank Leumi.

In the meantime, the government has seemingly gone in the opposite direction to its trustbusting rhetoric by recently awarding a single consortium the right to exploit two big gasfields in the Mediterranean—in effect, creating a powerful new energy monopoly. Ministers argue that only the prospect of rich pickings would encourage the group’s foreign investors to back the scheme, since they risk exclusion from projects in Arab countries for doing business with Israel.

Five years into this, his second stint as prime minister, Mr Netanhayu still says all the right things about doing away with crony capitalism and promoting more vigorous competition. But the worry is that his reformist zeal is running into the sand. Former government advisers say he is tiring of confronting vested interests and that his free-market economy minister, Naftali Bennett, a software entrepreneur turned politician, has become distracted by defending the settler movement, which his party supports. For the middle-class protesters who swarmed onto Israel’s streets three years ago, the promised land of increased competition and lower prices remains a distant dream.