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Cabinet Calls for Tough Laws to Regulate Government-owned Firms Follows Netivei Neft Probe

May 1, 1972
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The Cabinet today called for tough new laws to regulate the activities of government-owned corporations. The decision that such legislation is needed was announced after a five-hour session held in the wake of a bitter controversy over the findings of a three-man government panel investigating alleged scandals in the operations of the Netivei Neft oil company.

Attorney General Meir Shamgar told reporters after the session that the new legislation would probably take several months to enact and that it would have to establish a completely new authority to supervise the government firms. Under present laws, State-owned firms are virtually independent or government control once they are officially registered by the State Registrar of companies. The government, however, reserves the right to dismiss the management of such firms.

Whether it would have done so in the Netivei Neft case remains a moot question. Mordechai Friedman, managing director of the company operating captured Egyptian oil wells in the Sinai, resigned Friday amid a public clamor for his ouster even though the panel had cleared him by a 2-1 vote of charges of wrong-doing.

The majority findings of the government investigating committee were widely attacked for allegedly condoning unethical practices. Friedman was bitter. After handing his resignation to Finance Minister Pinhas Sapir, the oil executive claimed that he was “a victim of a demon’s dance, a witch hunt and dangerous hysteria in the streets.”


The Cabinet today was to have taken up the panel’s findings in the Netivei Neft case, including the recommendation by the minority member that Friedman be dismissed. Instead it assailed those persons casting “aspersions” on the panel and criticized the panel itself for having questioned the competence of Deputy Finance Minister Zvi Dinstein whose task it was to oversee the operations of Netivei Neft.

The panel’s majority report, concurred in by its chairman, Supreme Court Justice Albert Vitkon and industrialist Avraham Kalir, faulted Dr. Dinstein for falling to lay down clear guidelines for Netivei Neft but conceded that this was an administrative shortcoming and not a reflection on Dinstein’s integrity. The minority member, Reserves Maj. Gen. Meir Zorea, was tougher on Dinstein, claiming that his lack of proper supervision disqualified him from passing on Friedman’s merits.

The Cabinet, nevertheless, thanked all members of the panel for their work. Shamgar said the proposed new controls will entail a greater expense than is now devoted to the purpose by the Finance Ministry and will necessarily be complex in their operation. They will have to take into account the different functions of State-owned corporations which range from supplying electric power to producing phosphates for export, the Attorney General said.

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