Israeli Aerospace Firm Accused of Giant Fraud

MANHATTAN (CN) - Israeli Aerospace Industries and Elbit Systems looted ImageSat International of "hundreds of millions of dollars," shareholders claim in Federal Court. ImageSat was formed "to commercialize the Israeli military satellite program."

"Imaging is the investment vehicle of a group of primarily United States private equity funds, state pension funds and institutional investors that were solicited to invest in ImageSat to commercialize the Israeli military satellite program after the Israeli Ministry of Defense ('IMOD') lost funding for the program due to a series of failed launch attempts," the complaint states.

Lead plaintiff Imaging Holdings is a shareholder in ImageSat "and is the largest independent investor in the company by a significant factor," it states.

Israeli Aerospace Industries is the largest shareholder of ImageSat and controls the company, along with Elbit Systems, according to the complaint.

Plaintiffs claim the defendants, including individual board members, "breached contractual and fiduciary duties, engaged in self-dealing, and defrauded Imaging. ... IAI and Elbit have raided the company of hundreds of millions of dollars of value. Contrary to their representations to Imaging when they were seeking substantial U.S. investment into ImageSat, IAI and Elbit have utilized the company's funds and Imaging's investment to build their own satellite program, employ hundreds of people, facilitate expansion of research and development funding for their own derivative satellites and payloads, and now directly compete with ImageSat in direct contravention of their contractual obligations."

Also named as defendants are Elbit Systems Electro-Optics Elop Ltd., David Arzi, Joseph Gaspar, Gino Pipernobeer, and Yoav Chelouche.Plaintiffs demand more than $500 million in compensatory damages, and punitive damages. They are represented by with Stephen Baldini with Akin Gump Strauss

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