February 18, 2018 / 9:31 AM / a year ago

UPDATE 2-Israeli police arrest more executives from Bezeq Telecom

(Updates with fresh Netanyahu comment)

By Tova Cohen

TEL AVIV, Feb 18 (Reuters) - Israeli police made arrests on Sunday that included senior executives from Bezeq after the markets watchdog uncovered new evidence in an investigation into the country’s largest telecom group, the regulator and police said.

The Israel Securities Authority (ISA) has been investigating Bezeq over possible fraud and financial reporting offences. The firm’s former chairman and other officials were arrested in 2017.

Israeli media reported investigators were looking into allegations that Bezeq received benefits in return for enabling favourable media coverage of Prime Minister Benjamin Netanyahu.

A statement issued by a personal spokesman to Netanyahu said all decisions related to Bezeq “were made according to recommendations of expert committees and expert officials.”

It also said the Justice Ministry had said in a state auditor’s report that Netanyahu’s decisions were “not controversial” and did not specifically favour Bezeq. The statement said the media had created “a new balloon” about the issue that would deflate.

Police recommended last week that Netanyahu be charged with bribery for receiving gifts from businessmen and for discussing a deal with the publisher of Israel’s best-selling newspaper for better coverage in return for curbs on a rival newspaper.

Netanyahu denies wrongdoing in both those cases.

The attorney general must decide whether to file charges against him, a decision that could take months.

Bezeq said in a statement to the stock exchange it had no additional information on the new investigation. A company spokesman declined to provide further details.

ISA said in June it was investigating suspicions that former Bezeq chairman Shaul Elovitch had meddled in the 2015 merger between Bezeq and its satellite TV unit YES for personal financial gain.

Elovitch, who owns the Eurocom Group that controls Bezeq, has denied any wrongdoing and has not been charged.

ISA said in November it had enough evidence to support criminal charges against senior Bezeq officials, leaving it to Tel Aviv prosecutors to decide whether to indict.

The police and ISA said in Sunday’s joint statement that “a new joint investigation was opened ... in which a number of suspects were arrested, including senior executives in the Bezeq group,” without giving further details.

A 48-hour gag order issued by a Tel Aviv judge prohibits publication of information that could identify the suspects.

The new investigation is expected to focus on suspicions that Bezeq received benefits in exchange for favorable coverage of Netanyahu on the Walla website also controlled by Eurocom, Israeli media reported.

Elovitch stepped down as chairman at the outset of the investigation in June and was temporarily replaced by David Granot.

Activist investor Elliott disclosed on Jan. 16 it held 4.8 percent of Bezeq and called for the resignation of all directors implicated in the investigation and those affiliated with Eurocom.

Elovitch is under pressure to sell Eurocom, which has nearly 1 billion shekels ($282 million) in debt.

Bezeq shares were down 0.1 percent on the Tel Aviv Stock Exchange on Sunday.

$1 = 3.5455 shekels Additional reporting by Ari Rabinovitch, Maayan Lubell and Ori Lewis in Jerusalem, Editing by Toby Chopra and Edmund Blair

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