(Bloomberg) -- Israeli police detained Rami Levy, the controlling shareholder and chief executive officer of the eponymous supermarket chain, as part of its investigation into suspected fraud in the development of a shopping center he built. His company's shares fell the most in six years.
The police said early Sunday that it had detained several unidentified people for questioning, including the head of a local council, a newspaper editor and two prominent businessmen in connection with a mall. Levy was identified as one of the two businessmen, according to a Tel Aviv Stock Exchange filing the company submitted on Sunday.
The mall in question is located in Mevaseret Zion, a suburb of Jerusalem, and doesn't belong to the company, a Rami Levy spokesman said.
Rami Levy shares slumped as much as 8.6 percent on the news. The stock regained some of the losses, trading down 6 percent at 172.10 shekels at 1:29 p.m. in Tel Aviv. Trading volume was 7.4 times the three-month average, according to data compiled by Bloomberg.
Rami Levy chain grew the chain to one of Israel's biggest from a small hole-in -the-wall store in Jerusalem by marketing it as the cheaper alternative to the dominant grocers. That sparked what the local media dubbed the “Chicken War,” which in 2008 brought the price for the meat to an unprecedented 1 shekel per kilo (2.2 pounds).
The police probe of Levy is essentially taking aim at the company's brain trust, according to Ilanit Sherf, head of research at Psagot Securities Ltd. in Tel Aviv.
If the investigation spreads, “it will have negative consequences for the company, especially because the controlling shareholder also runs the company,” she said. In the immediate term, however, there are “no economic implications” for the company, Sherf added.
Rami Levy, the CEO, didn't reply to calls and text messages seeking comment.
--With assistance from David Wainer
To contact the reporters on this story: Alisa Odenheimer in Jerusalem at aodenheimer@bloomberg.net, Yaacov Benmeleh in Tel Aviv at ybenmeleh@bloomberg.net.
To contact the editors responsible for this story: Shaji Mathew at shajimathew@bloomberg.net, Amy Teibel, Mark Williams
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