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Israel's Bezeq seeks new board members amid police investigation

FILE PHOTO: The logo of Bezeq Israeli Telecommunication Corp Ltd, the country's largest telecom group, is seen outside their headquarters in Tel Aviv, Israel June 21, 2017. REUTERS/Amir Cohen/File Photo

By Tova Cohen

TEL AVIV (Reuters) - The parent company of Bezeq Israel Telecom (BEZQ.TA) is seeking to appoint new board members to replace three directors who submitted resignations amid a police investigation of fraud and other securities offences.

The resignations were sought by minority shareholders in the wake of the investigation by Israel's markets regulator last year. The probe threatens to create a power vacuum at Israel's largest telecoms group.

Former Bezeq chairman Shaul Elovitch said he would step down from the board as would his son and daughter-in-law, parent company B Communications (Bcom) (BCOM.TA) said on Monday.

Elovitch, a family friend of Prime Minister Benjamin Netanyahu, who controls Bezeq through Bcom parent Eurocom, was arrested last week.

Bezeq CEO Stella Handler was also arrested last week in connection with the Bezeq investigation over allegations including fraud, bribery and securities offences. She was released from police custody to house arrest on Monday until March 4. Handler must stay away from Bezeq for 30 days.

They all deny any wrongdoing.

Shaul Elovitch was ordered by the court on Monday to remain in police custody until March 4.

Handler's release followed a news report on Channel 10 television that disclosed WhatsApp messages between an Israel Securities Authority (ISA) investigator and the judge in the Bezeq case that show the two coordinated extending the detention of some of the suspects.

The judge and investigator have recused themselves from the case and a new judge has been appointed.

ISA Chairwoman Anat Guetta said this was an "unusual and serious incident that should not occur, but did," and was being investigated.

Bcom is proposing former Bezeq chairman Shlomo Rodav and Doron Turgeman -- CEO of Eurocom subsidiary Internet Gold (IGLD.TA) -- as board members.

In addition, a group of investors led by U.S.-Israeli businessman Naty Saidoff has proposed biotechnology executive Tamir Cohen as a board member. An offer for the indebted Eurocom from Saidoff's group has been accepted by Eurocom's creditors and submitted to court for approval.

A source close to Bezeq said the company's board would meet on Tuesday to discuss the changes.

Elovitch last June temporarily stepped down as chairman of Bezeq and was replaced by acting chairman David Granot.

Amid a 29 percent drop in Bezeq's shares in 2017, activist investor Elliott, which has a 4.8 percent stake, has called for the resignation of all Bezeq directors implicated in the investigation and those affiliated with Eurocom.

(Reporting by Tova Cohen; Additional reporting by Steven Scheer. Editing by Jane Merriman)