Investigations into Bank Leumi Intensify



Weeks after Bank Leumi agreed to pay the United States and New York authorities $400 million to settle the investigation into the bank’s assisting American clients in tax evasion, Israel’s Attorney General Yehuda Weinstein announced on Sunday, January 11, that he is creating a team to further examine to civil and criminal implications of Leumi’s settlement with U.S. authorities.

The probe will be coordinated by the Ministry of Justice and led by Deputy Attorney General Adv. Avi Licht, head if the Israel Money Laundering Prohibition Authority Adv. Paul Landes, and Tel Aviv District Prosecutor for taxation and financial matters Liat Ben-Ari. Israel Securities Authority chairman Shmuel Hauser and Israel Tax Authority director-general Moshe Asher will provide assistance as needed, either personally or through representatives.

On Monday, January 12, a source of the Justice Ministry, accentuated the fact that Weinstein’s office is not conducting an investigation at this time, but rather merely examining the implications the case has in Israel.

It was confirmed by a spokesperson from the Ministry of Justice that “in concluding the meeting the Attorney General decided to set up a joint team made up of enforcement and advisory elements in order to deepen the investigation; it will present its conclusions to the Attorney General for his consideration.”

A criminal probe into the bank’s dealings could have a far spread negative impact on the relationships between Leumi and other institutions overseas. Therefore, only if it is revealed in the examination over the next weeks that Israeli law was violated by Leumi, will there be a criminal investigation opened by the attorney general. However, whether there is a criminal probe or not, the opinions revealed by Weinstein, are sure to have a strong influence on civil suits against the bank and its executives.

Bank Leumi said it supports Weinstein’s decision to form the team and that its full cooperation will be provided.

On December 22, Leumi, Israel’s second largest bank, reached an agreement with the U.S. federal government and New York State.

Approximately $15.2 million, or 60 million shekels, of the settlement, which equals about 3.3% of the total fined to the bank, the British insurer Lloyds has agreed to cover. Under the agreement, the executives who were leading Leumi at the time are cleared of all liability. Controversy has been stirred by the compensation offered by Lloyds. The assertion made by two shareholders who have filed suits is that Maor, Raff and other Leumi executives should be held accountable and bear the cost of the settlement.

At the same time, the bank’s legacy shareholder, the Jewish Colonial Trust, along with the Finance Ministry have demanded that shareholders should approve any settlement.

After meeting on Sunday with the State Prosecutor’s Office, Justice Ministry officials, the Israel Securities Authority, the Tax Authority, the Banks Supervisor, the police, the Anti-Money Laundering Authority, and others, Weinstein made his decision.

The source from the Justice Ministry said, “As part of its examination, the team will have to investigate how much the bank in Israel was aware of the criminal aspects of the activities that were done, and if it acted in Israel to support illegal activities that were done overseas.”

If the team determines criminal proceedings are necessary, the bank’s executives would not have the pleasure of insurance coverage for the damages. A big focus of the investigation, among other things, will be whether the bank filed false reports with Israeli authorities, as it helped its clients evade U.S. taxes.

In response to Weinstein’s announcement, Bank Leumi made the following statement: “Bank Leumi has announced that it will not raise for discussion in the bank’s authorized forums any compromise settlement relating to claims against former officers before the joint team appointed by the Attorney General finishes its work and presents its findings. As it has stated in the past, the bank will cooperate fully with the team and will hand over all information as required. The bank is certain that it has not breached Israeli law.”


{ Israel}