Former Leumi chiefs deny knowledge of US tax evasion

Galia Maor and Eitan Raff

Bank Leumi's admission that it helped US citizens evade tax has caused a rift with its former management.

Since the negotiations between Bank Leumi (TASE: LUMI) and the US authorities for a settlement, in which the bank admitted abetting tax evasion by its customers, rumors have circulated that relations between former Bank Leumi CEO Galia Maor and current CEO Rakefet Russak-Aminoach, Maor's protege, have become distant. A letter sent to the bank by Adv. Ram Caspi, who represents Maor and other former Bank Leumi senior executives, indicates the estrangement and disputes that have arisen concerning the handling of the affair with the US authorities. Maor and former Bank Leumi chairman Eitan Raff believe that the bank should not have admitted to helping US customers commit tax evasion.

"Officeholders acted in complete good faith in the performance of their duties on behalf of the Leumi Group, and they deny and contest any allegation that they knew, or should have known, that the corporations allegedly and knowingly helped US taxpayers evade payment of taxes, or that they were negligent in this matter," Caspi wrote. He added, "In order to eliminate any doubt, if, against the wish of the officeholders, the settlements with the US authorities include any statement or declaration of this nature (abetting tax evasion, I.A.), this does not bind them or have any effect on them through any other or additional legal proceeding."

Caspi, who represents Maor, Raff, Zvi Itskovich, and Benjamin Naveh, sent the letter three weeks ago, following the filing of a derivative suit in the name of Bank Leumi against its former officeholders in respect of their responsibility for the bank's embroilment in this affair. It appears that the former Bank Leumi executives are preparing for the expected hearing in the case.

The letter was sent before the agreement between Bank Leumi and the US authorities was revealed. "Unfortunately, a copy of the draft settlement with the US authorities has not yet been sent to us, and we therefore regard it as proper to send you this letter," Caspi wrote, indicating also that relations between the preceding management and the current management have become formal.

"We believe that it should be made unmistakably and positively clear that any statements and admissions whatsoever, if any, included in the settlements with the authorities concerning allegedly deliberate assistance to US taxpayers in tax evasion were not with the consent of the officeholders of the Leumi Group, and that such statements are not binding on them, and cannot affect them or their rights, including under insurance exemption and indemnification arrangements. This means that any comment or admission whatsoever of a factual nature of involvement or conclusions arising from it shall not apply to them, and shall not bind them," Caspi wrote.

Bank Leumi's settlement with the US authorities is a deferred prosecution agreement, meaning that the bank admits guilt, pays a fine, and is on probation for two years, during which it is subject to severe regulation and compliance requirements. If it meets these requirements, the intent to file a claim against it is withdrawn. In his letter, Caspi wrote that a settlement of this kind was liable to have negative consequences for the current request for approval of the lawsuit, additional legal proceedings, exposure of Leumi Group companies, and the officeholders' exemption, indemnification, and insurance arrangements. All of these led to the sending of the letter and its request for clarifications.

Published by Globes [online], Israel business news - www.globes-online.com - on December 28, 2014

© Copyright of Globes Publisher Itonut (1983) Ltd. 2014

Galia Maor and Eitan Raff
Galia Maor and Eitan Raff
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