Hapoalim set to pay $870m to settle US tax probes

Dov Kotler / Photo: Gadi Dagon, ira prohorov

The Israeli bank says it will include a further NIS 1 billion provision in its fourth quarter results.

Bank Hapoalim (TASE: POLI) reported today that it is set to pay US government agencies $870 million (NIS 3.11 billion) to settle the two international investigations in which it has been involved. The bank will include a NIS 1 billion provision in its fourth quarter results, which will detract from its bottom line. If the settlement is thus concluded, then a cloud that has overshadowed Bank Hapoalim for a long time would have been removed, and the bank would now be able to attend to its business, especially the coronavirus challenge.

Bank Hapoalim notified the Tel Aviv Stock Exchange (TASE) today that it is on the verge of an $870 million (NIS 3 billion) settlement in the case in which it was accused of abetting tax evasion by its US customers. The fine is far greater than the fines paid by Bank Leumi (TASE: LUMI) and Mizrahi Tefahot Bank (TASE:MZTF), which have already settled their cases. The damage to Bank Hapoalim is not limited to the fine, which does not cover very sizeable expenses for lawyers and other consultants. Based on previously published figures, it appears that the bank paid a total of NIS 1.3 billion for legal and other expenses in the case.

Bank Hapoalim announced that these fines were "in accordance with the indications that we received from the teams handling the investigation on behalf of each of the US authorities." The bank will therefore include an additional $259 million (NIS 897 million) provision to the $611 million provision that it made in its previous financial statements.

Bank Hapoalim will also pay $30 million (NIS 103 million) to the US government for its part in the bribery affair involving FIFA, the governing body of world soccer, in order to settle the case. A provision for this amount will be made in the bank's fourth quarter reports.

Dov Kotler, who took over as Bank Hapoalim CEO early in the fourth quarter of 2019, is responsible for settling these cases, long after Bank Hapoalim and Mizrahi Tefahot Bank settled their cases.

Mizrahi Tefahot Bank paid the US $195 million, while Bank Leumi, the first Israeli bank to settle its case, paid $400 million. The three cases were part of a far wider investigation of a long list of foreign banks by the US authorities going back a decade on suspicion of abetting tax evasion by their customers who were US citizens.

Bank Hapoalim announced today that it had reached agreements whereby it would sign an information (a statement of criminal charges that does not require approval by a grand jury) issued by the US Department of Justice concerning the bank's activities in Israel as well as by Hapoalim Switzerland. Hapoalim Switzerland will sign a plea bargain with the Department of Justice. Bank Hapoalim also reached a settlement with the financial services department of the State of New York and with the US Federal Reserve Board, the US central bank.

Bank Hapoalim also announced that like the other two Israeli banks that were involved in charges filed by the US government, which have already settled them, it was appointing "as required by the Israel Supervisor of Banks" an independent committee. This committee will "examine in their entirety the management processes and auditing processes that allowed the deeds that were the subject of the US affair to take place, in particular the aspects of corporate governance and behavior of the bank's senior management and board of directors. This committee, headed by Supreme Court Justice (ret.) Yoram Danziger will formulate recommendations. Bank Hapoalim added, "The committee will also consider whether the good of the bank justifies instituting proceedings or other measures against any third party and/or reaching other arrangement," meaning reimbursement of bonuses by former Bank Hapoalim executives, for example.

With the closing of these two international affairs, Kotler is close to completing his handling of all of the hot potatoes left on his desk when he entered his position, with the exception of the sale of BankPozitif, Bank Hapoalim's activity in Turkey. He has already signing a new collective labor agreement at Bank Hapoalim.

At the same time, Kotler, like the rest of the financial system, particularly the banks, is now dealing mainly with the sudden halt in economic activity due to the coronavirus and the efforts to contain it. As of now, it appears that the economic paralysis will both increase the volume of the bank's debt that is not repaid and increase the taking of new debt by individuals, businesses, and companies left without revenue at the present time.

Published by Globes, Israel business news - en.globes.co.il - on March 18, 2020

© Copyright of Globes Publisher Itonut (1983) Ltd. 2020

Dov Kotler / Photo: Gadi Dagon, ira prohorov
Dov Kotler / Photo: Gadi Dagon, ira prohorov
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