A Bank of Israel draft audit report on the Bank Hapoalim's (TASE: POLI) handling of a sexual assault complaint against former CEO Zion Kenan reveals disagreements within the bank about whether to report the event to the board of directors.
Information obtained by "Globes" shows that Bank Hapoalim internal legal advisor Advocate Ilan Mazur advised former chairman Yair Seroussi to report the event to the board of directors. At the same time, Seroussi also obtained an opinion from an external lawyer, who said that it was not necessary to report to the board of directors. Seroussi chose to accept the recommendation by the external lawyer.
The Bank of Israel last week issued a draft audit report on the subject of the bank's actions in the affair. The report does not deal with the inquiry into the event itself - a complaint by a former employee that Kenan sexually assaulted her in Kazakhstan a decade ago; it focuses on the issue of reporting the event to the relevant parties in the bank and outside it. The Bank of Israel lacks the means or authority to handle the subject of sexual harassment. The police conducted an initial probe of the case, after which it decided to close the case without an investigation. The Bank of Israel report is not expected to lead the police to reopen the case.
As far as is known, the Bank of Israel report also did not deal with the question of the payment made to the complainant, and whether it involved compensation for her employment conditions, as Bank Hapoalim alleged, or a type of hush money. The audit report dealt mostly with the question of corporate governance, and why the event had not been reported to the Bank of Israel and Bank Hapoalim's board of directors.
In early November 2016, Channel 2 News revealed that a former Bank Hapoalim employee had complained that Kenan had assaulted her during a work trip to Kazakhstan in 2006. It was also learned that the bank had appointed Judge (ret.) Steve Adler as arbitrator in the case. While Adler did not find the complaint to be justified, he also awarded the employee increased compensation amounting to millions of shekels. The report aroused a storm and criticism of the large payment as being a type of hush money. Among other things, it was reported that Serouissi had not reported the event to the Supervisor of Banks and Bank Hapoalim's board of directors. The events culminated in Seroussi being forced to leave his post at the end of last year, with Advocate Oded Eran being appointed in his stead.
It is believed that the event was not reported because Kenan had already announced that he was leaving his job, and from concern that such a sensitive event would be leaked to the media (which happened in any case).
The Bank of Israel began looking into the case, while at the same time, it was learned that the police had begun an inquiry. Early this year, two months after the story broke, the Bank of Israel announced that it was suspending its probe until the police inquiry was completed. Seven months later, the police announced that it was closing the case. Following this announcement, the Bank of Israel said that it would resume its work on the report, stating, "Now that the police investigation is over, the Bank of Israel will rapidly complete the probe that it suspended at the request of the police." Three months have passed since then, and "Globes" recently wondered why publication of the report in the matter was being delayed. Channel 10 reported late last week that the draft report had finally been sent to the relevant parties for their comments. After the final report is completed, the Bank of Israel plans to publish the main points of the report to the public. At the same time, as far as is known, there is no plan at present to publish the full report.
Bank Hapoalim is currently faced with a similar incident involving sexual harassment. A senior bank employee posted on her Facebook page that a decade ago, a senior manager had kissed her against her will. "To this day, I don't understand why I didn't respond to attacks at the time; I simply moved my head and went my way," the employee wrote. "I told friends at work what had happened, and I made sure that he would not have another opportunity of doing it. To this day, however, I still have the feeling of helplessness I felt then when a man so highly placed in the system in which I worked, which could have such a material influence on my future career, took the liberty of doing such a thing, and I was afraid to react."
After the criticism of Bank Hapoalim's handling of the affair with Kenan, it appeared that the bank was trying to learn lessons from the event. This time, Bank Hapoalim quickly published a response saying that it intended to investigate the case, and even began processing the complaint. These two cases come on top of another affair of a sexual character at the bank several years ago, when it was reported that former Bank Hapoalim corporate division head Shimon Gal was in a relationship with a woman subordinate, and had promoted her. After this affair became known, Gal had to leave the bank. Bank Hapaolim appointed Judge (ret.) Dina Efrati to examine the case, but the results of her probe were not published.
In this case, also, the police checked whether the bank had handled the case properly, in view of the fact that there were rumors of a relationship between the Gal and the employee long before the affair was exposed. The police eventually decided to terminate its probe without opening an investigation. The woman employee later reached understandings with the bank, and received a senior position in one of its subsidiaries.
Published by Globes [online], Israel Business News - www.globes-online.com - on November 12, 2017
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