Mizrahi Tefahot Bank (TASE:MZTF) has refused an offer by the US Department of Justice to settle an investigation against it on allegations that it helped US customers evade tax. The Israeli bank, managed by CEO Eldad Fresher, announced last night that the US Department of Justice had offered to end the probe in exchange for a $342 million fine. However, Mizrahi Tefahot decided, in a rare such decision involving concerns about US regulators, to reject the offer to pay the fine.
The fine proposed by the US regulator seems to be comparatively high. Bank Leumi (TASE: LUMI), which engages in a volume of activities in the US that is considerably higher than Mizrahi Tefahot, agreed a settlement of $180 million with the Department of Justice and an additional fine of $120 million with the New York regulator (to whom Mizrahi Tefahot has no exposure).
Mizrahi Tefahot wrote, "The letter from the representative of the US Department of Justice specified an amount with no details or principles upon which this sum was calculated. The aforementioned letter did come with an attached working draft document that could serve as the basis for a possible settlement, although the draft settlement itself was not approved, it did reflect the existence of negotiations for the purpose of reaching an agreed settlement as soon as possible."
Mizrahi Tefahot also wrote that the bank's board of directors had instructed its US lawyers to tell the Department of Justice that the offer was not acceptable because, "Any reasonable calculation based on the alleged behavior of the bank and its employees as described by the Department of Justice would lead to a very significantly lower sum than that being talked about."
Despite Mizrahi Tefahot's rejection of the offer, in all likelihood the bank will be required to set aside a certain amount in its upcoming financial reports due to these latest developments, and the bank remarked that it is considering this. To date, Mizrahi Tefahot has only set aside $45 million for this matter.
Published by Globes [online], Israel business news - www.globes-online.com - on August 8, 2018
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