Leumi to Reclaim Bonuses From Executives After U.S. Tax Fineby
Bank will receive $93 million in agreed compensation
Two more Israeli banks have made provisions for fines
An independent panel appointed by Bank Leumi Le-Israel Ltd. recommended that a former chairman and chief executive officer both return bonuses after the lender agreed to pay a fine to U.S. authorities in a tax probe. An insurer for the former bank officials will pay an additional $92 million.
Leumi, Israel’s second-largest lender, agreed to a $400 million fine in December after a seven-year U.S. probe into offshore tax evasion focused on Switzerland. The settlement triggered investigations by Israel’s attorney general, state comptroller and banks regulator.
The independent panel, appointed by the bank to study responsibility for events leading to the U.S. inquiry, recommended three former executives, including former Chairman Eitan Raff and former CEO Galia Maor, return 5.1 million shekels ($1.3 million) to the bank, or 11 percent of their gross bonuses for the period relevant to the U.S. investigation. In addition, the panel said the bank should accept a compromise payment of $92 million offered by the executives’ insurers to settle all outstanding claims. The former officials said they agreed to return the amounts, Bank Leumi said in an e-mailed statement.
Leumi said its board decided to accept the recommendations of the panel, headed by a former judge, established after claims were filed in Israel and the U.S. against the company’s executives in relation to the tax probe.
“The insurance settlement payment will reduce the damage to Leumi from the fines paid and will positively impact its financial results,” Meir Slater, head of research at Bank of Jerusalem Ltd. in Tel Aviv, said by phone. “The panel’s message is that just that as executives get compensated for their good work, they have to take responsibility for the negative results of their actions.”
Galia Maor, who served as Leumi’s president and chief executive for 17 years, was the mentor of current CEO Rakefet Russak-Aminoach, who replaced her in 2012. Eitan Raff served as chairman for 15 years, according to data compiled by Bloomberg.
The board studied the bank and its management performance regarding events related to its U.S. clients in Israel, the U.S., Switzerland and Luxembourg between the years 2002 and 2010, Leumi said.
Leumi shares advanced 0.6 percent to 15.11 shekels at the close in Tel Aviv, bringing its year-to-date gain to 13 percent.
Two other Israeli banks, Bank Hapoalim Ltd. and Mizrahi Tefahot Bank Ltd., have set aside cash to cover costs resulting from the U.S. probe.
For Related News and Information:
Bank Leumi Is ‘Confident’ Co. Didn’t Violate Israeli Law
Bank Leumi to Pay $400 Million in U.S., N.Y. Tax Probes
Ex-Mizrahi Banker Said to Be Indicted in U.S. Tax Fraud Case
Legal headlines: TLAW
Bloomberg legal resources: BLAW
For more, read this QuickTake: Swiss Bank Accounts