Investment institutions are intervening in the Bank Leumi (TASE: LUMI) affair. The Association of Investment Houses in Israel today sent a letter to Bank Leumi chairman David Brodet and CEO Rakefet Russak-Aminoach demanding information and the suspension of the compromise agreement emerging in the derivative lawsuit against the bank's former executives, headed by former CEO Galia Maor and former chairman Eitan Raff.
Two weeks ago, Bank Leumi signed an arrangement with the US authorities, under which the bank will pay a fine of over NIS 1.5 billion, after admitting that it had helped its US customers evade taxes.
"As we understand it, the fine is to be paid from the bank's funds (i.e. at the expense of the bank's shareholders), while the officeholders and employees involved in the affair in the past and present are taking no responsibility and bearing none of the financial consequences from paying the fine. Furthermore, up until now, we have been shown nothing about the proceedings adopted by the bank itself with respect to the derivative lawsuits filed in this matter, including an examination of responsibility borne by the employees and officeholders," Association of Investment Houses CEO Julia Meroz wrote.
The Association, whose chairman is Psagot Investment House Ltd. CEO Hagai Badash, is demanding that the bank provide it with a series of particulars within a week. It is demanding the background to the settlement and its particulars and what measures have been taken to ensure that the settlement is consistent with the good of the bank and the investors "as distinguishable from the good of the officeholders."
The Association is also demanding particulars about the measures taken by Bank Leumi's board of directors and management for the purpose of determining the responsibility of past and present officeholders. The Association wants details of the measures taken in the context of the derivative lawsuits filed in this matter, "including those taken to safeguard the good of the bank and its investors and the bank's efforts to prevent a possible conflict of interest in its handling of this matter," Meroz writes.
A compromise settlement now is being reached in the derivative lawsuit filed against the banks' executive in this matter. In the framework of the compromise, the insurance company is scheduled to pay NIS 60 million on the officeholders' policy, while the former officeholders themselves will pay nothing.
"The Association is demanding the immediate suspension of any compromise in the matter before our comments on the requested information and particulars is obtained and the bank's insurance company and officeholders are informed about this demand," Meroz states.
The Association of Investment Houses cites the background to its letter, "It was recently reported that the bank had signed a plea bargain with the US authorities under which Bank Leumi is to pay an unprecedented $400 million fine. According to the reports, the plea bargain refers to the investigation by the US authorities, according to which Bank Leumi and its employees acted through the bank's various branches to conceal assets belonging to US customers for the purpose of evading payment of the required taxes," as Meroz puts it.
Published by Globes [online], Israel business news - www.globes-online.com - on January 6, 2015
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