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Bank of Israel employees received excessive benefits worth millions of shekels each, according to a report of unprecedented severity published yesterday by State Comptroller Micha Lindenstrauss.

The allowances were camouflaged by senior management under the names of normal public-sector benefits, despite being something completely different. The most senior managers at the bank were complicit in awarding and hiding the benefits.

These were headed by former personnel division head Ephraim Gross and former director general Oded Hezroni. Former Bank of Israel governors David Klein and, apparently, Jacob Frenkel knew what was going on.

In the wake of the report, the Finance Ministry wages division is likely to demand that most of the senior Bank of Israel figures, including some who have left the bank in the last five years, return sums totaling hundreds of thousands of shekels each.

At the top of the list of those who will have to return money are senior managers who authorized the wage arrangements at the bank and benefited from them themselves to the tune of millions of shekels. Hezroni received retirement benefits of NIS 1.9 million, in addition to a pension paid to him by the bank.

Gross also received NIS 1.8 million in addition to a pension, and former governor Klein, who unjustly received at least NIS 180,000 in addition to his pension. As well as these, six other senior managers received improper retirement benefits of NIS 1.3-2.8 million each, also on top of a regular pension.

The state comptroller calls the conduct of the bank "inappropriate and improper administration."

One item that he uncovered in his report was defined as possibly criminal, and the comptroller transferred the case to the attorney general, who will decide whether to order a police investigation. The case in question is that of employees who were not entitled to a full pension, who asked a doctor to authorize larger benefits on health grounds, in contravention of regulations stipulating that only a special committee can authorize increased benefits. All employees who requested the larger pensions received them.

The comptroller's findings are especially serious, given that there is no budgetary supervision of the Bank of Israel; the bank determines its own budget.

The comptroller found that the bank exploited its budgetary freedom to award improper, disproportionate, unacceptable and possibly even illegal benefits to employees.

The management also gave itself benefits, since the managers had the same terms as the employees, and therefore there was a serious conflict of interest in management's conducting wage negotiations with the workers.

As a result, the wage system at the bank included all kinds of creative inventions, which have no parallel in the rest of the public sector. Therefore, all of the managers at the bank automatically received seniority of 40 years, thereby also gaining a 0.6 percent pay rise every year, something only given in the rest of the public sector after 25 years.

The report also shows that employees and managers received extra pay disguised as professional training allowances, special vacation, sick pay and special health allowances.

The benefits are estimated to have totaled millions of shekels per year. Most of them did not appear on the employees' wage slips and were mostly paid upon retirement or randomly over the years.

There were also special arrangements for employees to receive loans, and for writing loans off. These loans totaled NIS 222 million. The bank wrote off loans worth NIS 7.1 million. The comptroller is demanding that these arrangements be canceled and calls it an inappropriate benefit.

The comptroller called on the bank to return the money that was improperly paid to workers and managers to the state.

The report shows that former governor Klein continued to accrue 4 percent to his pension every year after he was appointed governor, whereas regulations stipulate only 2 percent. Because of this, 7 percent was added to his pension based on his wage of NIS 43,527. This means that he improperly received NIS 3,000 per month, or a total of NIS 180,000 during the period between 2000-2005 when he served as governor.

Hezroni, who retired recently, received NIS 1.88 million on his retirement. Gross, who served as head of the personnel division, received NIS 1.824 million when he retired. Gross, Klein and Hezroni all participated in meetings in which workers' terms and conditions were discussed.

The report also shows that seven other senior managers who retired between 2000-2005 received one-time payments, mostly by redeeming special vacation allowances, training payments and sick days. Some of them also received additional payments totaling NIS 13 million.