Three former top executives at Bank Leumi will return part of the bonuses they received when the bank helped many of its American clients to avoid paying tax in the years 2002-10, Israel’s second-largest lender said yesterday.
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Former CEO Galia Maor, former chairman Eitan Raff and Zvi Itskovich, who had headed the bank’s international private banking division, will return 11% of the bonuses they received during those years, or 5.1 million shekels ($1.3 million). More than half the total, 2.6 million shekels, will come from Maor, Leumi said.
Leumi agreed to pay a $400 million penalty to the U.S. and New York State tax authorities last December to settle two separate investigations into whether it helped American clients, largely in its Swiss unit, evade taxes.
The penalty represented 11% of its total profits in those years, which is why the former executives were told to repay a similar portion of their bonuses. In addition, the committee recommended that the bank recoup $92 million from insurance policies covering board actions.
An independent committee, headed by retired judge Ori Goren, had been named to examine the conduct of the bank’s board and senior management in the tax affair and determine what steps should be taken. The three former executives had earlier informed the committee they agree to repay the amount requested in order to bring the matter to a close, but yesterday they continued to defend their actions.
“The executives believe that their conduct at the bank in connection with the accounts of American clients they did in accordance with the law and banking norms accepted by the domestic and global banking system,” they said in a statement, noting that the committee had no legal right to ask for any money back in return.
“At this stage in their lives it is worthwhile to bring this matter to a final conclusion in every aspect, so the executives agreed to the request of the committee,” the three said.
Leumi said its board of directors had voted to accept all of the panel’s recommendations and submit them to the Tel Aviv District Court for approval.