Leumi and Tefahot Implicated in Los Angeles Tax Evasion Case, Bloomberg Reports

According to an indictment against a former Israeli businessman, the alleged tax evasion took place between 2003 and 2010, and involved the opening of a bank account in Israel.

A former Israeli businessman now living in California, Zvi Sperling, has admitted that he was assisted by two Israeli banks to evade paying taxes in the United States, the Bloomberg news service reported Saturday.

The Bloomberg report relied on official documents submitted to the Federal Court in Los Angeles on Thursday in connection with a criminal case. The documents did not disclose the identity of the Israeli banks, but Bloomberg reported that Bank Leumi and Mizrahi Tefahot were the two institutions involved, citing unidentified sources.

Bloomberg reported the banks’ responses as follows: “Orit Reuveni, a spokeswoman for Bank Leumi in Tel Aviv, declined to comment on the company’s involvement in the case. ‘The bank has a long-standing policy of not discussing customer relationships,’ she said [Friday] in an email when asked about Sperling. “We have previously stated that we are among the international banks within the scope of a U.S. inquiry into tax matters involving U.S. customers.” No one answered the telephone at Mizrahi after regular business hours [Friday] in Tel Aviv.”

According to the indictment in the case, a banker from a bank in Los Angeles convinced Sperling to direct deposits from his American customers to a bank account in Israel. Sperling has agreed to plead guilty to conspiring with the banks to evade the payment of American taxes, Bloomberg reported. The news service also reported that Sperling has agreed to pay the taxes owed as part of a plea agreement.

The Israeli bank branch in Los Angeles allegedly then gave Sperling a loan backed by the deposits in Israel and in the process allegedly hid the income from the U.S. Internal Revenue Service.

For the Israeli banks implicated, the admission by the businessman could pose an additional difficulty in their relationship with American authorities, which have been investigating the banks’ activities for some time as part of an effort to halt tax evasion by Americans through the use of foreign banks.

According to the indictment against Sperling, the alleged tax evasion took place between 2003 and 2010, and involved the opening of a bank account in Israel through a power of attorney in the name of Orot Investments, a Caribbean-based firm. Sperling is said to have deposited about $4 million in the account.

The American authorities say the bank statements on the account were sent to the lawyer who allegedly served as power of attorney, who was said to have forwarded them onto Sperling by fax.

The indictment alleges that “Bank A,” which Bloomberg’s source reportedly said is Mizrahi, sought to cut off its dealings with Sperling in 2008, at which point he is alleged to have shifted the business to Bank B, which Bloomberg’s source says is Bank Leumi.

Limor Edrey