Leumi Close to $275 Million Settlement in U.S. Tax Evasion Case

Anticipated fine will have substantial impact on bank’s financials next quarter.

Bank Leumi's U.S. headquarters. Leumi is one of three Israeli banks embroiled in tax-evasion cases in the U.S.
Bloomberg News

Bank Leumi said on Sunday it was more than doubling the money it has set aside for a possible settlement over an investigation into claims that it helped Americans evade U.S. taxes, saying negotiations with the United States Justice Department were at an “intensive” stage.

The bank, Israel’s second-largest lender, told the Tel Aviv Stock Exchange it would increase the provision connected with the investigation by 460 million shekels ($133 million) to 950 million shekels ($275 million) for the second quarter, a move that it said would have a substantial impact on its financial results for the three months.

In addition to the fine, the bank said it will have lawyers’ and accountants’ fees adding up to another 200 million shekels. The fees were incurred at least in part in connection with the bank’s internal investigation to assess the extent of the alleged wrongdoing. All told therefore, the case could cost Bank Leumi 1.15 billion shekels.

Shares of Leumi closed down 0.4% at 13.83 shekels in TASE trading Sunday. The anticipated 950-million-shekel fine consists of paying taxes that the bank’s clients allegedly failed to pay to the U.S. Internal Revenue Service during the years 2002 to 2010 , as well as reimbursement of revenues generated by the bank from the clients. It may also include a fine in connection with the bank’s purported wrongdoing.

It is believed that the anticipated settlement with U.S. authorities will result in a fine but no criminal proceedings against Bank Leumi executives. Galia Maor was the bank’s CEO during the period under investigation.

Two other Israeli banks, Bank Hapoalim and Mizrahi Tefahot Bank, are also under investigation in the U.S., but those two banks say they cannot yet provide an assessment of the financial impact of the investigations. Based on information appearing in their financial reports, at this point they have only been asked to provide statistical data on the scope of their business with U.S. customers.