Israeli investigators examining Bank Leumi’s role in helping its American clients evade U.S. taxes believe there is a basis to open a criminal investigation into the affair, although the final decision is in the hands of Attorney General Yehuda Weinstein.
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One source told TheMarker on Monday that a criminal probe was likely to begin soon, and that it would involve the bank’s highest executives at the time. Most of the officials involved in what has been designated a preliminary examination believe there is enough evidence to warrant a criminal investigation.
Weinstein formed a team in January to examine the civil and criminal implications of a $400-million settlement Leumi made with U.S. and New York State authorities last December to settle accusations. The United States reserved the right to begin criminal prosecutions against individual Leumi executives and might use evidence uncovered by Israel in their own cases.
On Monday, the Justice Ministry declined to confirm or deny the reports. “It should be made clear that the team has not yet given its conclusions to the government’s attorney general, and so no operative decisions have been made,” a spokesman said in a statement.
Leumi said its discussions with the examining team led it to believe that no decision on a criminal investigation had been made. “It’s clear that someone is trying to influence the decision of the government’s attorneys general. The bank is confident all decisions will be taken in a professional and businesslike manner,” it said.
The attorney general’s team, which is headed by Paul Landes – the head of the Anti-Money Laundering Authority – would have to conclude that Leumi also violated Israeli law when it advised American clients how to evade U.S. taxes.
The issue is sensitive given the fact that a criminal probe of Leumi, Israel’s second largest bank, could undermine its banking relationships with institutions overseas. Leumi said in January it was confident it hadn’t violated Israeli law.
The criminal probe would most likely encompass the bank’s two top officers at the time – CEO Galia Maor and chairman Eitan Raff – as well as Zvi Itzkovitz, who was head of private banking.
They now have insurance coverage through Lloyd’s totaling 60 million shekels ($15.3 million) to cover any liability connected with the affair. But if they face a criminal investigation, they stand to lose the coverage. If so, Leumi shareholders seeking redress will only be able to go after the executives’ personal assets.