Testimony by clients of Bank Hapoalim accused of using the bank to evade U.S. taxes have asserted that Hapoalim bankers took an active role in the process, undermining claims by the bank that its exposure to penalties will be less than other Israeli banks.
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Hapoalim bankers’ role in helping clients evade taxes came in testimony given December 17 in Los Angeles where the clients recounted the alleged role of the tax advisers David and Nadav Kalai in steering them to Hapoalim.
Bank Leumi settled in December with U.S. and New York State authorities, agreeing to pay $400 million in penalties in connection with similar accusations also involving the Kalais. But Hapoalim has told Israeli regulators that it has not heard from the U.S. investigators about the matter since 2011 and that, unlike Leumi and Mizrahi Tefahot Bank, no specific allegations have been made against it.
But in his testimony to the court, Moshe Nativ, an Israeli who now lives in California, said that when he approached David Kalai about advice on taxes from money he earned selling the startup company WinNet in the year 2000, Kalai suggested that he deposit most of the money in a Hapoalim account in Luxembourg.
Nativ told the court that Kalai advised him to have about $2 million of the $2.4 million due him deposited in a Hapoalim Luxembourg account opened in the name of a foreign company to avoid taxes. He alleged that Kalai arranged a meeting with a Hapoalim banker who had the forms ready to be signed.
Nativ alleged that a Hapoalim banker helped him set up the offshore company and even suggested its name. Later, in 2003, the bank twice recommended changing the name and domicile of the company and took care of the arrangements, he asserted.
Another Hapoalim client, a television producer named Alex Yazlovsky, alleged that Nadav Kalai offered similar advice to open a foreign bank account via an offshore company to conceal money he earned from the tax authorities. He asserted that Hapoalim, like Leumi, flew executives over to the U.S. to help him open the account.
Kalai told him Luxembourg was the best place to open the account because of minimal reporting requirements, Yazlovsky alleged. Kalai recommended Hapoalim because of his good connections with the bank and that his father, David, knew someone at the bank who would arrange everything, Yazlovsky said.
Yazlovsky said he flew to New York to meet the Hapoalim banker and deposited over time some $2.6 million in money paid him from Russian television broadcasters. He claimed to have closed the account in 2008 as the U.S. opened an investigation into the Swiss bank UBS amid suspicions it helped clients evade taxes.
Hapoalim will be publishing its 2014 financial reports on Tuesday, in which it is expected to disclose for the first time provisions it has taken against expected penalties it will pay the U.S. The bank has been making set-asides but until now has classified them under “other expenses” in its financial reports.