The battle to make the former chairman of Bank Leumi, Eitan Raff, and former CEO Galia Maor return the bonuses they earned over the years is not a revenge campaign. It’s not meant to punish these executives or deter people who no longer work at the bank anyway. It’s simply shareholders’ reckoning with the officers who were responsible for managing the company.
- Attorney general to examine Bank Leumi's U.S. settlement
- Documents detail how Leumi aided clients to evade U.S. taxes
- Bank Leumi to pay $400m for U.S. tax settlement
- Israel's Bank Leumi gave the U.S. data on former customers
- Israeli bankers could face criminal probe over helping U.S. tax evaders
Leumi has admitted in an administrative settlement that in the years 2001-2011 it aided American citizens evade U.S. taxes. It is reasonable to assume that a significant portion of its profits at the time stemmed from this activity. The bank agreed to pay a penalty of around 1.6 billion shekels ($400 million), not including 250 million shekels for its lawyers. If Raff and Maor were still in office today, it’s doubtful they would keep their jobs.
As part of the lessons learned from the greed for risk at U.S. banks and investment houses that led to the world financial crisis of 2008, today’s employment contracts for top executives include clauses allowing a "clawback" of bonuses. That is, bonuses can be returned because of actions that seemed profitable at one time but turned out to be loss-makers.
Raff and Maor’s contracts did not include such clauses. Still, the two don’t need to hide behind a wall of legal defense.
Decency requires them to return their bonuses and not pass the results of their actions on to shareholders, many of whom are the public. The State of Israel owns 6 percent of Bank Leumi; the insurance companies and other institutional investors who manage the public’s investments and savings also own big stakes. In the end, we’re talking about the Leumi executives who let certain activities produce a major fine.
The bank, now led by Chairman David Brodet and CEO Rakefet Russak-Aminoach, decided that signing the administrative agreement in the United States was good for the company. They must ensure that the people responsible bear the burden for the fine, not just the public.
At the order of Attorney General Yehuda Weinstein, a team to examine whether this affair violated Israeli law was established this week. This probe is important, but the state as a shareholder, as the entity responsible for supervising banks and with influence over institutional investors, must use all legal means available to force Bank Leumi to get back the money that its executives unjustifiably made.