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Press Releases

Bank Leumi’s Board of Directors has adopted the recommendations of the Independent External Committee established to examine the affair involving US customers

October 12, 2015




The Committee recommends adopting an arrangement proposed by the insurers of former officers of the Bank, ending once and for all any claims against the Bank and its employees in connection with the affair involving US customers, against payment to Leumi of an unprecedented amount of $92 million (approximately NIS 360 million).


The Committee also recommends that three former senior officers of the Bank - Eitan Raff, Galia Maor and Zvi Itskovitch - will repay the bank a total amount of NIS 5.1 million, representing 11% of the bonuses granted to them (in gross terms) during the period of the affair involving US customers. 


The independent external committee, which was established by the Leumi Board of Directors in order to examine the factual and legal chain of events in the affair concerning US customers - and to recommend the correct course of action to be taken by the Bank - presented its final report to the bank's Board of Directors. The Board has decided to adopt the conclusions and recommendations in full. The committee's report was submitted today to Tel-Aviv District Court Judge Khaled Kabub.


The Committee was headed by former President of the Tel-Aviv District Court, Uri Goren, and its members were: former Jerusalem District Court Judge Orit Efal-Gabay; Dr. Lea Paserman-Jozefov, an expert in securities law capital markets; Prof. Yedidia Stern, an external director at the Bank and an expert in corporate law; and Dr. Samer Haj-Yehia, a director at the Bank and an expert in banking and capital markets. Both directors were appointed to their positions after the period relevant to the affair. The Committee was also given external legal counsel by Dr. Asaf Eckstein from Bar-Ilan University.


The Committee was formed earlier this year following a number of legal claims, both in Israel and in the United States, for approval of derivative actions and approval of a class action lawsuit filed against officials in the Leumi Group and against subsidiaries of the Group. The subject of the claims was damages caused to the Bank due to events that led to the signing of a settlement with the US authorities at the end of 2014, a settlement under which Leumi paid the authorities a fine of $400 million.


The Committee’s role was to review and recommend to the Leumi Board of Directors the desired legal course of action for the Bank, in light of all the circumstances and proceedings relating to the affair. The Committee conducted a broad and in-depth factual analysis of the US customers affair, including cross-border activities that took place in Israel, the US, Switzerland and Luxembourg during the years 2002-2010.


The Committee's work took over seven months, during which it held dozens of meetings. As part of its work, the Committee analyzed a huge volume of documents submitted to it by the Bank and by external experts. Various parties from Israel and abroad appeared before the Committee.


The Committee also conducted intensive discussions with representatives of the Bank's former officers, and their insurers, and reached unprecedented agreements with them, which were submitted as part of the Committee's recommendations for approval of the Court.


The recommendations of the Committee to the Board of Directors were as follows:


●  As a final and absolute dismissal of all the claims against the Bank and its employees in connection with the US customers affair, the insurers will pay the Bank a total of $92 million (NIS 360 million), in respect of a possibility of negligent behavior on the part of officials in the Leumi Group. Of this sum, Leumi's captive insurance company will bear a total of $26 million, in accordance with the Bank's insurance policy.


●  Three former senior managers will repay the Bank 11% of the gross bonuses granted to them during the period relevant to the US customers affair (2002-2010). This amounts to 22% of the bonuses net, after deducting tax.


This decision relates to Eitan Raff, who served as Chairman of the Leumi Board of Directors during this period, and as Chairman of Bank Leumi USA; Galia Maor, who served as CEO of the Bank and as Chairwoman of Bank Leumi Switzerland; and Zvi Itskovitch, who served as Head of the International & Banking Division, as Chairman of Leumi Luxembourg and as a director at Bank Leumi Switzerland.


The Committee was of the opinion that the measure of the bonuses to be repaid by the former officers should be derived from the measure of the damage caused to the Bank's profitability (during the relevant period), as a result of the settlement signed with the US authorities.


Accordingly, the ratio of bonuses that the former executives shall return, to total bonuses granted to them during the said period, should be identical to the ratio of the damage caused to the Bank as a result of the settlement reached with the US authorities ($400 million), to the profitability achieved by the Bank during the said period (over NIS 4 billion). As mentioned above, this ratio is 11%.


According to a calculation carried out by an independent external party, at the request of the Committee (the 'Suari' CPA firm), a rate of 11% of total bonuses granted to the three former officers, in the period relevant to the US customers affair, amounts to NIS 5.1 million. Out of this amount, NIS 1.7 million will be refunded by Eitan Raff; an amount of NIS 2.6 million will be refunded by Galia Maor; and an amount of NIS 800 thousand will be refunded by Zvi Itskovitch.


The three former executives informed the Committee that they agree to refund the said amounts, with the aim of ending the affair.