Five years after being indicted in the Bank Leumi (TASE: LUMI) fictitious loans affair, former Bank Leumi central branch CEO and Leumi UK CEO Menachem (Miki) Friedman was convicted today of stealing NIS 30 million from the bank on behalf of others. The Tel Aviv District Court also convicted him on a number of counts of aggravated fraud, corporate fraud and breach of trust, corporate management violations, and conspiracy to commit a crime. He was also convicted of possessing stolen property, after NIS 2.3 million was found in his bank accounts and those of his children.

In her verdict, Judge Yehudit Amsterdam ruled that Friedman had approved the granting of solo credit to fictitious borrowers on the basis of fictitious financial wealth statements many times, with no real collateral and in contravention of the bank's procedures. Fictitious borrowers obtained a NIS 1.5-4 million loan within 15 minutes. "The loans were a small proportion of the loans granted by Bank Leumi's central branch, and the accused even managed to conceal them among the loans in the commercial section, so that their failure would not be noticed, until the auditor's attention was drawn to a loan granted to Stern (one of the borrowers, C.M.), and the entire facade collapsed," the judge wrote.

The judge said that Friedman had breached the trust given him by Bank Leumi management, "and the corporation suffered actual damage amounting to tens of millions of shekels in unrepaid loans. Furthermore, investors' trust in Bank Leumi was damaged; investors are liable to think twice before depositing their money in a specific bank, thinking it safer to keep their distance."

Conflict of interest and exceeding his authority

According to the verdict, Friedman acted in the interests of his friends, Meir Ovadia and Ami Manor, and in violation of the interests of the bank, for which he was responsible. The judge strongly criticized the version presented by Friedman in his defense, writing, "To hear what Friedman said about how he granted the solo loans makes one's hair stand on end. The central branch manager, a trained and experienced man belonging to the commercial division, a man in the corporate department who grants billions of shekels in credit, claims in his testimony that it is risky to grant credit to a company, because it is a legal entity liable to collapse, while on the other hand, he prefers granting solo credit to a private individual without collateral, solely on the basis of his signature, and explains this by saying, 'I can pursue him for this purpose until his last day, until I collect the debt.'"

The judgealso dismissed Friedman's version given in court of the deposit of funds, ruling, "Friedman's version does not satisfy me with respect to the acquisition of the funds seized in his account and those of his family members, or the cash seized in his London office."

Published by Globes [online], Israel business news - www.globes-online.com - on July 22, 2014

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