Although, the US authorities have completed the investigation regarding Bank Leumi's aid in tax evasion about 18 month ago with the bank paying $400 million, details of this affair continue emerging. Yesterday (Tuesday), the "Bloomberg" website reported details on the plea bargain of Masud Sarshar, a naturalized US citizen from Iran and owner of the fashion company Apparel Limited Inc. This publication provides us with a glimpse into the methods used by Israeli banks to help clients conceal accounts from tax authorities.
Sarshar pleaded guilty to hiding over $21 million in accounts in Bank Bank Leumi (TASE: LUMI) and two other Israeli banks. During the trial, the prosecution claimed that a Leumi employee smuggled Sarshar's bank statements in a USB flash drive concealed in a necklace she wore. In court papers, neither of Sarshar's two contact persons was charged with wrongdoing.
According to "Bloomberg", in 2007 Sarshar opened three accounts in Bank Leumi which he concealed by registering them under entities he fabricated. According to his plea bargain agreement, he believed that his contact person “knew of his desire to keep his Bank Leumi accounts secret,” and she “acted accordingly”. Furthermore, the employee said she "would claim ignorance regarding Sarshar’s existence if asked about his Bank Leumi accounts,” and, as mentioned above, concealed his account statements in her necklace during her visits to the US.
Sarshar’s account managers also offered him back-to-back loans, allowing him to access accounts in Israel through loans taken at Los Angeles branches. This way, he moved about $19 million to the US without alerting tax authorities. According to the plea agreement, he also transferred funds to another Israeli bank in 2011 and $5.8 million from his Bank Leumi account to a Hong Kong bank.
Sarshar closed his Bank Leumi accounts in 2011, telling his manager that he was worried his accounts would be revealed to US investigators, probably due to emerging reports regarding an US authority investigation against Bank Leumi. Under the plea deal, Sarshar will serve two years in prison and pay $8.3 million and a penalty of 50% of the high balance of his accounts for failing to disclose them.
Bank Leumi said in response, "As the article says, this is an old affair currently handled by the California court. In December 2014, Leumi became the first and only Israeli bank to sign an agreement with US law enforcement authorities regarding activity with clients who are US taxpayers, which had put this affair behind. As the article indicates, two other Israeli banks are involved in this affair, for which this is still a standing issue. At present, Leumi adheres to the strictest regulatory requirements in the field of declared funds policy."
Nevertheless, it seems that the bank, managed by CEO Rakefet Russak-Aminoach, is still managing further outcomes of the investigation. As part of the agreement it reached with US authorities, a representative of the New York State financial regulator will monitor the bank's activity in the near future in order to verify that the bank adheres to strict US regulation standards and has learned its lesson from the tax evasion affair.
As such, regulator representatives have been meeting with bank employees, with some of these meetings apparently taking the form of questioning. As a result, the bank's workers' committee sent a letter calling on employees to refuse to participate in these inquiry meetings. "We consider this activity to potentially jeopardize employees and the professional future of employees who would undergo this questioning. Therefore, we ask all of you to refuse any address or request to meet," workers' committee chairman Miri Rubino wrote in the letter.
Published by Globes [online], Israel business news - www.globes-online.com - on August 3, 2016
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