Menachem (Miki) Friedman, the managing director and CEO of Bank Leumi (UK) plc, a wholly-owned subsidiary of Bank Leumi (TASE: LUMI) has been arrested on suspicion of embezzling NIS 25 million. 13 other persons have also been arrested. In a notice to the Tel Aviv Stock Exchange (TASE) today, Bank Leumi said, "Irregularities were discovered in the approval of loans" approved by Friedman.
Bank Leumi said that the irregularities were discovered by a regular internal audit. It added, "The audit indicates that this is an isolated incident that has no repercussions on the bank's customers. To the best of the bank's knowledge, the incident will cause no material losses to the bank."
Friedman allegedly authorized loans at extraordinary terms without guarantees. He exceeded his authority in these instances. The loans have never been repaid and the bank has had to make a provision for them. Friedman is suspected of accepting bribes from the borrowers.
Bank Leumi stated that its internal investigation uncovered issues that it could not investigate on its own, and it therefore decided to contact the police to investigate those matters.
Friedman was arrested today after a month-long undercover investigation. Bank Leumi's board ordered Friedman to take immediate leave until the issue is cleared up. The board also recommended to the board of Leumi UK to appoint Lesley Secretan and Colin Cumberland as acting CEOs in his place. Friedman, 57, worked at Bank Leumi for 34 years, holding several positions, including deputy head of the banking division where he was responsible for credit.
Bank Leumi has notified the Bank of Israel Banking Supervision Department of the case.
Published by Globes [online], Israel business news - www.globes-online.com - on June 17, 2008
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