A major Israeli bank admitted in court papers filed Monday to conspiring to aid American taxpayers for a decade in hiding their assets offshore, and the Justice Department said it has turned over the names of more than 1,500 U.S. account holders to federal investigators.
The Bank Leumi Group, a subsidiary of one of Israel’s largest banks, also agreed to pay $270 million to the U.S. government, including $157 million in criminal penalties for its secretive handling of U.S. individuals’ bank accounts held at Leumi Private Bank, a Swiss subsidiary.
The case was brought under the department’s Swiss Bank Program, which permits some Swiss banks to avoid prosecution by making a full and complete disclosure of their U.S. taxpayer-held accounts and paying substantial fines.
In announcing a deferred prosecution agreement with the bank on Monday, the Justice Department no doubt sent chills through hundreds, perhaps more than a thousand Americans who hid assets to prevent the IRS from taking its bite out of their hefty incomes. Monday’s action was only the latest salvo in a department crackdown on scofflaws who believe they can escape taxes by moving money offshore.
“The Bank Leumi Group recognized theat the writing is on the wall for offshore banking, and cooperating with the government’s investigation was the only way to proceed,” Deputy Attorney General James Cole said. He said, however, that the bank showed “extraordinary cooperation,” which will include cooperation in the resulting investigation of possible tax evaders, and received deferential treatment as a result.
In papers filed in U.S. District Court in Los Angeles, Bank Leumi became the first Israeli financial institution to admit to such criminal conduct, which included an array of financial services and products to conceal U.S. taxpayer accounts in Israel, Switzerland, Luxembourg and the United States.
The bank’s parent is Bank Leumi Le-Israel, B.M., which has subsidiaries in seven countries and more than 13,000 employees. Other subsidiaries that entered the deferred prosecution agreement include The Bank Leumi le-Israel Trust Company, Ltd., the oldest and largest trust company, Bank Leumi (Luxembourg) S.A., and Bank Leumi USA, an FDI-insured commercial bank with offices in California, Florida, Illinois and New York.
According to a statement of facts filed by prosecutors, the bank’s steps to conceal its clients’ assets included:
--Secretly dispatching private bankers to the United States from Israel and other countries to meet with clients at hotels, parks and coffee shops to discuss their offshore accounts.
--Aided them in using corporate entities created in Belize and other countries, as well as the Bank Leumi le-Israel Trust Company, to conceal their identities as the accounts’ true beneficiaries.
--Put accounts in assumed names or identified them only by numbers.
--Held mail so that correspondence and other account information would not go to clients’ U.S. postal addresses to make it more difficult to connect the client to the secret account.
--Loaned money to clients from Bank Leumi USA in deals collateralized by their offshore assets so the clients could leverage their secret foreign accounts.
--After the department’s cases against Swiss banks, including UBS, became public, Bank Leumi Group opened accounts for U.S. taxpayers who had left the Swiss banks because of the federal investigation.