Shareholder Brings Shareholder Derivative Suit Against Bank Leumi and Related Parties for U.S. Tax Shenanigans (3/11/15)

Tax Notes Today reports on a shareholder derivative suit against Bank Leumi and some of its affiliates, officers, employees and agents for the damages shareholders incurred because of Bank Leumi's assistance to U.S. tax evasion.  See William Hoke,  Shareholder Sues Bank Leumi for Helping Clients Evade U.S. Taxes, 2015 TNT 47-5 (3/11/15), no link available.  The suit is Porat v. The Bank Leumi Le-Israel Trust Co., No. 650645-2015 (N.Y. Sup. Ct.  2015).  The suit recounts the actions of Bank Leumi employees to assist in tax evasion and the consequences of a deferred prosecution agreement with DOJ Tax  including a fine of $270 million and a consent order with the New York Department of Financial Services which included a civil penalty of $130 million and various other requirements.

The article says that Bank Leumi, like many Swiss banks, tried to capitalize on UBS's woes beginning in 2008, seeing a "golden opportunity" to service U.S. customers lost first by UBS and then other Swiss banks.

The article further recounts allegations of misbehavior as follows:

Porat said Bank Leumi helped U.S. clients conceal undeclared accounts through the use of a "hold mail" service for 2,450 accounts, meaning that the bank did not send statements or other documents to its customers in the U.S. Porat said Bank Leumi charged a total of $1.5 million for the service. He claimed that the bank provided assumed-name and numbered accounts to U.S. taxpayers until at least 2008. Porat also alleged that Bank Leumi referred U.S. clients to outside lawyers and consultants who established and maintained offshore corporations in the British Virgin Islands, Panama, and Belize as the nominal owners of the undeclared accounts. 

Other arrangements marketed by Bank Leumi involved "participation loans" and standby letters of credit, which Porat said allowed the bank's U.S. customers to effectively access their funds without drawing the attention of U.S. authorities. 

Porat's filing included an excerpt from an e-mail, cited in the New York state consent order [citation omitted] , in which an unidentified Bank Leumi manager provided instructions to employees about handling customer accounts: "Remember the bottom line -- I don't want to know who the customer is, what the account number or the conditions are for credit or securities. All I want to know is what we need to know on this side of the ocean." 

Another e-mail quoted an unidentified Bank Leumi private banker who wrote to a supervisor in 2011 that "nearly every client who has an account with us has used the bank as a tax haven, and is aware that by not declaring his account in the US is committing an offense, [and] we have by virtue of the services we provided assisted the clients with what they wished to achieve."