Privileged Attorney Work Product

Bank Leumi Media Monitoring 02/27/15

English Language Press - There are no relevant clips to report at this time.

Swiss German Language Press - There are no relevant clips to report at this time.

Israeli Press

1. Hapoalim, Mizrahi to Set Aside NIS 100m Each for US Fines

   Feb 27, 2015 | Globes (English)

   By Stella Korin-Lieber and Irit Avissar
   
   
   Talks with Supervisor of Banks David Zaken will decide how much should be provided for allegedly abetting tax evasion in the US.
2. Leumi Responds to the Criticism: Samet and Hannes Will Not Be Members of the Commission

   Feb 26, 2015 | The Marker (Hebrew)

   By Sivan Aizescu
   
   
   Bank Leumi’s board of directors announced that it would change the makeup of the independent commission in light of allegations of conflict of interest.
3. Hannes: "JCT is Playing with Investors Money"

   Feb 26, 2015 | Globes (Hebrew)

   By Irit Avissar
   
   
   The harsh criticism of shareholders of the Jewish Colonial Trust (JCT) continues against the intentions of the company to block Sunday’s vote on the distribution of the bank Leumi shares as dividends in kind. Globes received a letter written by profession Sharon Hanes expert in corporate governance, written to the JCT and ISA

Bank Leumi Media Monitoring 02/27/15

English Language Press - There are no relevant clips to report at this time.

Swiss German Language Press - There are no relevant clips to report at this time.

Israeli Press

1. Hapoalim, Mizrahi to Set Aside NIS 100m Each for US Fines

   Feb 27, 2015 | Globes (English)

   By Stella Korin-Lieber and Irit Avissar

   Talks with Supervisor of Banks David Zaken will decide how much should be provided for allegedly abetting tax evasion in the US.

   Bank Hapoalim (TASE: POLI) and Mizrahi Tefahot Bank (TASE:MZTF) are expected to make provisions in their upcoming financial statements for the investigation by the authorities in the US. Discussions between the bank heads and Supervisor of Banks David Zaken are taking place in order to determine how much should be provided for the investigation of suspicions that the banks abetted tax evasion by their US customers. Bank Leumi (TASE: LUMI) paid a huge $400 million fine in the affair. The amount to be provided has not yet been decided, but estimates are that the initial provision will be over NIS 100 million at each bank.

   In addition to the ongoing discussions, Israel Securities Authority chairman Shmuel Hauser has also decided to increase his involvement in the issue. Sources inform "Globes" that Hauser sent another letter in recent days on the question to Bank Hapoalim, Mizrahi-Tefahot,Israel Discount Bank (TASE: DSCT), and First International Bank of Israel (TASE: FTIN). Hauser sent a letter to the four banks asking for clarifications about their situation and exposure to American customers and the investigation by US authorities several weeks ago. The banks answered, after which Hauser sent another letter.

   As far as is known, the answer received by Bank Hapoalim and Mizrahi Tefahot, against whom an investigation is being conducted, was quite sharp. The two banks were asked to provide a detailed list of their contacts with the US authorities, their considerations in handling the affair, and what they have done in the matter. These demands mean that the banks will have to make a provision in their reports.RELATED ARTICLESBanks setting money aside for US tax evasion fine - reportAttorney General deepens Bank Leumi investigationLeumi agrees $400m settlement over US tax evasion

   These letters were sent at the same time as the talks being held with Zaken about the expected provision. The amount of the provision is expected to be determined by a formula set by the authorities in the US and Switzerland for all banks making a compromise with the US authorities. Bank Hapoalim and Mizrahi Tefahot are not among the banks entitled to join the compromise agreement; however, Bank Leumi was also not in this group, and part of the fine it paid was nevertheless based on this formula.

   According to this mechanism, the bank pays a fine amounting to 20% of the volume of its US customers' assets. In addition, if the bank account was opened after August 1, 2008 (i.e. after the US authorities began to act in the matter), the rate of the fine for that account is raised to 30% of the volume of the assets. If the account was opened after February 2009, the rate jumps to 50%. Bank Hapoalim and Mizrahi Tefahot are in the process of mapping their US customers (Mizrahi Tefahot is at a more advanced stage, and has hired the KPMG firm to advise it), so that the formula can be used to estimate the amount of the provision. At the same time, the discussions with the Bank of Israel in recent days are on the question of whether to adhere to the formula in determining the provision, or to make a larger provision.

   Bank Leumi paid a $400 million fine in the affair, $157 million of which (40%) was based on the formula. The provision based on the formula will not be the sole provision made by the banks in the affair; the other parts will become clearer when the discussions with the US authorities reach a more advanced stage.

   Nevertheless, it is believed Bank Hapoalim and Mizrahi Tefahot's total fines will be lower than what Bank Leumi paid, given that their business with US customers was on a smaller scale than that of Bank Leumi. Another question being considered by the banks and the Bank of Israel Banking Supervision Department is how exactly the provision should be made: whether it should be defined as a special direct provision, or whether the Supervisor of Banks will allow it to be recognized as a kind of reserve fund that is not directly defined as a provision for the US investigation. Note that this issue involves the banks' concern that making such a provision constitutes a confession of wrongdoing to the US authorities, to which it is not clear how the authorities will respond.

   For Additional Coverage (English):

   http://www.haaretz.com/business/.premium-1.644531

   (Hebrew):

   http://www.news1.co.il/Archive/001-D-361160-00.html

   http://www.news1.co.il/Archive/001-D-361160-00.html
   

   Return to headline | Return to top

2. Leumi Responds to the Criticism: Samet and Hannes Will Not Be Members of the Commission

   Feb 26, 2015 | The Marker (Hebrew)

   By Sivan Aizescu

   Bank Leumi’s board of directors announced that it would change the makeup of the independent commission in light of allegations of conflict of interest. The decision to change the composition of the committee was made even before the judgment of Judge Khaled Kabub on whether to approve the establishment of the committee. Thus it seems that the bank sees in this move, the chance for a lower objection and potential increase in the chances of the Judge’s approval, or at least the ability to discuss the matter without the suspicion of self-interest.

   The bank requested to set up the commission in order to examine the justification to bring claims against executives, past and present, whose actions resulted in the banks entanglement in the affair in which it helped its US customers evade tax. The affair led to a fine of NIS 1.5 billion and legal and accounting costs of NIS 250 million.

   Leumi had included board member, advocate Haim Samet in the commission and represented him as independent. However, The Marker revealed that there may also be a claim against Samet who served as a director of bank Hapoalim from 2000-2007, a period for which Bank Hapoalim is under investigation for similar claims.

   ·        The bank stated in light of this fact, despite that it believes Samet to be independent, the bank has decided he will not serve on the commission as it wishes for the commission to be clean in the eyes of all external parties.

   ·        The bank replaced Samet with Dr Samer Haj-Yehia, who began serving as a director in September 2014 long after the object of the investigation. He holds a doctorate in economics from MIT and degrees in law, accounting and economics and business administration from the Hebrew University of Jerusalem

   ·        The board also decided to remove Professor Sharon Hannes due to his professional friendship with the Judge and because he gave several opinions with regard to the process of negotiations. While the bank believes that he is independent, it has decided not to include him on the commission to avoid slander.

   ·        The judge is set to publish his ruling in two weeks. 

   Return to headline | Return to top

3. Hannes: "JCT is Playing with Investors Money"

   Feb 26, 2015 | Globes (Hebrew)

   By Irit Avissar

   The harsh criticism of shareholders of the Jewish Colonial Trust (JCT) continues against the intentions of the company to block Sunday’s vote on the distribution of the bank Leumi shares as dividends in kind. Globes received a letter written by profession Sharon Hanes expert in corporate governance, written to the JCT and ISA.

   “I have been following with great concern the recent conduct of the company and for a moment it seems as if the company now plays with the money of its investors as if it were a joke” Hanes writes  that one cannot report to the public about the shareholders meeting that will decide on the issue so dramatically, and then cancel the vote just days before it is to take place. Shareholders of the company are dependent on the reports, some of them bought shares because of the report and others will be refrained from selling them for this reason.

   -        The JCT announced that it will not hold a vote based on an opinion released a few days ago by Professor Hamdani, that the court approval is needed for the vote because of the great difference in value of the Leumi Shares and the value of the company .

   -        Hannes did not accept these arguments saying that a bad smell arose from the cancelling of the vote.

   -        Yesterday the company published a response to the Company for the Location and Restitution of Holocaust Victims’ Assets’ argument saying the assembly cannot make vote on dividing assets that are not part of the net earnings. 

   Return to headline | Return to top