Bank Leumi to Pay $400 Million On Tax Evasion Rap

(Reuters) -

Bank Leumi, Israel’s second largest bank, will pay $400 million to settle two separate investigations into whether it helped its U.S. clients evade taxes.

The lender also fired some senior employees who engaged in misconduct and agreed to have an independent monitor review its compliance programs, the New York State Department of Financial Services said in a statement. 

Bank Leumi had been negotiating for months with the U.S. Department of Justice and New York state to settle an investigation of possible tax evasion. The bank will pay the U.S. government a total of $270 million and the state department will receive $130 million.

“Bank Leumi employees engaged in a series of egregious schemes – including creating complex, sham loan arrangements – to help its U.S. clients shirk their responsibility to pay taxes,” the state department’s Superintendent Benjamin Lawsky said in a statement.

“What’s worse, when certain Swiss banks began to put the brakes on this type of misconduct, Bank Leumi instead hit the accelerator even harder – viewing it as a ‘golden opportunity’ to pick up new business,” Lawsky said.

Bank Leumi officials were not immediately available for comment.

Bank Leumi Luxembourg and Leumi Private Bank will also cease to provide banking and investment services for all accounts held by U.S. taxpayers, the Justice Department said.

Israel’s largest bank Hapoalim and fourth-largest lender Mizrahi-Tefahot are also being investigated.