BKHYY Bank Hapoalim BM (PK)

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (May 1, 2020).

By Rebecca Davis O'Brien 

Israel's largest bank admitted to conspiring with U.S. customers and others to hide more than $7.6 billion in secret Swiss and Israeli bank accounts and, together with a Swiss subsidiary, will pay $874 million to resolve a sprawling U.S. tax-evasion investigation.

According to court filings unsealed Thursday in Manhattan federal court, Bank Hapoalim BM entered into a three-year deferred-prosecution agreement, while the bank's Swiss subsidiary -- Bank Hapoalim Switzerland, or BHS -- pleaded guilty to tax evasion. The banks admitted to helping customers set up secret accounts, shelter assets and income, and evade taxes for the period from 2002 to 2014, according to the court filings.

The $874 million in payments to federal and New York state authorities marks the second-largest recovery by the Department of Justice arising from investigations into offshore U.S. tax evasion by foreign banks, authorities said. Prosecutors said at least four senior Hapoalim executives, including two members of BHS's board of directors, were directly involved in the tax evasion. Prosecutors said the bank initially didn't cooperate fully with the investigation, which began in or before 2011, but has since provided assistance and taken steps to prevent misuse of its services.

Lawyers for Hapoalim and BHS didn't immediately respond to a request for comment.

In a letter to the Tel Aviv Stock Exchange last month, the bank said it had established an independent committee headed by a former Justice of the Supreme Court of Israel to examine the processes that led to the investigations.

Hapoalim, or BHBM, has more than 2.5 million accounts. In addition to retail banking, Hapoalim offers private-banking services, including through BHS, which has headquarters in Zurich and during the time in question had branches in New York, Miami, the Cayman Islands and elsewhere.

From 2002 to 2014, prosecutors said, Hapoalim employees helped U.S. customers conceal ownership and control of assets, enabling the customers to evade U.S. tax obligations.

Hapoalim, the parent bank, will pay a total of $214.4 million as part of a deferred-prosecution agreement.

The sum includes $77.9 million to the Internal Revenue Service for unpaid taxes. The bank is also forfeiting $35.7 million in fees earned on undeclared accounts, and paying a $100.8 million penalty. If Hapoalim complies with the agreement, including assisting with the investigation, the Justice Department will dismiss a count of conspiracy to defraud the U.S.

BHS, the Swiss subsidiary, entered a guilty plea to the conspiracy count, and will pay a total of $402.5 million -- $138.9 million to the IRS, $124.6 million in gross fees and a $139 million fine.

Separately, the New York State Department of Financial Services announced a settlement requiring Hapoalim to pay a $220 million penalty. The bank also paid $37.5 million to settle an enforcement action with the Board of Governors of the Federal Reserve System.

Hapoalim began to cooperate with the Justice Department investigation in late 2014, but its initial cooperation was "deficient, marked by an inadequate internal investigation, the failure to timely disclose relevant facts, and the provision of incomplete and, in some cases, inaccurate information and data," according to the agreement, which was filed in federal court. For example, the Justice Department said that in 2016 it found evidence of criminal misconduct by a senior BHS executive and a board member with no assistance from Hapoalim.

Separately on Thursday, Hapoalim and BHS agreed to pay more than $30 million to resolve an investigation into the bank's role in an international soccer bribery scheme. As part of a nonprosecution agreement with the U.S. Attorney's office in Brooklyn, the banks admitted that bank employees conspired to launder more than $20 million in bribes and kickbacks to soccer officials at the Federation Internationale de Football Association, or FIFA, and other soccer federations.

Write to Rebecca Davis O'Brien at Rebecca.OBrien@wsj.com

(END) Dow Jones Newswires

May 01, 2020 02:47 ET (06:47 GMT)

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