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Two Israeli banks implicated in U.S. tax evasion case

A California man born in Israel agreed to plead guilty to conspiring with people at Bank Leumi Le-Israel Ltd. and Mizrahi Tefahot Bank Ltd. to hide offshore accounts and income from the U.S. Internal Revenue Service, according to court filings and people familiar with the matter. Zvi Sperling was accused Thursday by federal prosecutors in Los Angeles of conspiring with people at two Tel Aviv-based banks, identified only as Bank A and Bank B. The charging document and plea agreement didn’t identify the banks. Bank A is Mizrahi, according to a person who wasn’t authorized to speak publicly about the case. Bank B is Leumi, according to a second person, who similarly asked not to be identified.

Since 2008, U.S. prosecutors have cracked down on offshore tax evasion, charging at least 83 U.S. taxpayers or foreign bankers, lawyers or advisers with tax crimes. UBS AG, the largest Swiss bank, avoided prosecution in 2009 by admitting it aided tax evasion, paying $780 million and handing over account data on 250 clients. It later disclosed information on about 4,450 more accounts. Wegelin & Co., a Swiss bank, pleaded guilty last month. No Israeli bank has been charged.

“The bank has a long-standing policy of not discussing customer relationships,” Orit Reuveni, a spokeswoman for Bank Leumi in Tel Aviv, said in an email, declining further comment on the case. “We have previously stated that we are among the international banks within the scope of a U.S. inquiry into tax matters involving U.S. customers.”

Benny Shoukron, a spokesman for Mizrahi, said by phone Sunday that the bank is looking into the matter.

The shares of Leumi advanced 0.5 percent at the close in Tel Aviv Sunday, while Mizrahi slipped 0.7 percent. “It is known the banks are facing investigations and fines,” Terence Klingman, head of trading at Psagot Investment House Ltd. in Tel Aviv, said Sunday by phone. “The market doesn’t know how to price this, there is not enough information.”

Sperling, who co-owns a wholesale goods company with his brother, had an account in China when he met Banker 1 from Bank A in 2001, according to the plea agreement. At that meeting, in Beverly Hills, California, Banker 1 persuaded Sperling to move his money from China, according to the plea deal.

“Sperling wanted to keep the money secret from the U.S. government and Banker 1 ensured that the money would be secret at Bank A in Israel,” according to the agreement. “Banker 1 also explained that Sperling would use the money by borrowing against the money at Bank A in the U.S.”

Steven Toscher, Sperling’s lawyer, said in a phone interview Thursday that his client “recognizes the serious mistakes that he has made and he accepts full responsibility for his conduct.”

Sperling arranged so-called back-to-back loans, according to the charging document, known as an information. Banker 1 “solicited and routed deposits into undeclared bank accounts at Bank A in Israel from clients in the U.S., and offered loan products on behalf of Bank A and the Los Angeles branch” to U.S. clients.

Bank A had more than 100 branches worldwide, including one in Los Angeles, according to the information.

The account was opened under the name of an offshore company called Orot Investments Ltd., according to the plea deal.

It was based in the Caribbean island of Nevis. An Israeli attorney opened the account and needed the approval of Sperling to “do anything with the account,” the plea deal said.

“The account was opened this way in order to keep it secret and make it harder to detect” by the U.S. government, according to the plea deal.

 
A version of this article appeared in the print edition of The Daily Star on February 18, 2013, on page 6.
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