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Bank Leumi Suing Its Former Chief Executive Officer to Return the $4 Million He Got in Severance Pay

The Bank Leumi is suing its former chairman and chief executive officer, Ernst Japhet, to return the $4 million severance pay he received when he was forced to resign almost a year ago.

Two prominent lawyers representing the bank, Haim Zadok and Michael Heshin, filed suit in Tel Aviv district court Thursday arguing that the sum paid Japhet was the result of a private deal he made with one or two of the bank directors without the knowledge of senior board members, and therefore illegal.

Japhet, who is living in New York, has not replied to the suit. But he has let it be known he intends to fight it and will insist that the bank pay his legal expenses.

The suit also demands that Japhet repay the $30,000 monthly pension money he received up to the time payment was stopped by a new directorate that took office at Bank Leumi late last year. The court was asked to fix a reasonable sum for severance and pension for the former bank executive.

Japhet was forced to step down after a state commission of inquiry found him and the heads of four of the other largest banks culpable in the bank shares scandal which precipitated a financial panic in 1983. The heads of the banks were held responsible for inflating the price of shares to mislead investors, resulting in severe financial losses for thousands of shareholders when bank stocks collapsed.

The disclosure of the amount of severance and pension money awarded Japhet led to the resignation of the Bank Leumi board last year.

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