Bank Leumi is trying to recover at least part of the$3 million in retirement benefits paid to a former chairman forced to resign in Israel’s largest bank scandal.
Attorneys for Bank Leumi are arguing that the retirement benefits are excessive and that they were not approved according to the rules.
The former bank chairman, Ernest Japhet, resigned in 1986 after an investigation commission found that collusion by bank officials led to the collapse of bank-issued securities in 1983.
The civil suit opened Wednesday in Tel Aviv District Court and is expected to sat a few months.
The suit is one of the legacies of Israel’s 1983 securities scandal, when securities issued by Israel’s five largest banks suddenly collapsed on the Tel Aviv Stock Exchange, wiping out the savings of thousands of investors.
A special commission of inquiry headed by Chaim Beisky, a member of the High Court of Justice, found that collusion between the heads of the banks artificially inflated the price of the shares — while the public was kept unaware of their rapidly diminishing value.
The commission’s report, released on April 20, 1986, recommended that the bank chairman be forced to resign within 30 days and that they be barred from ever working again for Israeli banks.
Japhet resigned as chairman and chief executive officer of Bank Leumi and moved to New York. He did not return calls to his Manhattan residence this week.
Bank Leumi charges that Japhet ran the bank as if it were his personal property, and rarely consulted wish its other offices.
The attorneys told District Court President Michael Ben-Yair that Japhet drew up his own retirement package and then lad it approved without a full board meeting, as was required.
According to the bank, his retirement benefits should be a pension equal to 70 percent of Japhet’s last monthly salary. The bank wants Japhet to return the difference.
Japhet’s defense, which will be presented in court next week, emphasizes his past contribution to the bank. His attorneys will argue that his severance pay and pension package was established before he became chairman of the board.
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