Former Bank Leumi Chairman Convicted on Charges Stemming from 1983 Scandal

Ernst Japhet, former chairman of Bank Leumi, was found guilty on Thursday of fraudulently manipulating the shares of his bank in a case that goes back more than a decade.

Japhet, who four months ago returned here from New York after fleeing Israel more than 10 years ago, personified the country’s banking establishment for most Israelis until the 1983 bank shares scandal.

He was the last of the senior officials at Israel’s leading banks to face trial on charges surrounding the 1983 scandal.

In April, the nation’s leading banks and more than a dozen of their top officials were given large fines, and the executives sentenced to prison, on charges relating to what had been Israel’s biggest financial scandal ever.

The manipulation of bank share prices a decade ago had spurred buying of the shares until they dominated 70 percent of the market. When the Israeli stock market crashed in October 1983, many small investors and private businesses were devastated, and billions of shekels were lost.

Only the intervention of the government prevented large-scale bankruptcies and the closings of major banks. The affair cost Israeli taxpayers approximately $9 billion.

During his trial, Japhet refused to testify and sat stone-faced throughout. Often considered aloof and distant, he was arrogantly dismissive of all journalists’ attempts to interview him.

When handing down the guilty verdict, District Court Judge Miriam Naor drew particular attention to Japhet’s formidable position as the country’s top banker, not merely in the eyes of the public, but also among his peers and in government circles.

In April’s sentencing, Japhet’s second in command, Mordechai Einhorn, was given an eight-month prison term and fined some $200,000. Officials with the Hapoalim, Discount and Mizrachi Banks were also fined and sentenced to prison at that time for their roles in the scandal.