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Israeli Bank, Government Enter Deferred Prosecution Agreement

DEC. 22, 2014

United States v. Bank Leumi Le-Israel BM et al.

DATED DEC. 22, 2014
DOCUMENT ATTRIBUTES
  • Case Name
    UNITED STATES OF AMERICA, Plaintiff, v. BANK LEUMI LE-ISRAEL B.M., THE BANK LEUMI LE-ISRAEL TRUST COMPANY LTD., BANK LEUMI (LUXEMBOURG) S.A., LEUMI PRIVATE BANK S.A., and BANK LEUMI USA, Defendants.
  • Court
    United States District Court for the Central District of California
  • Docket
    No. CR14-0731
  • Cross-Reference
    Information in United States v. Bank Leumi Le-Israel BM, No.

    CR14-0731 (C.D. Cal. 2014) 2014 TNT 247-13: Other Court Documents.
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2014-30374
  • Tax Analysts Electronic Citation
    2014 TNT 247-12

United States v. Bank Leumi Le-Israel BM et al.

[Editor's Note: For the full agreement, including exhibits, see .]

DAVID A. HUBBERT

 

Deputy Assistant Attorney General

 

Tax Division, United States Department of Justice

 

CHRISTOPHER S. STRAUSS

 

Trial Attorney (LA Bar No. 28770)

 

ELLEN M. QUATTRUCCI

 

Trial Attorney (DC Bar No. 462103)

 

DENNIS R. KIHM

 

Trial Attorney (TX Bar No. 24 066929)

 

Tax Division, Western Criminal Enforcement Section

 

United States Department of Justice

 

601 D St. NW, Room 7022

 

Washington, D.C. 20004

 

Telephone: (202) 514-5762

 

Facsimile: (202) 514-9623

 

E-mail: Christopher.S.Strauss@usdoj.gov

 

Ellen.M.Quattrucci@usdoj.gov

 

STEPHANIE YONEKURA

 

Acting United States Attorney

 

SANDRA R. BROWN

 

Assistant United States Attorney

 

Chief, Tax Division

 

300 North Los Angeles Street

 

Los Angeles, California 90012

 

Telephone: (213) 894-5810

 

Facsimile: (213) 894-0115

 

E-mail: Sandra.Brown@usdoj.gov

 

Attorneys for Plaintiff

 

UNITED STATES OF AMERICA

 

UNITED STATES DISTRICT COURT

 

FOR THE CENTRAL DISTRICT OF CALIFORNIA

 

 

DEFERRED PROSECUTION AGREEMENT

 

 

The United States Department of Justice, Tax Division, Criminal Enforcement, by and through David A. Hubbert, Deputy Assistant Attorney General, Tax Division, U.S. Department of Justice; Christopher S. Strauss and Ellen M. Quattrucci, Trial Attorneys, Tax Division, United States Department of Justice; and the United States Attorney's Office for the Central District of California, by and through Stephanie Yonekura, Acting United States Attorney and Sandra R. Brown, Assistant United States Attorney (collectively, the "Government") and the defendants Bank Leumi le-Israel B.M. ("Bank Leumi-Israel"); The Bank Leumi-le Israel Trust Company Ltd. (the "Bank Leumi Trust"); Bank Leumi (Luxembourg) S.A. ("Bank Leumi-Luxembourg"); Leumi Private Bank S.A., also referred to herein as "Bank Leumi-Switzerland"; and Bank Leumi USA (collectively, the "Bank Leumi Group Entities"), by the Deputy Chief Executive Officer of Bank Leumi-Israel and undersigned attorneys pursuant to the authority granted by the Bank Leumi Group Entities' Boards of Directors in the form of a Board Resolution, as described in paragraph 47, attached hereto as Exhibit A, hereby enter into this Deferred Prosecution Agreement (the "Agreement"). This Agreement does not apply to any individual or entity other than the Bank Leumi Group Entities as set forth herein.

 

THE CRIMINAL INFORMATION

 

 

1. The Bank Leumi Group Entities will waive indictment and consent to the filing of a one-count Information (the "Information") in the United States District Court for the Central District of California, Western Division (the "Court") charging the Bank Leumi Group Entities with unlawfully, voluntarily, intentionally, and knowingly agreeing together and with others both known and unknown to the United States Attorney to commit the following offense against the United States: to willfully aid and assist in the preparation and presentation of false income tax returns and other documents to the Internal Revenue Service of the Treasury Department, in violation of Title 26, United States Code, Section 7206(2), all in violation of 18 U.S.C. § 371. A copy of the Information is attached hereto as Exhibit B.

 

ACCEPTANCE OF RESPONSIBILITY FOR VIOLATION OF LAW

 

 

2. The Bank Leumi Group Entities acknowledge and accept that, among other things, as set forth more fully in the Statement of Facts, attached hereto as Exhibit C:

 

The Bank Leumi Group Entities aided and assisted U.S. taxpayers to file false tax returns by aiding and assisting such U.S. clients to maintain undeclared accounts and evade their U.S. tax obligations through a variety of means. Prior to April 2009, Bank Leumi-Israel, Bank Leumi-Switzerland, and Bank Leumi-Luxembourg (collectively the "Foreign Leumi Group Entities") sent private bankers to the United States on a regular basis for the purpose of opening new accounts and servicing existing accounts of U.S. taxpayers, some of whom the bankers knew were evading their U.S. tax obligations. The Foreign Leumi Group Entities, knowing that certain U.S. taxpayers were maintaining undeclared accounts, offered an array of services and products that aided and assisted the U.S. taxpayers in opening and maintaining undisclosed accounts. These products and services included: (1) the issuance of guarantees and Standby Letters of Credit to collateralize loans issued by Bank Leumi, USA; (2) the use of offshore entities and the Bank Leumi Trust to serve as nominee accountholders; (3) the use of "Hold Mail" service that prevented any mail from the Foreign Leumi Group Entities from coming to the U.S. client in the United States; (4) the use of "assumed name" and "numbered" accounts that concealed the name of the U.S. account holder on all external correspondence, account records, and other documents; and (5) the opening and maintenance of accounts for U.S. clients that exited UBS and other Swiss banks after the Department of Justice's investigation of UBS became public.

Specifically:

 

(A) Beginning in 2000 and continuing until 2010, the Foreign Leumi Group Entities, through certain private bankers and managers within their respective Private Banking Divisions, actively assisted or otherwise facilitated a number of U.S. taxpayers in maintaining undeclared accounts at one or more of the Foreign Leumi Group Entities' branches by (1) advising certain clients to sell all U.S. securities to evade U.S. reporting requirements on earnings; and (2) referring U.S. beneficial owners of accounts to outside advisors to set up offshore corporations to act as nominee account holders, thereby concealing the U.S. taxpayers' beneficial ownership in the accounts.

(B) In July 2008, UBS, the largest Swiss bank, announced that it was closing its U.S. cross-border business. Certain Bank Leumi executives in both Israel and Switzerland viewed UBS's exit from the U.S. cross-border business as an opportunity and sought to obtain former UBS customers whose accounts UBS had stopped servicing because the accounts were undeclared and were used to evade U.S. tax obligations.

(C) The Bank Leumi Group Entities marketed and offered two types of loans to U.S. customers through Bank Leumi USA: participation loans and loans guaranteed by a Standby Letter of Credit ("SBLC"). These types of loans allowed U.S. taxpayers to enjoy the economic benefits of undeclared funds held offshore without directly repatriating the funds or creating a paper trail that could disclose the existence of the undisclosed foreign accounts to U.S. authorities.

3. The Bank Leumi Group Entities admit, accept, and acknowledge that they are responsible for the acts and omissions of their officers, executives, employees, and agents, as set forth in the Statement of Facts and herein.

4. The Bank Leumi Group Entities represent to the Government that this Agreement, the Information, the Statement of Facts, and all other exhibits to this Agreement were reviewed by their respective Boards of Directors and any officer, employee or agent deemed necessary by the Bank Leumi Group Entities in order to enter this Agreement. The Bank Leumi Group Entities, through their undersigned authorized representatives represent that the Statement of Facts contains truthful and accurate statements based upon the Bank Leumi Group Entities' internal investigation, and information provided to the Bank Leumi Group Entities by the Government.

5. The U.S. accounts as set forth more fully in paragraph 2 of this Agreement and the Statement of Facts, concerning the period between 2002 and 2010, are referred to hereinafter as the "Relevant Accounts."

6. Pursuant to this Agreement, based upon the conduct set forth in the Statement of Facts, the Bank Leumi Group Entities agree to pay to the United States a total of Two Hundred Seventy Million Dollars ($270,000,000)("the Resolution Amount") within 5 business days of the approval of this Agreement by the United States District Court. The Bank Leumi Group Entities agree that they shall pay $71,769,305 in restitution regarding unpaid taxes on interest, dividends, and capital gains of U.S. clients with respect to the Relevant Accounts, which the parties agree exceeds the gross profits related to the Relevant Accounts at Bank Leumi-Israel, Bank Leumi-Luxembourg, and Bank Leumi USA. The parties agree that the restitution amount shall be paid directly to the Internal Revenue Service, IRS-RACS, Attn: Mail Stop 6261/Restitution, 333 W. Pershing Ave., Kansas City, MO 64108 pursuant to payment instructions provided to the Bank Leumi Group Entities. The Bank Leumi Group Entities further agree to pay $198,230,695, which consists of (1) $157,000,000 for Bank Leumi-Switzerland, in lieu of restitution for all Relevant Accounts at Bank Leumi-Switzerland, consistent with the Program for Non-Prosecution Agreements or Non-Target Letters for Swiss Banks announced on August 29, 2013, and (2) in light of the Bank Leumi Group Entities' extraordinary cooperation as stated in paragraphs 16 through 29, a monetary penalty of $41,230,695 for Bank Leumi-Israel, Bank Leumi-Luxembourg, and Bank Leumi USA (collectively, the "Penalty Amount"). The parties agree that the amount paid with respect to Bank Leumi-Switzerland exceeds the gross profits of Bank Leumi Switzerland related to the Relevant Accounts. The Penalty Amount shall be paid directly to the United States pursuant to payment instructions provided to the Bank Leumi Group Entities. The parties agree that if the Bank Leumi Group Entities fulfill their obligations set forth in this Agreement, the Government will take no further action to collect any additional criminal payment from the Bank Leumi Group Entities with respect to the criminal investigation and the matters referenced in the Statement of Facts and related to the Relevant Accounts.

7. The Bank Leumi Group Entities agree that no portion of the amounts that the Bank Leumi Group Entities agree to pay to the Government and/or the Internal Revenue Service pursuant to the terms of this Agreement is deductible on any United States federal, state, or local tax return. The Bank Leumi Group Entities further agree not to challenge or dispute any part of the Resolution Amount in any subsequent judicial or administrative proceeding against the United States or any agency thereof.

8. The Bank Leumi Group Entities acknowledge that the payment of the Resolution Amount is a final payment and shall not be refunded: (a) if the Government moves to dismiss the Information pursuant to this Agreement; or (b) should the Government later determine that any of the Bank Leumi Group Entities has breached this Agreement and brings a prosecution against any of the Bank Leumi Group Entities. Further, nothing in this Agreement shall be deemed an agreement by the United States that the Penalty Amount is the maximum amount that may be required in the event of any such prosecution and the Government shall not be precluded in any such prosecution from arguing that the Court should impose a higher amount. The Government agrees, however, that in the event of a breach of this Agreement and a subsequent prosecution against any of the Bank Leumi Group Entities, it will recommend to the Court that the Penalty Amount paid by the Bank Leumi Group Entities pursuant to this Agreement be credited toward any payment ordered by the Court as part of any judgment.

 

PERMANENT RESTRICTIONS ON THE U.S. CROSS-BORDER BUSINESS OF

 

BANK LEUMI LUXEMBOURG AND LEUMI PRIVATE BANK

 

 

9. The "Bank Leumi Group" is defined herein as the Bank Leumi Group Entities plus all other Bank Leumi-Israel subsidiaries and affiliates of Bank Leumi-Israel worldwide.

10. The Government recognizes that Bank Leumi-Israel, as the parent organization of the Bank Leumi Group, informed the Government prior to the execution of this Agreement that it had decided on its own initiative to cease all banking and investment services to U.S. taxpayers through Bank Leumi-Luxembourg (hereinafter "BLUX") and Leumi Private Bank (hereinafter "LPB"). BLUX and LPB agree that (a) BLUX and LPB shall cease to provide banking and investment services for all active accounts held or beneficially owned by a U.S. taxpayer by December 31, 2014; and (b) BLUX and LPB shall cease to provide banking and investment services for all accounts, both active and dormant, held or beneficially owned by a U.S. taxpayer by the end of the Deferral Period, as defined in paragraph 31 of this Agreement. The cessation of banking and investment services with respect to U.S. clients described in this paragraph is hereinafter referred to as the "BLUX/LPB Exit Program." The completion of the BLUX/LPB Exit Program as set forth in this paragraph is a material condition of this Agreement.

11. Pursuant to this Agreement, the Bank Leumi Group Entities agree that the Bank Leumi-Israel Deputy Chief Executive Officer or an executive appointed by Bank Leumi-Israel's Board of Directors shall provide to the United States Department of Justice periodic reports on the BLUX/LPB Exit Program. The first report shall be due on or before the two-month anniversary of the date this Agreement is approved by the Court in the Central District of California (the "Approval Date"), and every sixty (60) days thereafter until the completion of the BLUX/LPB Exit Program.

 

HEIGHTENED STANDARDS FOR FATCA COMPLIANCE

 

 

12. Bank Leumi-Israel, as the parent organization of the Bank Leumi Group, agrees to ensure that (a) all its subsidiaries and affiliates, other than Bank Leumi USA, to the extent required by the Foreign Account Tax Compliance Act, 26 U.S.C. §§ 1471-1474 ("FATCA"), have or will enter into a foreign financial institution agreement ("FFI") or will register under an applicable intergovernmental agreement ("IGA") for the implementation of FATCA; and (b) all its subsidiaries and affiliates will continue to implement and maintain an effective program of internal controls with respect to compliance with FATCA in its affiliates and subsidiaries (the "FATCA Compliance Program"). Bank Leumi-Israel shall ensure that the FATCA Compliance Program include, but not necessarily be limited to, the following measures, a number of which Bank Leumi-Israel has represented to the Government have already been implemented:

 

a. The appointment of a Global Head of Cross-Border Activity who reports directly to the Chief Risk Officer or Deputy Chief Executive Officer of Bank Leumi-Israel, and who shall make periodic reports on FATCA to the Audit Committee of the Bank Leumi-Israel Board of Directors;

b. The continued employment of a designated FATCA Coordinator at Bank Leumi-Israel who reports to Bank Leumi-Israel's Chief Compliance Officer;

c. The appointment of a FATCA Compliance Officer at each other affiliate and subsidiary who shall be responsible for compliance with FATCA and shall report to each subsidiary's or affiliate's Chief Compliance Officer, who shall in turn report directly to the Risk Management Committee of the Boards of Directors of each affiliate or subsidiary. Each Board of Directors shall in turn report its FATCA compliance to Bank Leumi-Israel's Board of Directors;

d. The continued development and implementation of enhanced controls to identify, prevent, detect, and correct any material failures regarding the Bank Leumi Group's compliance with FATCA;

e. The continued development and implementation of periodic training of relevant personnel with respect to FATCA compliance; and

f. The continued development and implementation of policies and procedures for receiving and investigating allegations of material failures of FATCA-related internal controls.

 

13. In addition to the FATCA Compliance Program, Bank Leumi-Israel shall implement a revised governance structure for the compliance functions. Within this new framework, the Chief Risk Officer will have functional management responsibility and joint line management authority over the compliance functions that advise the different business divisions, including Global Private Banking. The Chief Risk Officer will also have authority to identify issues of Bank Leumi Group importance, and will have final authority with respect to compensation and promotion matters for divisional level compliance personnel.

14. The Bank Leumi Group Entities agree to close any and all accounts of recalcitrant account holders as defined in 26 U.S.C. § 1471(d)(6). The development and implementation of the FATCA-related measures described in paragraphs 12 and 13 of this Agreement shall include procedures to prevent any of Bank Leumi Group's employees from assisting recalcitrant account holders to engage in acts of further concealment of assets and income in connection with closing any account or transferring any funds; and Bank Leumi-Israel shall ensure that the Bank Leumi Group will not open any U.S. accounts except on conditions that ensure that the account will be declared to the United States and will be subject to disclosure to the United States by the Bank Leumi Group.

15. With respect to Bank Leumi USA, Bank Leumi USA agrees to provide the Department of Justice periodic reports that identify any loan issued by Bank Leumi USA that is collateralized by a SBLC issued by any Foreign Leumi Group Entity, or any foreign affiliate of the Bank Leumi Group. The periodic reports shall further warrant that Bank Leumi USA is fully compliant with all applicable anti-money laundering regulations regarding such loans and that the relevant foreign affiliate has confirmed that the related foreign account is FATCA compliant. The periodic reports shall be due on the two-month anniversary of the Approval Date, and every one hundred eighty (180) days thereafter until the end of the Deferral Period.

 

COOPERATION

 

 

16. The Government acknowledges that the Bank Leumi Group Entities have provided substantial and extraordinary cooperation concerning the Government's investigation of the Bank Leumi Group Entities' cross-border business with U.S. taxpayers. Among other things, beginning in December 2011, Bank Leumi-Israel undertook substantial efforts through meetings with the Bank of Israel, the Israeli Ministry of Finance, and the Israeli Tax Authority ("ITA") to facilitate the provision of U.S. account files and client data, including the identities of U.S. beneficial owners, of U.S. accounts held at Bank Leumi-Israel that had certain attributes, without requiring the Government to identify each U.S. account holder or beneficial owner by name (hereinafter referred to as "Pattern Requests"). Bank Leumi met with the ITA Director General to request that he confer with IRS representatives concerning the exchange of information pursuant to the Convention Between the Government of the United States of America and the Government of the State of Israel With Respect to Taxes on Income (hereinafter the "Tax Treaty").

17. In August 2013, Bank Leumi-Israel informed the Israel Association of Banks that it supported efforts to amend Israeli law to facilitate the exchange of information with the United States and would not join in a divergent view.

18. The Bank Leumi Group Entities conducted an extensive internal investigation of the Bank Leumi Group Entities' conduct, including the collection and review of millions of documents. During the Government's investigation, Bank Leumi-Israel timely provided over 481,000 pages of documents to the Government, some of which were voluntarily provided and in addition to the information sought by the Government pursuant to its requests under the Tax Treaty or other formal process. Bank Leumi-Israel voluntarily provided translations of produced documents, conducted over 40 internal interviews, and through counsel, proffered the substance of internal interviews conducted by counsel with the Bank Leumi Group Entities' employees and management upon the Government's request. Additionally, Bank Leumi-Israel made presentations to the Government regarding the results of its internal investigation.

19. The Bank Leumi Group Entities confirm that relevant senior officers and managers of the Bank Leumi Group Entities that were in place at the time the conduct set forth in the Statement of Facts occurred have been replaced.

20. The Government acknowledges that in connection with the Bank Leumi Group Entities' internal investigation, Bank Leumi-Israel engaged Deloitte Transactions and Business Analytics LLP ("Deloitte") as an independent forensic and accounting expert to collect and analyze data regarding U.S. accounts. Deloitte collected and analyzed electronic and hard copy documents from four countries. Deloitte made an in-person presentation to the Government supporting its data collection and analysis of U.S. accounts and cooperated in providing the production of additional explanatory materials as requested by the Government.

21. Bank Leumi-Israel cooperated with U.S. investigators by voluntarily and timely providing information that assisted the Government in connection with requests under the Tax Treaty and the Mutual Legal Assistance Treaty request to the Duchy of Luxembourg, in a manner that resulted in the production of additional information relevant to the Government's investigation.

22. The Government acknowledges that Bank Leumi-Israel has engaged special counsel to assist in requesting the Israeli Government to look favorably upon IRS requests for information and has requested that the Israeli Government agree to future IRS requests for information regarding U.S. accounts. The Government has been advised that Bank Leumi-Israel has recently approached the Israeli Government to amend Israeli Tax and Anti-Money-Laundering laws to require Israeli banks to consider the tax compliance of its customers.

23. The Government acknowledges that in 2012, Bank Leumi-Israel sent letters to its U.S. clients advising them of the IRS's Offshore Voluntary Disclosure Program.

24. The Government acknowledges that the Foreign Leumi Group Entities have provided data regarding outgoing transfers during the period between June 1, 2008, and December 31, 2012, which includes the value of the transfers, the number of accounts engaging in transfers, and the financial institutions to which such transfers were made.

25. The Government acknowledges that, prior to being contacted by the Government concerning this investigation, Bank Leumi USA began a process of conducting its own assessment of SBLC loans by reviewing all customer relationships with outstanding SBLC loan clients. Bank Leumi USA continued that process by either confirming that the SBLC-backed loans were U.S. tax-compliant or calling the loans and, where necessary, terminating non-compliant customer relationships.

26. The Bank Leumi Group Entities acknowledge and understand that the cooperation they have provided to date with the criminal investigation by the Government, and its pledge of continuing cooperation, are important and material factors underlying the Government's decision to enter into this Agreement. The Bank Leumi Group Entities agree to cooperate fully with the Department of Justice, the Internal Revenue Service, and any designated law enforcement agency regarding any matter related to the Government's criminal investigation of the Bank Leumi Group Entities' U.S. cross-border business, including in connection with any criminal investigation or prosecution based on information disclosed to the Government pursuant to this Agreement.

27. The Bank Leumi Group Entities agree that their continuing cooperation with the Government's investigation as set forth in the preceding paragraphs shall encompass, but not be limited to, the following:

 

a. Completely and truthfully disclosing all information in their possession to the Government about which the Government may inquire in connection with its investigation of the Bank Leumi Group Entities' U.S. cross-border business;

b. Assembling, organizing, and providing, in a responsive and prompt fashion, and upon request, expedited fashion, all documents, records, information, and other evidence in the Bank Leumi Group's possession, custody, or control as may be requested by the Government related to its United States cross-border business;

c. Providing, at their own expense, fair and accurate translations of any foreign language documents produced by the Bank Leumi Group pursuant this Agreement as may be requested by the Government, and;

d. Providing testimony or information, including testimony and information necessary to identify or establish the original location, authenticity, or other basis for admission into evidence of documents or physical evidence in any criminal or other proceeding as requested by the Government. Such cooperation shall include providing information and testimony concerning the Government's investigation, including, but not limited to, the conduct set forth in the Information and/or the Statement of Facts.

 

28. Nothing in this Agreement shall require a Bank Leumi Group Entity to waive any of the protections of the attorney-client privilege, attorney work-product doctrine, or any other applicable privilege unless the Bank Leumi Group Entity voluntarily chooses to waive any such privilege.

29. The Bank Leumi Group Entities agree that their obligations to cooperate under the terms set forth in this Agreement will continue even after the dismissal of the Information, and the Bank Leumi Group Entities will continue to fulfill the cooperation obligations set forth in this Agreement in connection with any investigation, criminal prosecution, or civil proceeding brought by the Government arising out of the conduct set forth in the Information or the Statement of Facts relating in any way to the Government's investigation of the Bank Leumi Group Entities' U.S. cross-border business.

 

DISCLOSURE OF CLIENT DATA

 

 

30. Pursuant to requests' made under the Tax Treaty for information regarding accounts held and/or beneficially owned by U.S. clients, and consistent with orders issued by the Israeli courts regarding such requests, (1) Bank Leumi-Israel has provided or caused to be provided to the Internal Revenue Service certain account information, including the identities of U.S. account holders and beneficial owners, with respect to in excess of 1,500 accounts held at Bank Leumi-Israel and Bank Leumi Trust (the "Disclosed Accounts"); and (2) Bank Leumi-Israel agrees that it shall collect and maintain all account records regarding the Disclosed Accounts and produce all account records regarding the Disclosed Accounts as may be requested by the Internal Revenue Service on an expedited basis. The parties agree that the production of information and records pursuant to this paragraph is a material condition of this Agreement.

 

DEFERRAL OF PROSECUTION

 

 

31. In consideration of the Bank Leumi Group Entities' entry into this Agreement and their commitment to: (a) accept and acknowledge responsibility for their conduct; (b) continue to cooperate with the Government as set forth above; (c) make payments specified in this Agreement; (d) comply with United States federal criminal laws and any guidance, directive, regulation or order issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the United States Department of the Treasury with respect to FATCA; and (e) otherwise comply with all of the terms of this Agreement, the Government agrees to recommend to the Court that prosecution of any of the Bank Leumi Group Entities be deferred for the period of twenty-four (24) months from the Approval Date (the "Deferral Period"), subject to the provisions of paragraph 39 below. The Bank Leumi Group Entities shall expressly waive indictment, and hereby waive all rights to a speedy trial pursuant to the Sixth Amendment to the United States Constitution, Title 18, United States Code, Section 3161, Federal Rule of Criminal Procedure 48(b), and any applicable Local Rules of the United States District Court for the Central District of California for the period during which this Agreement is in effect.

32. The Bank Leumi Group Entities also hereby agree to waive all rights, whether asserted directly or by a representative, to request or receive from any department or agency of the United States any records pertaining to the investigation or prosecution of this case, including without limitation any records that may be sought under the Freedom of Information Act, Title 5, United States Code, Section 552, or the Privacy Act, Title 5, United States Code, Section 552a.

33. The Government agrees that if the Bank Leumi Group Entities are in compliance with all of their obligations under this Agreement, the Government shall: (a) within thirty (30) days of the expiration of Deferral Period (including any extension thereof) hereunder, seek dismissal with prejudice as to the Bank Leumi Group Entities of the Information filed against them pursuant to paragraphs 1 and 31 above; and (b) during the term of this Agreement and thereafter, refrain from pursuing any additional charges against, or investigation of, the Bank Leumi Group Entities arising out of, in connection with, or otherwise relating to the conduct of the Bank Leumi Group Entities' U.S. cross-border business as admitted to or disclosed by the Bank Leumi Group Entities to the Government.

34. By entering into this Agreement, the United States does not compromise any civil liability, including but not limited to any tax liability, which the Bank Leumi Group may have incurred or may incur as a result of its conduct set forth in the Statement of Facts.

35. This Agreement does not provide any protection against prosecution for any crimes except as set forth above in paragraph 33(b). The Bank Leumi Group Entities and the Government understand that this Agreement to defer prosecution must be approved by the District Court in the Central District of California, in accordance with 18 U.S.C. § 3161(h)(2). Should the Court decline to approve the Agreement to defer prosecution for any reason, both the Government and the Bank Leumi Group Entities are released from any obligation imposed upon them by this Agreement, and any exhibits hereto, which shall be null and void.

36. It is further understood that should the Government in its sole discretion determine, after the date of the execution of this Agreement, that any of the Bank Leumi Group Entities: (a) gives false, incomplete, or misleading information; (b) violates any United States federal criminal law or fails to comply with any guidance, directive, regulation, or order issued by the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, or the United States Department of the Treasury with respect to FATCA; or (c) otherwise commits a material violation of this Agreement, the Bank Leumi Group Entities shall, in the Government's sole discretion, thereafter be subject to prosecution for any federal criminal violations of which the Government has knowledge, including but not limited to a prosecution based on the conduct described in the Information and the Statement of Facts; any prosecution may be premised on any information provided by or on behalf of the Bank Leumi Group Entities at any time.

37. Any prosecutions that are not time-barred by the applicable statute of limitations on the date of the execution of this Agreement may be commenced against any of the Bank Leumi Group Entities within the applicable period governing the statute of limitations. In addition, the Bank Leumi Group Entities agree to toll, and exclude from any calculation of time, the running of the statute of limitations during the duration of this Agreement. By this Agreement, the Bank Leumi Group Entities expressly intend to and hereby do waive their rights in the foregoing respects, including any right to make claims premised on the statute of limitations, as well as any constitutional, statutory, or other claim concerning pre-indictment delay. These waivers are knowing, voluntary, and in express reliance of the advice of the Bank Leumi Group Entities' counsel.

38. It is further agreed that in the event the Government, in its sole discretion, determines that any of the Bank Leumi Group Entities has committed a material violation of this Agreement, including the Bank Leumi Group Entities' failure to meet their obligations under this Agreement: (a) all statements set forth in the Statement of Facts, as well as any testimony given by the Bank Leumi Group Entities or by any of its then-current employees before a grand jury, or otherwise, whether before or after the date of this Agreement, or any leads from statements or testimony, shall be admissible in evidence in any and all criminal proceedings hereinafter brought by the Government against any of the Bank Leumi Group Entities; and (b) none of the Bank Leumi Group Entities shall assert any claim under the United States Constitution, Rule 11(f) of the Federal Rules of Criminal Procedure, Rule 410 of the Federal Rules of Evidence, or any other federal rule, that statements made by or on behalf of the Bank Leumi Group Entities before or after the date of this Agreement, or any leads derived therefrom, should be suppressed or otherwise excluded from evidence. By executing this Agreement, it is the intent of the Bank Leumi Group Entities to waive any and all rights in the foregoing respects.

39. The Bank Leumi Group Entities agree that, in the event that the Government determines, in its sole discretion, during the Deferral Period described in paragraph 31 above (or any extension thereof) that any of the Bank Leumi Group Entities have committed a material violation of this Agreement, a one-year extension of the period of deferral of prosecution may be imposed in the sole discretion of the Government, and, in the event of continuing or additional violations, additional one-year extensions as appropriate; provided, however, that in no event shall the total term of the deferral of prosecution period of this Agreement exceed four (4) years.

40. The Bank Leumi Group Entities agree that they shall not, through their attorneys, agents, or employees, make any statement, in litigation or otherwise, contradicting any factual statement in the Statement of Facts or the Bank Leumi Group Entities' representations set forth in this Agreement; provided, however, that the restrictions set forth in this paragraph are not intended to and shall not apply to any current or former employee of any of the Bank Leumi Group Entities, or any other individual or entity, in the course of any criminal, regulatory, or civil case, investigation, or other proceeding, whether in the United States or any other jurisdiction, as long as the individual or entity is not authorized to speak on behalf of any of the Bank Leumi Group Entities in such proceedings. Any contradictory statement by any of the Bank Leumi Group Entities shall constitute a breach of this Agreement and any of the Bank Leumi Group Entities shall thereafter be subject to prosecution as specified in paragraphs 36 and 37 above, or the Deferral Period may be extended pursuant to paragraph 39 above.

41. The decision as to whether any contradictory statement will be imputed to any of the Bank Leumi Group Entities for the purpose of determining whether there was a breach of this Agreement shall be at the sole discretion of the Government. Upon the Government's reaching a determination that a contradictory statement was made by any of the Bank Leumi Group Entities, the Government shall promptly notify the Bank Leumi Group Entities in writing of the contradictory statement, and the Bank Leumi Group Entities may avoid a breach of this Agreement by repudiating the statement both to the recipient of the statement and to the Government within five (5) business days after receipt of notice from the Government. The Bank Leumi Group Entities consent to the public release by the Government, in its sole discretion, of any repudiation.

42. The Government agrees that nothing in this Agreement in any way prevents the Bank Leumi Group Entities from taking good faith positions in litigation involving private parties, including asserting defenses and affirmative defenses.

 

THE GOVERNMENT'S DISCRETION

 

 

43. The Bank Leumi Group Entities agree that it is within the Government's sole discretion to choose, in the event of a violation of this Agreement, the remedies contained in paragraphs 36 and 37, or instead choose to extend the Deferral Period pursuant to paragraph 39. Should the Government determine that any of the Bank Leumi Group Entities have committed a material violation of this Agreement, including paragraph 6, the Government shall provide prompt written notice to Bank Leumi-Israel addressed to its General Counsel, and to the Bank Leumi Group Entities' counsel, Angela Burgess, Esq. of Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, NY 10017, or to any successor the Bank Leumi Group Entities may designate, of the alleged material violation and provide the Bank Leumi Group Entities with a three-week period from the date of receipt of notice in which to make a presentation to the Government, including upon request by the Bank Leumi Group Entities, the Assistant Attorney General in charge of the Tax Division of the Department of Justice, to demonstrate that no material violation has occurred, or, to the extent applicable, that the material violation should not result in the exercise of those remedies or in an extension of the Deferral Period. The Bank Leumi Group Entities expressly understand and agree that the exercise of discretion by the Government under this Agreement is not subject to review in any court or other tribunal outside of the United States Department of Justice.

 

LIMITS ON THIS AGREEMENT

 

 

44. It is understood that this Agreement is binding on the Bank Leumi Group Entities and the Government as defined above, but specifically does not bind any other federal agencies, any state or local law enforcement authorities, any licensing authorities, or any regulatory authorities. However, if requested by the Bank Leumi Group Entities or its attorneys, the Government will bring to the attention of any agencies or authorities, this Agreement, the cooperation of the Bank Leumi Group Entities, and its compliance with its obligations under this Agreement, and any remedial steps specified in or implemented pursuant to this Agreement.

 

PUBLIC FILING AND MISCELLANEOUS PROVISIONS

 

 

45. The Bank Leumi Group Entities and the Government agree that, upon filing of the Information in accordance with paragraph 1 above, this Agreement, including the Statement of Facts and the other exhibits, shall be filed publicly in the proceedings in the United States District Court for the Central District of California.

46. This Agreement may be executed in counterparts, each of which constitutes an original and all of which taken together constitute one and the same document.

47. The Bank Leumi Group Entities shall provide to the Government a certified copy of a resolution of the Board of Directors of Bank Leumi-Israel affirming that the Board of Directors has authority to enter into this Agreement on behalf of all of the Bank Leumi Group Entities and that each Bank Leumi Group Entity Board of Directors has (1) reviewed the Information and the Statement of Facts in this case; (2) reviewed this Agreement; (3) consulted with legal counsel in connection with this matter; (4) voted to enter into the proposed Agreement; and (5) voted to authorize the Bank Leumi-Israel corporate officer identified below to execute this Agreement on behalf of all of the Bank Leumi Group Entities and all other documents necessary to carry out the provisions of this Agreement.

48. Deloitte shall provide the Government with a statement summarizing the quality assurance processes that were executed in producing the computations provided to the Government and confirming that its work was performed in accordance with the American Institute of Certified Public Accountants Standards for Consulting Services.

49. This Agreement sets forth all of the terms of the Deferred Prosecution Agreement between the Bank Leumi Group Entities and the Government. No modifications or additions to this Agreement, in whole or in part, shall be valid unless they are set forth in writing and signed by the Government, the Bank Leumi Group Entities' attorneys, and a duly authorized representative of the Bank Leumi Group Entities.

Respectfully submitted,

 

 

David A. Hubbert

 

Deputy Assistant Attorney General

 

Tax Division

 

 

Stephanie Yonekura

 

Acting United States Attorney

 

 

Christopher S. Strauss

 

Trial Attorney

 

 

Sandra R. Brown

 

Assistant United States Attorney

 

 

Ellen M. Quattrucci

 

Trial Attorney

 

 

Dennis R. Kihm

 

Trial Attorney

 

Date: 12/22/14

BANK LEUMI GROUP ENTITIES

 

Defendants

 

 

Date: 12/16/14
By: Prof. Daniel Tsiddon

 

Deputy Chief Executive Officer

 

Bank Leumi Le-Israel Group

 

DAVIS POLK & WARDWELL LLP

Date: 12/16/14

By: Scott W. Muller, Esq.

 

Angela T. Burgess, Esq.

 

Ava Gesser, Esq.

 

Counsel to the Bank Leumi Group

 

Entities
DOCUMENT ATTRIBUTES
  • Case Name
    UNITED STATES OF AMERICA, Plaintiff, v. BANK LEUMI LE-ISRAEL B.M., THE BANK LEUMI LE-ISRAEL TRUST COMPANY LTD., BANK LEUMI (LUXEMBOURG) S.A., LEUMI PRIVATE BANK S.A., and BANK LEUMI USA, Defendants.
  • Court
    United States District Court for the Central District of California
  • Docket
    No. CR14-0731
  • Cross-Reference
    Information in United States v. Bank Leumi Le-Israel BM, No.

    CR14-0731 (C.D. Cal. 2014) 2014 TNT 247-13: Other Court Documents.
  • Code Sections
  • Subject Area/Tax Topics
  • Jurisdictions
  • Language
    English
  • Tax Analysts Document Number
    Doc 2014-30374
  • Tax Analysts Electronic Citation
    2014 TNT 247-12
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