1. The Danziger Commission has ended its role. Now it is the turn of the court, and the turn of the Attorney General, and perhaps also the turn of the Supervisor of Banks and Chairman of the Securities Authority, to have their say. , Or at least to express in court his firm position against the conclusions reached by the independent committee set up by Bank Hapoalim. Its conclusions do not do justice, are not fair or even reasonable in the circumstances of the case. The public interest necessitates their correction. And it’s still possible.
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2. It will be recalled that the committee, headed by retired Supreme Court Justice Yoram Danziger, was established by the workers following the affair of the tax evasion of its clients. The committee was asked to examine whether the bank’s senior executives should be required to return some of the bonuses they received, which were also derived from the bank’s profits from tax evasion. The affair, it is important to note, ended in a whopping $ 900 million fine paid by the bank to the US authorities.
3. “The committee believes that if the officers had acted reasonably, as expected of them, at least some of the damage caused to the bank in connection with the American tax and investigative affair would have been spared,” the committee report said. Black on top of legal white: There were serious failures of the principals, which caused damage to the bank. Poignant and worthy words. The problem lies in conclusions derived from these words, or rather in conclusions not derived. Because the committee ultimately recommends not demanding from workers’ managers in the relevant years even one shekel back.
4. The committee examined, among other things, the conduct of the principals in the face of the investigative proceedings initiated by the American authorities. The committee states that “there is a probable possibility that a number of officers who served in the bank violated the duty of care imposed on them … behaved in an unreasonable manner and not as expected of them.” The workers violated the duty of care unreasonably imposed on them.This is a direct and sharp criticism, because the same managers were paid and bonuses just for that: be careful, spot failures, prevent them ahead of time or act immediately to repair what went wrong and reduce the damage. , The committee states, they did not.
5. According to the committee’s report, between 2014 and 2011, when the Americans had already investigated the conduct of the workers in Switzerland, the bank’s management froze in a chair. CEO Zion Keinan, for example, conducted a limited and limited investigation in scope and depth, there is not a single meeting with the legal team, and in fact did not know the references of the U.S. Department of Justice that conducted the investigation. “There is a probable possibility that CEO Keenan violated the duty of care imposed on him in connection with leading the bank’s conduct in the American investigation.”
6. And the chairman, Yair Seroussi? “To have satisfactory discussions … regarding the conduct of the bank … in the American investigation.”
7. The managerial strategy adopted by the workers’ leaders, as portrayed in the committee’s report, was to “wait and see, maybe it will go away on its own.” The tax evasion of the working customers, who is responsible for it and how it can be fixed, the managers just held on to the chair and prayed that it would be okay.All this time the salaries and bonuses, tens of millions, flowed into their pockets.
8. The review committee was not set up on the initiative of Bank Hapoalim, but was forced on it with no choice, after a derivative lawsuit and class actions were filed against the bank. The committee was in fact required to examine whether an agreement should be reached with the bank’s insurers, and to examine whether its managers should be required to return funds. Now the judge of the Tel Aviv District Economic Department, Magen Altuvia, before whom the lawsuits are being heard, is expected to demand the position of the ombudsman for the compromise settlement that the bank seeks to reach. This will be the moment for Amit Isman, Acting Spokesman Avichai Mandelblit, who is retiring this week, to speak. As a representative of the public interest, his word should be sharp and clear: in light of the harsh conclusions, any compromise arrangement that does not charge a price even to the bank’s executives is inappropriate. Nor is the arrangement formulated by the Danziger Committee, according to which the bank will receive a handsome sum of $ 135 million from the insurance companies (from which NIS 50 million will be deducted as expenses). Because without personal responsibility, there is no deterrence.
9. In truth, Isman does not even have to wait for Judge Altuvia’s request to represent the public’s position on his own initiative. This right is vested in him. And he can ask for the position of the Supervisor of Banks and the chairman of the Capital Market Authority, for example.
10. The obligation to charge a price to managers is not “revenge” on them. It is requested due to the need to establish corporate governance. Probably in the giant companies, probably in the banks that run our money. If even after the commission finds that they have violated the duty of care the executives will not be required to pay an economic price, there will be almost no effective whip left in front of them (the criminal whip should be reserved for extreme cases of actual offenses).
11. The arrangement at hand basically says: We, the managers, did throw away a bit, and the bank did pay capital, but the insurance will pay back some and the rest will be absorbed by the public, because the bank makes a lot of money anyway. This is a very bad message for stock market investors, who have to decide whether to invest their money in the securities of listed companies. Therefore, the chairman of the Securities Authority, Anat Guetta, can and should voice her position on the matter.
12. The huge gap between the serious findings and the fact that the committee avoided personal conclusions necessitates rethinking this institution called the “Independent Committee”. To date the Economic Court has warmly embraced this solution. It is possible that the Danziger report pulled the rope a little too much and revealed that this is in fact a convenient and too easy solution for the job issues. If an officer is negligent, an account should be brought with him. But if the whole purpose of setting up these committees is to align with insurance companies and find an explanation for why they have to pay, it’s a waste of time and money. It is possible to send a lawyer to negotiate with them. It will be shorter and cheaper, without the appearance of criticism.
13. It is important to understand the depth of the problem. Dozens of pages in the Danziger report reviewed far beyond the failures of CEO Keenan and Chairman Seroussi. The report mentions, for example, Orit Lerer, who held a number of positions at Bank Hapoalim and Poalim Switzerland, as someone who violated her duty of care due to “her malfunction … in handling the conduct of Poalim Switzerland in the American investigation.” Alberto Garfunkel, CEO of Hapoalim Switzerland, is also being criticized for violating the duty of care due to his conduct towards one of Hapoalim Switzerland’s major customers. And so is Danny Koller, the bank’s chief risk officer, who did not monitor the risk that arose after the UBS affair, in which the US authorities fined the Swiss bank. And also mentioned is Adv. The risk after the UBS affair exploded.This means that the breakdowns were both at the high top and across the layers below it.
14. How can the committee actually determine that there was a breach of a duty of care that caused damage to the bank, and still determine that no price should be charged for the garden? After all, if a lifeguard in a pool deals with a cell phone while someone drowns, or a construction supervisor reads a book while the scaffolding in front of him collapses, they will be held responsible and sanctions will be imposed on them. So how come it’s not here?
15. Here comes the turn of the legal quibble, which takes into account the “good of the bank” and the arrangement with the insurers, “the” lessons learned “and the” improvement in the compliance system, “and of course the high costs involved in conducting a lawsuit.” They are usually not enjoyed. If the Danziger Commission had been courageous and loyal all along to the public interest, it would not have chosen to formulate legal terms such as “Regulation A310 for Proper Banking Procedure”, or “the language and purpose of the relevant regulation”, or “lack of proper banking practice” . And she probably should not have thrown into the excuse of fire the “passing of time,” the most annoying legal sedative words. Workers’ managers did not wait for the “passage of time,” and took the bonuses on the spot. Now, in light of the sharp conclusions of the committee appointed by the bank itself, it is time for them to return.