On August 8, 2018, Mizrahi-Tefahot Bank (“Mizrahi-Tefahot”) informed the Tel Aviv Stock Exchange that its Board of Directors rejected a settlement offer from the US Department of Justice (“DOJ”).
It appears that the DOJ offer was received by the bank on August 7, 2018. The DOJ proposed that Mizrahi-Tefahot pay $342 million to settle the DOJ investigation into whether the bank helped US taxpayers evade US federal taxes.
Mizrahi-Tefahot felt that this was an unreasonably high amount to pay. In its financial statements for the quarter that ended on March 31, 2018, the bank reserved just $46.1 million to settle the DOJ investigation.
The official and primary reason for the rejection of the DOJ offer, however, was the fact that the DOJ’s letter was not accompanied by any details of how DOJ arrived at such a high sum of money. The letter did not contain even any references to any calculation principles. Mizrahi-Tefahot’s lawyer felt that any reasonable calculation of potential settlement amount would lead to a much lower settlement offer.
The most likely reason why Mizrahi-Tefahot felt so confident in rejecting the DOJ offer was its knowledge of the settlements paid by the Swiss banks. NPB Neue Privat AG, for example, only paid $5 million. Basler Kantonalbank believes it can settle for $100 million. In other words, it appears that the negotiation process with the DOJ has matured to the point where Mizrahi-Tefahot can reasonably predict the amount for which the DOJ would agree to settle the case.
Mizrahi-Tefahot is not the only bank in Israel under the IRS investigation. Bank Leumi settled its DOJ investigation for a fine of $270 million and entered into a deferred prosecution agreement. Bank Hapoalim is still in settlement negotiation with the DOJ; in fact, last May, it further increased the funds set aside for a possible DOJ settlement to a total of $365 million.
Contact Sherayzen Law Office for Help With the Voluntary Disclosure of your Mizrahi-Tefahot and Other Israeli Bank Accounts
As part of their settlement agreements, foreign banks agree to supply to the DOJ full information concerning bank accounts owned by US persons. Mizrahi-Tefahot settlement will very likely follow the same path; so will Bank Hapoalim and any other Israeli bank investigated by the DOJ.
This means that if you have undisclosed foreign bank accounts in Israel, you are at a high risk of IRS detection and potentially disastrous FBAR penalties. This is why you need to contact Sherayzen Law Office for professional help with the voluntary disclosure of your Israeli bank accounts. Our law firm specializes in offshore voluntary disclosures of foreign accounts and we can help you!