The Legal Adviser to the Government, Attorney Gali Beharev-Miara, submitted to the District Court in Tel Aviv a clarification notice regarding the legal basis for charging officers of Bank Hapoalim.
At the heart of the case are some of the compensation payments, as stipulated in the settlement agreement being formed as part of the derivative lawsuit in the case concerning the settlement reached by the bank with the prosecution authorities in the US who claimed that the bank helped American customers to evade tax.
The ombudsman's announcement is published following the opinion she submitted at the end of October 2022 in relation to the compromise settlement emerging in the process, and the court's request. The Legal Adviser to the Government believes that under the circumstances of the case the court should consider the possibility of imposing personal liability on the office holders as well.
"Fix the compromise arrangement".
Advocate Gali Beharev Miara, photo: Gideon Markovitch
Broad public considerations
In a position submitted to the court at the end of October 2022, the ombudsman proposed that the court receive from the parties the report of the independent committee established for the purpose of examining the conduct of the bank, as well as the completion of aspects that were not included in it.
Among them: the quantification of the components of the damage caused to the bank group due to the conduct of the officers in the case as well as compensations paid to the defendants due to the profits of the bank group in the relevant periods.
The ombudsman also suggested at the time, that the court would consider instructing the parties to amend the settlement arrangement, paying attention to the proposed standards, so that those who served as officers in the company (or part of them) would personally pay a portion of the settlement amount out of profits paid to them.
In response to the court's request, Attorney Beharev-Miara clarifies that her reference to the possibility of charging company officials to participate in the settlement amount or part of it, stems from the rationale underlying the derivative lawsuit procedure: a group procedure, in which, unlike a normal civil lawsuit, the court is also required to take into account public considerations There is a personal obligation of the office bearers to fulfill the public interest in a better way.
Heavy damage due to the conduct of office bearers
This reference is based on the statements of the court in a previous similar proceeding in the case of "Bank Leumi", where the settlement agreement included the participation of some of the officers in the amount of compensation to the bank.
In the clarification to the court, it is stated that "in the context of deterrence and the improvement of corporate governance, the examination of the actual carrying of the officers in a part (even if reduced in scope in relation to the total settlement amount) of the settlement amount, depends on two main criteria."
"One, the extent of the damage caused to the company as a result of their conduct. Thus, the heavier the damage caused due to the conduct of officers in a way that violates their obligations towards the bank group, and the more the damage resulted from a more central event in the life of the company, the greater the justification for carrying the officers responsible for the damage, at least in part of the compensation to be paid to the company," the opinion reads.
"The other consideration is the severity of the violation attributed to the office holders. The more serious the violation, and the greater the deviation from the expected standard of behavior, the greater the justification for assigning the office holders to bear part of the compensation for the company. The more the court finds that the conduct of the office holders in the case is more serious and indicates a greater deviation From the norm of the behavior expected of office holders in a large and significant public company like the bank, settling for compensation from the insurance fund only, will not fulfill the public interest."
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