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C
PHOTO
RESTORATION
Banks Fined
In Scandal
Jerusalem (JTA) — The
nation's leading banks and
more than a dozen of their
top officials this week were
given large fines, and the
executives sentenced to
prison, on charges relating
to what had been Israel's
biggest financial scandal
ever.
In a Feb. 16 ruling, the
Jerusalem District Court
rendered guilty verdicts
against Bank Leumi, Bank
Hapoalim and the Discount
and Mizrahi Banks in what
was seen as the culmination
of the scandal surrounding
the bank share collapse of
1983.
The court ruled that the
bank officials had artificial-
ly inflated the price of bank
shares in 1983, risking the
banks' capital and their abil-
ity to meet their obligations.
This week, the court fined
the four banks some
$330,000 apiece.
In addition, the court im-
posed fines as high as
$200,000, and in some cases,
prison terms of as much as
eight months, on the ex-
ecutives.
But the court allowed time
for appeals before
implementation of the
sentences.
Although none of those
found guilty is active today
in the management of
banks, some are managers of
investment companies, and
the court ruling may bar
them from these positions.
The sentences may well
bode ill for Ernst Japhet, the
former head of Bank Leumi,
who recently returned to
Israel and will be tried
separately.
Mr. Japhet was regarded
as the king of Israeli bank-
ing in the period leading up
to the 1983 crisis. He is said
to have played a leading role
in the manipulation of the
bank shares.
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.
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