Foreign banks have been helping Americans dodge U.S. income taxes for years. But it’s taken decades for law enforcement to catch up with them.
Bank Leumi, Israel’s second largest bank, admitted late last year to helping its American customers evade income taxes, hide assets, and launder their money back into the United States. The bank agreed to pay $130 million in fines to New York regulators and another $270 million to the federal government, and assist in an ongoing probe of other Israeli banks.
But I know that the FBI and SEC have known about this for decades because I personally flagged it to them in 1989, when Crazy Eddie was busted for fraud and I was trying to avoid prison time. (Which I did.)
During my criminal career at Crazy Eddie, my family used Bank Leumi to help them evade taxes, hide assets, and launder money because of their exceptional client services and discretion. From 1971 to 1984, I was intimately involved in my family’s scheme to underreport cash revenues and evade income taxes at Crazy Eddie when we were a private company. Bank Leumi sent its Israeli employees to New York to assist my family in opening secret numbered accounts in Israel, ferry their skimmed cash overseas, and later helped them launder that cash back into the United States when they needed access to those funds.
Family members handed over briefcases full of cash to Bank Leumi employees. When family members boarded their El Al flights to Israel, somehow the cash was waiting on the plane for them. The Israeli bankers personally handed over to family members all bank documents to avoid using U.S. mail. When my family needed cash, they obtained sham business loans from Bank Leumi-USA, but those loans were secretly secured by the cash deposited at Bank Leumi-Israel. They were able to deduct the interest paid on those loans as a business expense, while earning tax-free interest on the funds deposited overseas.
Then in 1984, after we went public, we stopped doing income-tax fraud to engage in the more lucrative business of screwing investors by doing securities fraud. From 1984 to 1987, we overstated our income to reap huge financial rewards by selling stock to unsuspecting investors at inflated prices. We used Bank Leumi to launder cash back into Crazy Eddie through a foreign dummy corporation in Panama to overstate our sales and profits to drive up the stock price. The financial rewards that my family reaped by selling stock at inflated prices many more times covered the added cost of Crazy Eddie paying corporate income taxes on the laundered cash.
