Former Leumi Chairman Ernst Japhet Gets Harshest Sentence in Bank Scandal

Ernst Japhet, former chairman of Bank Leumi, was sentenced this week to an 11-month prison term and fined some $300,000 for fraudulently manipulating his bank’s shares in Israel’s biggest financial scandal ever.

Japhet, who four months ago returned here from New York after fleeing Israel more than 10 years ago, personified the country’s banking establishment for most Israelis until the 1983 bank shares scandal.

He was the last of the senior officials at Israel’s leading banks to face trial on charges surrounding the 1983 scandal.

Japhet’s sentence was the severest to be handed down by the Jerusalem District Court against any of those involved in the affair.

In April, the nation’s leading banks and more than a dozen of their top officials were given large fines, and the executives sentenced to prison, on charges relating to the scandal.

The manipulation of bank share prices a decade ago spurred buying of shares until they dominated 70 percent of the market. When the Tel Aviv 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, which effectively nationalized the banks, prevented large-scale bankruptcies and the closings of major banks.

When the sentence was delivered Wednesday, Judge Miriam Naor described Japhet as bearing “the largest share” of responsibility for the crisis.

Among the others who were previously tried in connection with the banking scandal, the harshest sentence was eight months in prison and a fine of approximately $200,000. That sentence was given to Japhet’s second in command at Bank Leumi, Mordechai Einhorn.

Japhet took the news of his sentence with the same stony stoicism with which he received last week’s guilty verdict. It is considered certain that he will launch an appeal.