Opinion ID: 697268
Heading Depth: 2
Heading Rank: 1

Heading: The Collapse of NAB and the Litigation in Israel

Text: 4 In 1985, NAB collapsed after years of fraud, embezzlement, and mismanagement by its senior managers in Israel. BOI made payments to NAB depositors and obtained the appointment of the Official Receiver of the State of Israel (the Receiver) to liquidate NAB's remaining assets. In 1989, the Receiver commenced a civil action in Israel in the name of the State of Israel (the Israeli action), naming as defendants Sussman, Guilden, and several other officers and directors of NAB, and alleging, inter alia, that the NAB directors had been negligent and had breached their fiduciary duties by failing to monitor adequately the management of NAB and to ensure that NAB operated in compliance with Israeli banking regulations. The Receiver's complaint sought recovery from the defendants, jointly and severally, of more than $100 million dollars to compensate for losses allegedly incurred by BOI as a result of NAB's collapse. 5 Sussman and Guilden, represented by Israeli counsel, raised affirmative defenses to the Receiver's claims and asserted third-party claims against BOI and two of its officials. In addition to alleging that BOI and the officials had been negligent in failing to carry out their supervisory duties with respect to NAB, the third-party claims alleged that BOI and the officials had deliberately misrepresented NAB's financial condition and concealed from NAB's non-Israeli directors certain financial transactions stemming from a 1983 banking scandal in Israel, which came to be known as the Bank Shares Crisis following revelations that many Israeli banks were artificially and unlawfully inflating the market prices of their respective shares. The third-party claims alleged that BOI and the Israeli Ministry of Finance (the Ministry) had sought to avert the financial collapse of NAB by extending it a secret $10 million loan in order to allow NAB's senior managers to continue their manipulation of NAB's stock price; that the third-party-defendant officials, despite learning of the NAB managers' improper activities, had continued to misrepresent NAB's situation to its nonresident directors and sought to prevent public disclosure of BOI's role in the NAB stock-manipulation scheme; and that NAB would not have collapsed but for the actions of BOI and the defendant officials. Sussman and Guilden sought contribution and indemnification for any amounts that they might be required to pay in the Israeli action. 6