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(photo credit: Bloomberg)
Allegations raised by a New York business magazine that Matthew Bronfman resigned from the board of Israel Discount Bank of New York due to alleged wrongdoings are false, a source close to Bronfman told the The Jerusalem Post on Sunday.
"The accusations raised are false and the only reason Bronfman resigned from the board was because of a conflict of interest in having a director who also held ownership interests," said the source.
Bronfman and another director, Michael Rubinoff, resigned at a meeting on Friday after being asked to step down, while a third board member, Chairman Leonard Grunstein, did not attend the meeting and was voted off by the board after he refused to resign, Israel Discount Bank, the parent of New York, said in a filing to the Tel Aviv Stock Exchange on Friday.
Bronfman, son of financier Edgar Bronfman and controlling shareholder of Israel Discount Bank, stepped down from his position following a board decision to replace directors who also held ownership interests in the bank. The New York board accepted its parent's April 1 recommendations that controlling shareholders of the bank and their representatives should not serve as directors of either entity.
The timing of the call for Bronfman's resignation coincided with a report from Crain's New York Business stating that Bronfman quit due to an investigation into whether he exploited his position for personal benefit.
Crain's reported on Friday that earlier this year New York's board hired law firm Sullivan & Cromwell to conduct an investigation into Bronfman's activities and that an as yet not released report was presented to the board in March. According to Crain's, two sources who have seen the report say it examined allegations that Bronfman used a floor of New York's offices for staffers who worked for his other businesses and on his civic activities, without reimbursing the bank and also raised allegations that Bronfman meddled in bank operations, including trying to revise compensation for the bank's in-house broker-dealer, IDB Capital Corp.
Additionally, Crain's stated that Sullivan & Cromwell's report probed whether Bronfman persuaded a Discount New York loan officer to lend some $1 million to one of Bronfman's partnerships without informing the board. According to Bronfman sources quoted in the Crain's article, however, the loan was made in 2005 before Bronfman became a director or bought a controlling interest in the bank.
All those allegation were denied by the Bronfman source to the Post who noted that he had not seen the full report from Sullivan & Cromwell nor does he know if Bronfman has been made aware of its findings.
Meanwhile, Michael Goldstein, a New York Discount board member who has been appointed acting chairman, told Crain's he believes Bronfman is doing things in the best interest of the bank. "He is a man of unquestionable integrity and moral character," said Goldstein in the Crain's report. "Could he have made some mistakes? Maybe, and we will look at that."
In 2005, the Bronfman family led a group of investors that purchased 26 percent of the bank with an option to purchase 25% more.
Bronfman's lawyer, George Canellos, told Crain's that Bronfman would continue to work "for the benefit of the bank and its shareholders."