$138m Nudie juice tax dodge sting for Israel’s Discount Bank over Bittener loans

An Israeli bank has paid the ATO $138m after admitting its role in a decades-long tax dodge scheme put in place by the Sydney family that founded the Nudie juice empire.

The Binetter’s were behind the Nudie juice business. Picture: Sam Mooy

The Israeli bank at the centre of a two-decade long international case has been forced to make a $138m payout as part of a settlement with the Australian Taxation Office over a case involving tax evasion and the family behind the Nudie juice empire.

The Israel Discount Bank made the deal with the ATO after a years-long battle in the Federal Court over actions taken by the bank to assist the high profile Israeli-Australian Binetter family evade taxes.

Federal Court Judge Jacqueline Gleeson ruled in November 2016 that some Binetter family members and their company had engaged in a decades-long tax fraud involving millions hidden in Swiss and Israeli bank accounts.

The Binetter family engaged in a “back-to-back” loan operation that saw it deposit money in Israeli accounts before borrowing back that money as a business loan.

The interest of these expenses was deducted in income tax returns to the ATO as an expense to reduce the company’s tax liability.

The court found brothers Emil and Erwin Binetter and their sons Michael and Andrew were found to have engineered the tax scheme.

In a statement posted to the Tel Aviv Stock Exchange, Discount Bank noted the agreement, stating it would pay a fine of $128m for its conduct in the tax evasion scheme.

Its subsidiary bank, Mercantile, will pay the remaining $10m fine.

The bank also said it had reached an agreement that after making the payments to the ATO the bank would receive $71.8m from its insurers to cover costs.

It also announced an inquiry headed by retired judge Jila Gerstal to investigate how the bank allowed the conduct to take place.

The committee of inquiry will look at who allowed the conduct to take place and benefited from the deal and will make recommendations to the supervisor of Israeli banks.

The ATO, which welcomed the payout, is still engaged in one last legal battle over the Binetter’s tax claims, with an ongoing court matter with Rawson Finances, a company linked to the Binetters.

In 2013 the ATO was defeated in a court battle over Rawson Finance, in which authorities alleged it had borrowed millions in back-to-back loans through three Israeli banks between 1993 and 2005.

The matter was brought before the courts by the liquidators who had been called in to clean up the Binetter’s companies after the size of their tax schemes was revealed.

The Binetter family owned the Nudie juice empire until selling it to Philippines food group Monde Nissin for $80m in 2015.

Former Nudie Juices boss Michael Binetter sold his mansion at 36 Chamberlain Ave, Rose Bay for $12.5 million to Chinese-born buyer Xiaochao Zhang.

The family, which was previously based in Sydney, now lives in New York

The battle came after an appeal by Andrew and Michael Binetter in the US after liquidators pursued the pair for tax bills run up by companies they controlled.

In July 2018 A judge knocked back efforts by Michael Binetter to get access to the money from the sale of his Rose Bay mansion.

ATO assistant commissioner Aislinn Walwyn said the deal was the result of years of work by the ATO and its debt recovery officer working with liquidators of the companies.

“These proceedings involved similar claims to a prior case where funds in Israel were used as security for advances from the Israeli banks of amounts equivalent to the funds deposited in Israel,” she said.

“The defendants’ conduct led the applicant companies to incur tax liabilities when the ATO disallowed deductions for interest expenses.

“These cases involved elaborate and complex structures. Investigating such cases requires specialist skills, dedication, and tenacity. The settlement justifies the efforts of the ATO teams over a number of years.”