The report by State Comptroller Eliezer Goldberg submitted today indicates that former Bank of Israel governor Jacob Frenkel enjoyed a series of special arrangements worth hundreds of thousands of shekels. Frenkel served as central bnak governor for two terms of office from August 1991 through January 2000. From 1987 until 2000, Frenkel also served as aneconomic advisor and researcher for the International Monetary Fund. Frenkel now serves as chairman of the board of Merrill Lynch International and a director in a number of Siraeli technology companies, including Lumenis and Emblaze.
According to the Bank of Israel Law and cabinet decision from 1969, the Bank of Israel governor¿s wages and benefits are identical to those of a cabinet minister. The comptroller's investigation revealed that, during Frenkel's tenure, Bank of Israel made agreements with him that entitled him to better terms than those of a cabinet member, arguing that "the situation exists where the governor is compensated less than other senior staff members of the central bank".
At the end of Frenkel's tenure in January 2000, Frenkel was paid NIS 135,877 gross (which translated into a net NIS 107,506) for the redemption of 101.4 unused sick days, despite the fact that the compensation law for public servants does not mention remuneration for unused sick days. The unprecedented decision to pay the equivalent in cash to Frenkel was made by a senior executive of the bank who answered to Frenkel himself.
From 1991 through 1998 the bank repaid Frenkel for expenses incurred during trips abroad according to the regulations for a cabinet minister. At the end of 1998, the senior executive instructed that the expenses be recalculated retroactively for Frenkel's entire term of office according to the regulations for senior bank staff. As a result of the recalculation, Frenkel was paid discrepancies of $20,546 for 623 days abroad during the period.
The report indicates that although the bank had reports of restaurant meals and lodgings charged to the central bank¿s credit cards, the bank never examined whether these expenses were also included in Frenkel's personal expense reports, relying instead on the same senior executives notes from discussions with Frenkel. Frenkel explained in his response to the comptroller that the expense repayment arrangement was made according to bank norms and that his work abroad "was not at all similar to that of cabinet ministers and their entourages, which enjoy the hospitality of the host countries".
In mid-1998, the bank conducted an examination of unused vacation days during Frenkel¿s 1991-1996 tenure, and wrote off 25 days from the balance remaining as required by the guidelines for a cabinet minister. In April 1999, the senior executive instructed the write-off be annulled, arguing that Frenkel had been unable to take vacations as no deputy had been appointed for him. In compensation for the 25 unused vacation days, Frenkel was paid NIS 30,000.
Frenkel claimed in his response to the comptroller, "during both my terms the cabinet did not appoint a deputy governor for Bank of Israel. Solely responsible for the ongoing management of the central bank and in light of Israel's urgent needs . . . I worked day and night. Circumstance prevented my use of most of my vacation days, and now I find it difficult to understand why that fact should constitute an obstacle to me and I should be 'fined' for my dedication."
Goldberg determined that "the shortcomings outlined in the report indicate improper decision-making procedure in matters concerning the salary and benefits approved for the former governor. Even if the situation occurred under which the governor was compensated less for his labor than were his subordinates, the issue could only be corrected through a formal appeal to the cabinet to change the decision linking the governor¿s compensation to that of a cabinet minister or to approve certain terms of employment other than those for ministers. It is inappropriate that the governor¿s subordinates should approve various payments to him based on bits of agreements not originally intended to cover him, in opposition to precedents set with prior governors and against the advice of the central bank's in-house counsel".