The Unthinkable Happens: A Former TBTF Bank Chief Goes to Jail

Contributed by Don Quijones, a freelance writer and translator based in Barcelona, Spain. His blog, Raging Bull-Shit, is a modest attempt to challenge some of the wishful thinking and scrub away the lathers of soft soap peddled by our political and business leaders and their loyal mainstream media.

Like Al Capone’s merry band of bootleggers before their fateful brush with the legendary lawman Elliot Ness, today’s banking executives believe they can flout pretty much every law without the slightest fear of sanction. And judging by the number of convictions meted out to senior financial fraudsters in the wake of the global crisis they themselves caused, their sense of hubris and impunity is entirely justified. Put simply, they are untouchable.

In the frankest admission yet that banks and other corporations are quite literally above the law, the U.S. Department of Justice recently announced that big companies couldn’t be indicted because it might damage the U.S. or world economy. Indeed, as Matt Taibbi reported in The Rolling Stone, the U.S. Attorney General Eric Holder is nowsaying that not only can they not indict the companies, but they cannot even indict any of the individual criminals at the companies. In other words, the department ostensibly responsible for delivering justice in the U.S. is now running a protection racket and its clients include the employees and executives of the country’s largest law breakers.

But just when you thought that the enlightened concept of universal justice was dead and buried, a courageous Spanish judge by the name of Elpidio José Silva has done what virtually no other judge in the Western world, bar Iceland, has dared to do: He has refused to grant bail to a former senior banker, sending him to prison before facing trial for his alleged role in the lead-up to the financial crisis.

The ex-banker in question, Miguel Blesa, is the former president of Caja Madrid, now part of the too-big-to-fail (but-almost-certainly-too-big-to-save) banking group Bankia. He stands accused of a number of felonies including involvement in irregularities in Caja Madrid’s purchase of City National Bank, financial fraud and the wrongful “appropriation of funds” – legalese for white-collar theft.

Indeed, Blesa is no stranger to Madrid’s Soto del Real prison, having already spent a whole day and night there on May 16, before being released after his team of lawyers posted bail to the tune of 2.5 million euros. This time around, though, he may face a much longer stay after new evidence emerged that he and Caja Madrid’s financial director Ildefenso Sánchez Barcoj knowingly flouted Spain’s merger and acquisitions laws when authorising Caja Madrid’s purchase, in 2010, of City National Bank of Florida and the Mexican real estate firm “Su Casita” (HSC).

In email correspondence cited by the judge, the two bragged that Caja Madrid had as much as 100 million dollars in available funds to buy whatever entity it wanted to “get its hands on” – despite the fact that the bank was already showing signs of strain in the wake of the collapse of Spain’s property boom.

Once the chains of debt began unravelling in Spain, the most heavily exposed cajas (savings banks) started dropping like inebriated flies. The Zapatero government’s solution was to meld together smaller bankrupt cajas with bigger, seemingly healthy entities. It was too big to fail writ large and the result was the birth of a new generation of semi-still born frankenbanks — the ugliest of which was undoubtedly Bankia, spawned from the loins of Caja Madrid’s merger in late 2010 with six smaller cajas. And like Frankenstein’s monster, Bankia would also turn on its creators — or at least its investors — by posting a record loss, in 2012, of over 19 billion euros.

Since then, more than 20 billion euros of Spanish taxpayer funds have been funnelled into the entity to keep it alive, while hundreds of thousands of customers who were scammed into investing their life savings into Bankia’s fraudulent preferentes shares have been left high and dry.

Public Prosecutor Becomes Banker’s Defender

As one of the people most responsible for Bankia’s collapse settles into his new, rather austere surroundings, trying no doubt not to think about the next shower he’ll have to take, a legal shit storm of epic proportions is brewing beyond the prison gates. On the one side is Silva and his defenders and, on the other, Spain’s highly politicised public prosecutor’s office.

Now that Belsa, a distinguished member of the financial elite and a one-time senior political figure of the governing Popular Party, is on the sharp end of the law, Spain’s public prosecutor’s office has suddenly become the accused’s most strident defender– on taxpayer expense, of course. Indeed, it is even “seriously considering” launching a lawsuit against Judge Silva for continued breach of duty, citing “procedural irregularities” in his management of the Blesa case.

According to El País, among the charges levelled against Silva is his tendency to resort to snap rulings instead of the more traditional judicial decrees. For example, Silva recently ordered Caja Madrid to provide records of all the emails sent and received by Blesa during his time as president of the bank – an act that the prosecutors described as “extremely invasive” and a violation of Blesa’s “fundamental rights.” Tough words indeed, especially for a government that just announced plans to grant the police sweeping new powers to use Trojan software to spy on all criminal suspects’ electronic communications – surely, you’d think, a far greater and more insidious threat to personal privacy!

Such blatant hypocrisy is, however, par for the course for a government steeped to its eyeballs in corruption. And given the seriousness and scale of the charges facing both Rajoy’s administration and its former pet bank, Caja Madrid, it is hardly surprising that the government is fighting tooth and nail to prevent due process from prevailing in Blesa’s case.

After all, the legal tradition is one based on the law of precedence. And should Blesa end up facing the music for his crimes  (rather than have his case languish in the courts until the statute of limitations elapses, as so often tends to happen with high-profile cases of white-collar crime here in Spain), there’s no telling who might be next. An obvious candidate would be Rodrigo Rato, a former deputy leader of the Popular Party and one-time managing director of the IMF, who replaced Blesa at the helm of Bankia in 2010 and whom many blame for its collapse in 2012.

What happens in the coming weeks and months will determine whether or not justice prevails in Spain, and whether or not the Blesa case serves as an example for independently-minded judges of other countries to follow. For in the face of the wholesale betrayal of the public by the executive and legislative branches, the rare principled stance taken by activist judges like Silva represents one of our last remaining hopes of justice ever returning to this dark, lawless world. Contributed by Don Quijones.

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