By Don Quijones, Raging Bull-Shit .
“We have to fight corruption in order to build a new model of more sustainable and fairer growth.”
These laudable words came from the least likely of mouths – that of Francisco González, CEO of Spanish banking giant Banco Bilbao Vizcaya Argentaria (BBVA). González was speaking at the bank’s annual shareholder meeting, held last week in Bilbao.
BBVA is Spain’s second biggest bank with operations in more than 30 countries including the U.S., China, Argentina, Columbia and Mexico. It has about 107,000 employees, 47 million customers worldwide, a million shareholders and now, it seems, a moralizing CEO.
It is not the first time that González has inveighed heavily against rampant political and financial corruption in Spain. In February 2013 he spoke passionately about the need to bring ethics back into the financial sector, as well as create “stronger”, “better” financial regulations – not what you’d normally expect to hear from the big boss of a big bank.
The bulk of Spain’s general and financial press ate it up. And thoughtful input on the topic of corruption in Spain is welcome from all quarters – especially given the sheer scale and scope of the problem (for a little background, read this and this). However, I’m a little suspicious when it comes to moralising senior bankers; they have hardly painted themselves in glory in recent years.
Getting a Bang for Its Buck
BBVA is by far Spain’s biggest investor in the arms trade. In 2011 the bank invested close to 2 billion dollars in the sector. Together with Spain’s biggest bank, Santander, BBVA accounts for 90 percent of total funding for the country’s arms industry.
According to allegations from the London-based organisation Human Rights Investigations, BBVA has been consistently singled out for its human rights record and its links with the arms industry. The bank has also been criticised by Pax Christi for having no rules banning it from transactions linked to cluster bombs.
As if that were not enough, a 1986 investigation by the West German Federal Criminal Bureau uncovered evidence that Syrian General Duba, Syrian dictator Hafez al-Assad, and heroin kingpin Rifaat al-Assad all maintained multimillion dollar accounts at the Banco de Bilbao (now BBVA), which were used to launder proceeds not only from weapons deals but also drug trafficking – which, as luck would have it, brings us to the next entry on BBVA’s charge sheet.
Spain’s Narco Bank
By now, it’s common knowledge – at least to those still paying attention to the non-stop carrousel of banking scandals – that when it comes to laundering the proceeds from their business, the world’s narco trafficantes’ preferred bank of choice is the world’s “local bank”, HSBC.
Founded in the middle of the nineteenth century to serve as the backbone of the financial network of the British East India Company – then the world’s largest drug trafficking operation – HSBC has repeatedly been caught laundering money for Mexican and Columbian narcos as well as Islamist terrorist groups.
What is less well-known is the somewhat smaller, but all the same vital, role played by González’s bank, BBVA, in the global drugs trade. Like Santander, BBVA has branches and divisions throughout Latin America and as such comes into regular contact with the proceeds of the continent’s vast drugs trade. Just last year the Bolivian government seized a stash of more than a million dollars of presumed drug money from a light aircraft – money that was confirmed by the Bolivian government to have come from two Paraguayan-based banks: Banco Visión and BBVA.
However, a million dollars is chump’s change compared to the amount of money BBVA is alleged to have laundered through its Mexican operations. In 1996 the bank – then called BBV – acquired Mexico’s second largest financial institution Mercantil Probursa (now called BBVA Bancomer). As the Mexican daily La Jornada reported in 2004, so grave and profuse were the irregularities in the operation that they drew the attention of not only Spanish but also U.S. authorities.
According to an FBI report obtained by La Jornada, Probursa’s then-president José Madariaga and his trusted sidekick Eduardo Perez Montoya were suspected of having close ties to some of Mexico’s most powerful narco gangs. Allegedly, when the two senior directors gave the green light to BBV’s purchase of Mercantil Probursa in 1996, they did so on one proviso — that the Spanish bank would launder their profits from the drug trade through its Cayman Islands subsidiary. Given that Probursa ended up in BBV’s possession, it’s probably safe to assume that the Spanish bankers complied with their Mexican counterparts’ wishes.
The Mother of All Scandals
But that was just the tip of BBV’s corruption iceberg. In 2002, Spain’s financial markets regulator launched a joint probe with the Bank of Spain into 200 million euros’ worth of funds that BBV had kept off its books for well over a decade. Hidden in offshore accounts in Jersey, Lichtenstein and the Cayman Islands, the money was purportedly used to hide bought-back shares and executive pensions from the prying eyes of Spanish and U.S. tax authorities.
The bank was also accused of helping then-Guatemalan president Alfonso Portillo launder millions of dollars of scarce public funds to personal bank accounts in Paris, Luxembourg and Switzerland.
It was, according to the Spanish financial website El Confidencial, the mother of all Spanish banking scandals. In total, 22 of the bank’s senior executives, including its then co-president Emilio Ybarra, were charged with tax evasion and money laundering. For a number of the suspects, including Ybarra, the public prosecution office recommended lengthy prison sentences.
However, in time-honored fashion, none of the bankers ended up doing time. Their only punishment was to lose their jobs (probably with a juicy little pay out) and suffer temporary damage to their reputations. In Mexico, the government and regulators stone-walled any attempt to investigate the abuses, while in Spain the scandal was allowed to die a slow death until, in 2010, the Madrid High Court decided to drop all charges against the bank.
The Rise of Francisco González
As for González, Ybarra’s loss was ultimately his gain. He was able to escape prosecution in the matter by proclaiming that the laundering allegation occurred prior to his association with Ybarra. Just how González could co-chair BBV for five long years without knowing about the laundering operations is anyone’s guess.
Nonetheless, in 2002 he was nominated president of the banking group – no mean feat for the former CEO of the junior partner in the 1999 merger of BBV with Argentara.
In the most perverse of ironies, González, the man who now appears set on a moral crusade against political corruption, owes his stellar rise in the banking profession as much to his political connections as to his undoubted talents.
His close ties in the mid-nineties to then-Spanish premier José María Aznar and Spain’s former economy minister Rodrigo Rato were instrumental in his appointment, in 1996, as CEO of the part-public banking group Argentaria. Once installed in his new position, González began laying the groundwork for the institution’s wholesale privatization in 1998, followed a year later by its merger with BBV.
The rest, as they say, is history – much of it now sadly forgotten. This is particularly true in the case of Spain’s anti-fraud office’s 2005 investigation into serious irregularities in Gonzalez’s sale, in 1996, of his investment fund FG Valores to the U.S. bank Merrill Lynch. Unfortunately, all the evidence of said irregularities literally went up in smoke in February 2005 when the offices of the investment fund’s former auditor, Deloitte, were turned to ashes in the intense fire that consumed Madrid’s Windsor building – just two days prior to the deadline for delivery of the evidence to Spanish authorities.
All of this is, of course, conveniently ignored and forgotten whenever González takes to the pulpit of moral righteousness. So too, apparently, is his bank’s role in the Noos Affair, the huge corruption scandal engulfing the country’s Royal Family. Among other things, the King’s son in law and former Olympic handball player Iñaki Urdangarin is accused of embezzling millions of euros of public funds, and with the help, it seems, of Antonio Ballabriga, now BBVA’s director of corporate social responsibility. (Bankers do have a sense of humour.)
So, to recap, Spain’s second largest bank has been repeatedly caught engaging in all manner of corrupt and immoral activities, including money laundering for drug traffickers and corrupt heads of state, tax evasion and arms funding. In Francisco González, it has a leader who lectures Spain on the need to curb corruption in public affairs, despite the fact that he himself was once the subject of an international corruption probe.
But then, banking has long been the most corrupt profession on the planet. What our politicians get up to when our backs are turned pails into insignificance compared to the myriad crimes of the world’s biggest banks.
Our great tragedy, though, is that no matter what nefarious acts they commit or the irreparable harm they visit upon the broader economy and society, senior bankers like González continue to be treated with almost universal respect and reverence by our politicians and press. Their actions go unquestioned, their words unchallenged. Not only are they given a free pass for their multiple misdeeds, they are often held up as the pinnacles of moral rectitude, their lives the high watermark of success.By Don Quijones, Raging Bull-Shit
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