But will they actually warm a bench in a Spanish prison?
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
The unimaginable just happened in Spain: two former bank CEOs, Miguel Blesa (CEO of Caja Madrid) and Rodrigo Rato (CEO of Bankia) were just awarded prison sentences of six years and four-and-a-half years, respectively, for misappropriation of company funds.
Rato was also Managing Director of the IMF from 2004 to 2007. He was succeeded by another luminary, Dominique Strauss Kahn.
Now, the question on everyone’s mind is will Blesa and Rato actually serve the sentence (more on that later).
Dozens more former Caja Madrid senior executives, most of whom are closely connected to either, or both, of the country’s two main political parties and/or unions also face three to six years in prison. They were found guilty by Spain’s National High Court of misusing company credit cards. Those cards drained money directly from the scarce funds of Caja Madrid, which at the height of Spain’s banking crisis was merged with six other failed savings banks into Bankia, which shortly thereafter collapsed and ended up receiving the biggest bail out in Spanish history, costing taxpayers over €20 billion, to date.
Between 2003 and 2012 Caja Madrid (and its later incarnation, Bankia) paid out over €15 million to its senior management and executive directors through its “tarjeta negra” (black card) scheme. According to accounts released by Spain’s bad bank, FROB, much of that money went on restaurants, cash withdrawals, travel and holidays, and the like.
The amounts – which did not show up on any bank documents, job contracts, or tax returns – may be small, given the magnitude of the misdeeds that led to the Spanish bank fiasco, but it’s the principle that counts.
Only 4 out of 90 Caja Madrid senior managers, executives, and board members had the basic decency to turn down the offer of undeclared expenses. For the rest, it was an offer they could not refuse.
In his last few months at Caja Madrid – just before the whole edifice came crumbling down – Blesa went on a mad spending binge. In one month alone he made purchases on his black card worth €19,000 – more than many Spaniards’ annual salary.
This is a man who pocketed over €20 million in salaries and bonuses while at the helm of the bank that he helped destroy. On his departure in 2010, he was awarded a €2.5 million golden parachute. Yet even after his ouster he, like many other Caja Madrid executives, continued making liberal use of his tarjeta negra.
For Blesa, this will not be his first time behind bars (assuming he is actually sent to prison). He was jailed twice in 2013 and both times was promptly sprung from his cell by Spain’s prosecution service. In fact, the only person upon whom justice was served in the initial case against Blesa was the presiding judge, Elpidio Silva, who was barred from the bench for 17 years for overstepping his limits.
Blesa’s successor as CEO of Caja Madrid/Bankia, Rodrigo Rato, could see his sentence grow in the coming months. He also faces charges of fraud, embezzlement and money laundering. Allegedly he even laundered funds while serving as IMF Managing Director.
While Rato is not solely responsible for the myriad disasters that occurred on his watch, he does seem to have an incredible knack at being in the wrong place at the wrong time, and making lots of money in the process. He was Spain’s economy minister during the nascent years of Spain’s property bubble; IMF chief during the run up to the subprime crisis years; and Bankia CEO just before its collapse and subsequent heist of the life savings of hundreds of thousands of its own retail customers, who were persuaded by branch sales staff to invest their funds in the bank’s high-risk subordinate bonds.
Now, he faces the prospect of hard time behind bars. But will the sentence be served? That is the question people are asking in Spain.
Just last week Iñaki Urdangarín, the husband of the King’s sister, Infanta Cristina, was sentenced to six years in prison for fraudulently obtaining (and spending) millions of euros in public funds in the Nóos case. Today he was told that he can go back to his home in Switzerland where he can stay until all possible appeals are exhausted, which, this being Spain, could take years. He did not even have to post bail.
Will Rato, Blesa and the rest of the Bankia 65 also be able to prepare their appeals from the comfort of their own home? Many of them are so intimately connected to the political and business establishment that it’s almost impossible to imagine them warming a bench in a jail cell. If they are given similar treatment, expect public anger to reach new heights. If, by some miracle, they are sent down, things could be about to get very interesting in the Eurozone’s fourth largest economy, especially with six senior central bankers waiting in the wings to testify about the Bank of Spain’s role in the collapse and subsequent bailout of Bankia. By Don Quijones.
Six central bankers and a financial regulator get dragged to court. Read… The Unthinkable Just Happened in Spain
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