• Fri
  • Oct 17, 2014
  • Updated: 6:56pm
NewsWorld
BANKING

Ex-head of Spain's Caja Madrid accused over Florida bank takeover

PUBLISHED : Sunday, 19 May, 2013, 12:00am
UPDATED : Sunday, 19 May, 2013, 7:09am
 

The former head of Spanish bank Caja Madrid became the first top banker to spend time in jail over alleged mismanagement in the financial crisis.

Miguel Blesa, 65, who has links to senior members of Spain's governing Popular Party, was held overnight in a Madrid jail and came out on Friday after putting up €2.5 million (HK$25 million) in bail, a prisons service official said.

Judge Elpidio Jose Silva said in a written ruling earlier that Blesa presented an "undeniable flight risk" and fixed the bail sum pending investigations of his management of the bank.

Caja Madrid was one of several old regional savings banks, many run by political appointees, that expanded during Spain's building boom and had to be merged after the bubble burst in 2008. The judge is investigating the takeover by Caja Madrid of the City National Bank of Florida, which was caught up in the US subprime mortgage meltdown that year.

The judge said he saw "reasonable indications of criminal responsibility" in that takeover.

Caja Madrid paid US$1.17 billion to take over the Florida bank, about double what it was worth, the ruling said, adding this was a sign of "very bad banking management" that posed "a systemic risk to Caja Madrid in the context of the economic crisis". Prosecutior Luis Pineda said on Friday that the takeover was carried out without authorisation from the relevant authorities. He alleged that managers of the Spanish bank could have pocketed "more than US$100 million in commissions" in the deal.

Blesa left Caja Madrid in 2009, shortly before it was merged with six other savings banks to form Bankia as part of a major overhaul of Spain's financial sector.

Bankia was nationalised last year, prompting Spain to turn to its euro-zone partners for tens of billions of euros of emergency aid to rescue the financial sector.

That bailout fuelled angry popular protests in Spain, where the recession brought on by the financial crisis has driven unemployment above 27 per cent.

Dozens of suspects have been questioned by a judge in a separate investigation of alleged fraud in the running of Bankia.

Blesa was the first major banking figure to go behind bars in the course of Spain's banking saga, albeit briefly.

Pineda said that with the detention of Blesa, "a process of flushing out who was responsible has begun". He added: "This country needs to be reassured that people will pay for what they have done."

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