Spanish bankers jailed for financial abuses
Jail terms were cut after defendants agreed to give back €28.6m
Four bankers found guilty of financial crimes. Photograph: iStockPhoto
Six years after the start of an economic crisis that left Spain on the verge of collapse, the country has finally seen bankers sentenced for financial abuses.
On Thursday Ricard Pagès, a former managing director of Catalan savings bank Caixa Penedès, was handed a two-year jail sentence for embezzling funds from the lender, while three of his former colleagues were given one-year sentences. The defendants’ jail terms were cut after they admitted their guilt and agreed to give back €28.6 million which they had ploughed into their pension funds.
“This was malicious, insidious behaviour that deceived society,” said Judge José María Vázquez in announcing the sentences. “Tricking the controls of the savings bank, with figures such as the chairman and those on the bank board being virtually decorative, you put personal interests ahead of social interests, abusing the confidence that was entrusted in you as senior executives.”
Like many other of the country’s banks, Caixa Penedès overstretched during Spain’s decade-long real estate boom. After the property bubble burst in 2008, the financial sector suffered massive losses and was weighed down with toxic assets.
Stay afloatCaixa Penedès received €915 million in state funds as it struggled to stay afloat. As the banking crisis deepened in 2012, Spain’s government requested a €100 billion rescue for its banks from the EU.
Due to the relatively short sentences handed to the Caixa Penedès executives, they could avoid jail altogether. However, the case is significant given that it is the first of its kind since the economic crisis began.
It also reflects a backlash against the financial sector that is evident not only in the justice system, but also in the political and social spheres.
This week it was revealed that Bankia, Spain’s fourth biggest lender, had been ordered to pay back €900,000 to an 88-year-old farmer who had invested his life savings in a financial product that proved to be virtually worthless.
The product, known as “preferential shares”, was a complex, high-risk investment sold to long-time customers of Bankia and other lenders.
It has emerged that clients were frequently and erroneously led to believe that it was a low-risk product that could be cashed in after five years.
“For a lot of people the banks are the main cause of the financial and economic crisis,” says Manuel de la Rocha, an economist at the Fundación Alternativas think tank.
“Now that the economy is recovering they are still not lending, and on top of that many of the financial instruments that they put on the market they did so in a way that was at the least misguiding and to many people simply criminal.”
Many of the hundreds of thousands of Spaniards who invested in preferential shares are now recovering their money as their cases slowly go through the courts.
Meanwhile, there could be other high-profile scalps as the fall-out from the financial crisis continues. Former IMF managing director Rodrigo Rato is just one banker who is facing legal action, in his case for alleged fraud in overseeing the merger and stock exchange listing of Bankia, as well as its issuance of preferential shares.