Spanish law sinks teeth into banks as we faff about with Anglo
THE MANNER in which the Spanish have moved to hold the architects of Bankia’s destruction to account inevitably invites comparison with our own attempts to investigate the individuals behind the collapse of Anglo Irish Bank.
The Spanish High Court last week opened a fraud investigation into Rodrigo Rato, the former International Monetary Fund boss who was chairman of the bank which is to Spain what Anglo is to Ireland.
The move comes a matter of weeks after the Spanish had to rescue Bankia, the most damaged of all its banks. The comparisons with Anglo are striking. It was the collapse of Bankia that sparked fears about Spain’s ability to recapitalise its banking system and ultimately forced it into accepting a bailout from its EU partners. The €23.5 billion earmarked for Bankia is the largest single element of the €100 billion Spanish bailout.
Mr Rato and 32 other executives are now to be investigated for falsifying Bankia’s accounts and misleading investors during its stock market flotation.
It will be deeply embarrassing for the Spanish government because Mr Rato is a former finance minister and supporter of Spain’s ruling Popular party. He led the 2011 flotation of Bankia which was created through the amalgamation of seven cajas (regional savings banks), which were heavily exposed to Spain’s collapsing property market.
The embarrassment is unlikely to stop at the ruling party as the investigation is expected to explore the relationships between the seven cajas and the regional political and business elites that exerted a powerful influence on them.
Members of the opposition socialist party are unlikely to emerge unscathed.
It should be pointed out that the case was brought not by the Spanish regulator or police, but by a small rival party. However, some 400 small shareholders are expected to join the case.
The Spanish legal system obviously has its own way of doing things. Judges, for example, have investigative powers. But the Spaniards certainly seem to have won hands down on the notion of justice being seen to be done and people held to account.
However you choose to look at it, it is hard to escape the conclusion that Spain seems to have got further in a matter of weeks than the Irish criminal justice system has in the best part of four years.
Nobody associated with the collapse of Anglo has been charged with anything to date, and the overlap between Seán Quinn’s legal difficulties and Anglo’s demise can only mean further delays.
There are several competing narratives about what caused the collapse of Anglo, but they all put Quinn at the centre of the story. His clandestine stake-building to the point where he – the largest customer of the bank – owned almost 30 per cent of the institution meant it was doomed when the wheels came off the global credit markets in 2008.
It is paradoxical then that the former Anglo executives’ best chance of avoiding prosecution now rests with Quinn and his family’s efforts to avoid being made honour their debts to Anglo.
At the heart of Quinn’s defence is the argument that his wife Patricia and their children have no liability for some €2.3 billion in loans made by Anglo on the grounds they were allegedly made for the unlawful purpose of propping up the bank’s share price. The money – advanced from the autumn of 2007 onwards – was used to meet margin calls on complex investments in Anglo shares made by Quinn on behalf of his children, but without their knowledge, it is claimed.
It seems a bit of a long shot until you realise that any case brought by the State against former Anglo Irish executives for fraud or similar offences will – if successful – go a long way towards helping his case.
This puts the State in something of a cleft stick. If it moves now to bring prosecutions in relation to Anglo, it could have unintended and very negative consequences for the Irish Bank Resolution Corporation (formerly Anglo) and its efforts to recoup the €2.3 billion from the Quinns.
The mere fact of bringing the case could lead to a delay of months if not years in Anglo’s efforts to realise what it can from the Quinns. And given that the State owns the IBRC, it would be tantamount to shooting itself in the foot.
A more prudent way to proceed would be to let the Quinn case proceed before launching any Anglo-related prosecutions.
But that is unlikely to be very palatable from a political perspective and then there is the issue of the six-year statute of limitations.