MADRID – An imprisoned former managing director of the International Monetary Fund told Spain’s national court on Tuesday during a high-profile corruption trial that an allegedly fraudulent initial public offering of a bank he presided over was a legal decision that had been given the green light at the time by the Bank of Spain and the government.
During his testimony, Rodrigo Rato – who headed the IMF between 2004-07 after serving as Spain’s deputy prime minister and finance minister for eight years before being appointed the president of important lender Bankia – attempted to convince magistrates that he was not to blame for the alleged securities fraud committed during Bankia’s IPO in July 2011.
“Going public, or not, was in the hands of regulators and the law,” Rato said, adding that the entire operation had been rushed because the Bank of Spain had imposed a deadline for Sept. of that year.
The 69-year-old – who is currently serving a four-and-a-half year prison sentence for embezzling funds through opaque credit cards while he was president to cover undeclared expenses made by himself and top executives – said the haste had been prompted by the government’s worry that the economic crisis in Greece and the Irish bailout could derail a group of savings banks’ efforts to raise capital from investors.
Bankia was formed through the merger of seven regional saving banks, including Spain’s oldest, Caja Madrid, which Rato became president of in 2009.
The ex-politician and banker referred to the parliamentary testimony of the former head of the national securities market commission (CNMV), Julio Segura, who had denied before lawmakers that Bankia had any specific problems at the time of the IPO.
Chief prosecutor Carmen Launa, who is seeking a five-year prison sentence for Rato in this case, focused most of her questioning on the complex situation of Banco de Valencia – which was at that point was owned by Bancaja, the second-largest savings bank that made up Bankia, with a stake of 37.7 percent of shares.
Rato stressed that the Banco de Valencia was not directly involved in the merger and claimed that the Bank of Spain “knew the inner workings” of Bancaja because the institution had 15 people monitoring it.
The prosecutor also asked that former Bankia Vice President Jose Luis Olivas be sentenced to four years’ imprisonment; Jose Manuel Fernandez Norniella, an advisor to the bank, to three years; and former managing director Francisco Verdu to two years and seven months.
Anti-corruption prosecutors allege that all four individuals systematically failed to disclose that Bankia was not a viable entity and that the leaders were “intent on accessing the necessary funds at all costs.”
The defense has argued that of the 180,000 investors that were scammed, only 168 still await compensation, which amounts to some 2 million euros ($2.3 million).
Bankia was hard-hit by the financial crisis that swept Spain in the wake of a real estate bubble that burst.
In May 2012, Bankia was bailed out to the tune of 19 billion euros by the FROB, Spain’s state bank bailout fund.
However, by Sept. 2012 it had to be bailed out again with 4.5 billion euros, with Spain’s government having to seek aid from Europe’s rescue fund.
Some analysts calculated that one-tenth of Bankia’s loans had gone bad.
Rato’s name also appeared in the so-called Panama Papers, leaked documents with the names of alleged tax evaders with offshore assets in Panama, a tax haven.
Rato has denied having any accounts in Panama.