Newspaper article International Herald Tribune

Former Executive of Caja Madrid Briefly Jailed ; Banker Posts Bail after Judge Acts, Even before Charges Are Filed

Newspaper article International Herald Tribune

Former Executive of Caja Madrid Briefly Jailed ; Banker Posts Bail after Judge Acts, Even before Charges Are Filed

Article excerpt

Miguel Blesa, the former executive chairman of Caja Madrid, has become the first prominent Spanish banker to enter prison since the start of the financial crisis.

Miguel Blesa, the former executive chairman of Caja Madrid, has become the first prominent Spanish banker to go behind bars since the start of the financial crisis. He is accused of leaving the company saddled with huge losses because of an ill-advised takeover of a bank based in Miami in 2008.

Caja Madrid was one of several banks that eventually merged to form Bankia, which became the biggest mortgage lender in Spain.

But the problems at Caja Madrid were part of the cascading issues that eventually undermined Bankia, which the government seized it last year. Bankia's collapse set off a crisis that resulted in Spain's banking system requiring a EUR 40 billion, or $51.3 billion, European bailout.

Mr. Blesa, 65, spent Thursday night in a Madrid jail but walked out a day later after posting bail of EUR 2.5 million.

The Madrid judge in charge of the case, Elpidio Jose Silva, had ordered that Mr. Blesa should be jailed and have his passport withdrawn because there was a risk that he would flee the country.

Mr. Blesa has denied wrongdoing and has not been formally charged with any crime. The bail was set at EUR 2.5 million because that is equivalent to the severance payment that Mr. Blesa received when he voluntarily left Caja Madrid in 2010.

He is accused by the group Manos Limpias, or Clean Hands -- a far- right association that has been pursuing several corruption cases -- of buying City National Bank, based in Miami, in 2008 for an inflated price without following due diligence by checking into City National's underlying liabilities. Judge Silva is also investigating whether the purchase involved falsifying documents.

The case highlights how Spain's banking troubles stretched beyond its borders, as cajas, regional savings banks that are tightly controlled by regional politicians, tried to emulate the overseas expansion of their commercial peers during the country's economic boom.

Over all, about 100 Spanish bankers have been named as suspects in continuing court cases that have mostly focused on allegedly fraudulent loans, conflicts of interest and excessive compensation packages granted by collapsed cajas. But Mr. Blesa is the first to have spent any time in jail.

Mr. Blesa, a former official in Spain's Economics Ministry, became chairman of Caja Madrid in 1996. That was shortly after Jose Maria Aznar, who had studied public administration alongside Mr. Blesa, was elected prime minister. In April 2008, the bank announced that it would buy 83 percent of City National Bank for $927 million, following the lead of other Spanish commercial banks that had already expanded in the United States. …

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