Change font size:   

 
Abigail Hofman:

Abigail Hofman:

I wonder if ______ is an extremely optimistic person or in a cocoon of senior management denial

Cash management poll 2008:

Cash management poll 2008:

Results now live

weeklyFiXLiquid real estate
Skip Navigation LinksHome :: Back Issues :: Banks ‘shocked’ by $250 million

March 2002

Banks ‘shocked’ by $250 million





       
Carlos Rohm
Carlos Rohm, vice-chairman of Banco General de Negocios (BGN), is facing charges of fraud in Argentina, based on evidence mainly supplied by his brother, Jose Rohm, the chairman of BGN.
Carlos Rohm has said in court that Argentina now is as bad as Russia under Stalin or Germany under Hitler.
An Argentine court deposition obtained by Euromoney says that Jose Rohm alleges that his brother used around $250 million to pay off debts owed by BGN in an offshore Panamanian account.
The money, according to a source at a foreign investor in BGN, was deposited by Argentine small investors in a Uruguayan bank, Compania General de Negocios (CGN), also run by the Rohms. Another source says that employees of BGN were among those who deposited money. BGN declines to comment.
The foreign investor source says: "It appears there were two entities with the same name". One was Compania General de Negocios SA, a well-known financial entity. The other, also called Compania General de Negocios, had the same management, the same name, but different legal status. It was not a bank but a company, and the investors had less legal standing when they tried to get their money back.
According to evidence supplied by JPMorgan Chase, the money was then transferred out of Compania General de Negocios to an offshore Panamanian bank called San Luis Financial and Investment, where it paid off debts built up by Banco General de Negocios in the 1980s.
Credit Suisse, JPMorgan Chase and Dresdner Bank, which together own 31% of the equity in BGN, have declared themselves "shocked and deeply concerned" by the allegations, in a Credit Suisse press release.
The three banks all own equity in San Luis Financial and Investment, as well as in Uruguay's Banco Comercial, yet another bank owned by the Rohms.
Banco Comercial, the biggest private bank in Uruguay, is currently affected by a liquidity crisis and the three foreign banks have committed around $25 million each to recapitalize it.
The CEOs of all three foreign banks have resigned from the board of BGN. A source says that none of the directors had any knowledge of any offshore dealings by BGN. Consultancy firm KPMG has been contracted by the banks to look into the accounting of the alleged fraud.
The charges of alleged fraud come on top of multiple other charges against the Rohm brothers.
On January 24, Carlos Rohm was arrested in Buenos Aires while boarding a plane to Switzerland, as part of a separate long-running investigation into alleged money laundering at BGN in the 1990s.
The Rohms' lawyers have declined to comment.
At the time of the arrest of his brother, Jose Rohm was in Switzerland, meeting with Lukas Mühlemann, president of Credit Suisse and at that time a director of BGN.
Credit Suisse says the meeting was part of a normal meeting of the BGN board of directors. Some time after the meeting, Jose Rohm informed Credit Suisse management of the fraud, which he says his brother committed without his knowledge.
Credit Suisse says it immediately informed the other banks by teleconference. The next day, Jose Rohm met with Brian O'Neill, managing director of JPMorgan Chase in Latin America.
The foreign banks clearly thought the situation so serious that they felt they had to come forward with this new information to the Argentine and Uruguayan central banks, in order to distance themselves from a potentially very damaging scandal.
The JPMorgan evidence
On Monday January 28, Marcelo Podesta, managing director of JPMorgan in Argentina, made an official presentation of evidence to Argentine and Uruguayan central bank staff. The one-page document is sparse on details. It says: "Jose Enrique Rohm met last Friday with the president of Credit Suisse [Lukas Mühlemann] in Switzerland, when he took the opportunity to inform the president of the existence of a fraud that had been committed by his brother Carlos Alberto Rohm".
The document says that as a result of this new information provided by Jose Rohm, the foreign banks lost confidence in the management of BGN. On the board of BGN were Mühlemann, David Mulford (chairman of CSFB International), William Harrison (CEO of JPMorgan Chase), Brian O'Neill (managing director of JPMorgan Chase in Latin America) Bernard Farholz (CEO of Dresdner Bank) and Holger Sommer (president of Dresdner Bank Lateinamerika).
All the foreign directors have now resigned from the board of BGN. The case continues in Argentina.
Compania General de Negocios was involved in another major fraud in Argentina, the IBM-Banco Nación scandal of 1994.
IBM paid a state-owned bank around $30 million to win a $300 million contract, much of which ended up in the bank accounts of government officials.
A US Senate report of 2001 says: "The scandal has been called 'one of the biggest political-financial scandals' in Argentina's history ... On May 10 1994, Compania General de Negocios, a bank in Uruguay, ordered $1 million to be taken from its Credit Suisse account and deposited in Federal Bank's correspondent account at Citibank. The $1 million proved to be part of the $21 million payoff from the IBM kickback scandal."
Carlos Rohm was cleared of any involvement by an Argentine court.






The management of accounting rules today is a scandal. It is as if the ayatollahs are running the world and imposing their own theoretical values

One European bank CEO bemoans the reality of marking to market as living in the economy of the instant

  1. US treasury market reaches breaking point

  2. Top 10 financial definitions that are funnier since the credit crunch

  3. Top 10 reasons to tell your boss you deserve a bonus this year

  4. Eksportfinans turns to government for funding

  5. Nomura’s great leap forward: Will Lehman takeover help fulfil its global ambitions?

Latest Issue

December 2008
Ruromoney Jobs Post a job

Home | Mobile site | Contact Us | Debt markets | Equities | Foreign exchange | Banking | Alternative Investments | Regions and Emerging markets | Polls & Awards | Structured credit | Back issues | Euromoney store | Useful links and Related events | Site Map

The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms and Conditions, Privacy Policy before using the site.

All material subject to strictly enforced copyright laws. © 2008 Euromoney Institutional Investor PLC.