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Santander’s Emilo Botin is the latest target of Spain’s judiciary |
Botín is the latest high-profile target for Spain’s very active judiciary. Judge Teresa Palacios has been given permission to begin proceedings against him and four former directors of Banco Santander (as it was at the time of the alleged offences) by the Audiencia Nacional, Spain’s highest court. The charges relate to the bank’s activities in the late 1980s.
In 1987 the Santander Group began to market its now infamous cesiones de crédito, or loan assignments. The assignment was developed by Santander. It involved selling investors the credit risk on corporate loans without, in most cases, withholding the returns. In this way, the investor was able to avoid paying tax on the holdings at 25%.
Santander sold some Ptas430 billion ($2.6 billion) of loan assignments up to 1991. At the time the product was marketed the practice was legal. But a tax loophole was subsequently closed, creating a tax liability of around Ptas145 billion.
That debt was settled. But then allegations emerged of irregularities in some of the accounts. It was alleged that the title deeds on nearly 10,000 of the securities had been changed with the intention of concealing from the Spanish treasury the true identities of their owners. This implicated the client and the bank.
In April 1997 prosecutor Jesús Santos published a report showing that Santander had concealed the true owners of the securities, using false identities. Santos proposed that Botín and the rest of the executive committee should face charges. However, the following June, the case was taken over by the chief prosecutor, Eduardo Fungairiño, who decided to withdraw the charges.
In June last year, Palacios took up the baton. She accused Botín and four former directors of the bank of 138 tax-related crimes.
The government appears to be happy that Santander acted entirely legally. This April the prosecutor and government lawyers, along with Botín’s lawyers, called for the case to be closed, claiming that Botín and the other ex-directors had nothing to do with the crimes committed. Nevertheless, on June 24, the Audiencia Nacional gave Palacios the go-ahead to open proceedings against Botín and his co-defendants on 38 counts. Palacios told Euromoney that despite the mountains of paperwork to get through, she hoped the trial would begin in two or three months.
Sources close to the case suggest that an old rival of Botín’s, Rafael Pérez Escolar, has been pushing for the prosecution. He has launched a string of lawsuits against Botín.
Most of them have been dismissed, although another charge relating to the severance payments made by SCH to two former senior directors is also being taken forward by Palacios. There was a stand-off between the two men at this year’s shareholder meeting, which ended with Pérez Escolar being booed from the stage by other delegates.
While one analyst acknowledged that the case certainly represented an additional risk for SCH, no-one seriously expects Botín to go to jail. “La sangre no llega al río” commented one Madrid financier – the blood never reaches the river.
But perhaps Botín’s sang-froid comes from knowing that he’s already seen the number of charges knocked down from 138 to 38. With a four-year maximum set for each count, he was looking at a lengthy stretch indeed. If he’d been sentenced to 550 years, he might actually have had to do some time.
