The ‘Corrupt System’ Which Brought the Spanish Bankers a Luxury Life

Economy Jamie Simon
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The former head of the International Monetary Fund Rodrigo Rato will be tried on charges of overseeing a ‘corrupt system’ that would have helped him and other Banking executives abuse of bank funds for personal expenses on hotels, parties, and luxury shopping while he held positions in the Spanish banking system, writes the Guardian.

Following the trial, former economy minister and sometime star of Spain’s Conservative Popular Party is likely to end up in prison and receive a considerable fine.

The case is also another blow for the Popular Party after its repeated failure to form a government due to lack of support due mostly to corruption scandals in which he was involved. Rato will appear in court along with 65 other former executives and former members of Caja Madrid and Bankia banks boards.

The problems of the two banks led EU bailout of Spain’s financial sector. They are charged because of covering personal expenses with credit cards provided to them by the two banks without a warrant or declaring them to the tax authorities.

In total, they would have spent 12 billion Euro in between 2003 and 2012, sometimes making luxury spendings even during the economic crisis in Spain. Allegedly Rato kept the corrupt system instituted by his predecessor Miguel Bles when he took the reins of Caja Madrid in 2010. It should be copied to the system when he took over Bankia, a group created in 2011 by the merger of Caja Madrid and six other banks. Now aged 67, Rato was the minister of economy and deputy prime minister in the PP government of José María Aznar in 1996-2004 period, then took over the IMF until 2007.

His career as a banker in Spain was a short one, from 2010 to 2012, but unless undeclared credit cards, it has also led to another banking scandal considered the largest in history. Thousands of small investors lost their money after they were persuaded to convert savings into shares before the listing of Bankia in 2011 by Rato at the helm of the bank. Less than a year after, Rato resigned.

An investigation was then launched. Rato is now accused of being spent 99,000 euros in two years on handbags, luxury five-star hotels, and alcohol. Prosecutors seek to obtain a prison sentence of four and a half years and a fine of 2.6 million euros. Rato, however, denies any irregularities.

As head of Caja Madrid, Bles, which implemented card system, he is accused of having spent 436,000 euros between 2003 and 2010. Rato is the second IMF chief abd was indicted after Dominique Strauss-Kahn. The current head of the IMF, Christine Lagarde, will also appear in court in December in connection with massive sums of state money granted to the French tycoon Bernard Tapie in the period in which she was the minister of finance.