In this interminable post-crisis reality we are living, one thing has become crystal clear: regardless of the crime, senior bankers never do the time — at least not in most Western countries (with the obvious exception, of course, of bankster-scalping Iceland).
In fact, in most places these days it’s probably easier to pass a camel through the eye of a needle than it is to pass a senior banker through a wide-open prison gate.
One country that tried to buck this trend was Spain. And not just once, but twice. Yet on both occasions the banker in question — Miguel Blesa, the former CEO of Caja Madrid who stands accused of irregularities in the purchase of a Florida bank, as well as a 27-million-euro loan he granted to the now-jailed businessman Gerardo Díaz Ferrán – was promptly sprung from Madrid’s El Soto prison.
In the first instance it was the country’s public prosecution (turned defense) service that provided the V.I.P. (Very Important Prisoner) with the metaphoric file and rope needed for escape; in the second it was Spain’s National High Court. [For more background on the case, click here, here and here]
On his release the second time round, Blesa and his defense team, in cohorts with the country’s heavily politicised prosecution service, went on the counter attack. They accused the judge in the case, Elpidio Silva, of overstepping his limits and turning the case into a cause célèbre against the banking profession as a whole. Silva was promptly charged with perversion of justice. If found guilty, he faces the prospect of indefinite expulsion from the bench.
So far, so normal. Following the National High Court’s intervention, Spain was once again fully realigned with the rest of the West. But then, out of the blue, something happened that was in neither the government’s nor Blesa’s scripts. Somebody, somewhere, somehow, got their hands on a cache of over 8,500 emails and SMS messages from Blesa’s last three years at Caja Madrid — documents that Judge Silva had solicited during his investigation — and promptly leaked the whole lot to the Spanish online publication El Diario.
Now that the emails are gradually seeping into the public domain, Silva is finally receiving some vindication for his actions, as a picture slowly emerges of shameless shenanigans at a publicly financed, not-for-profit savings bank. Hijacked by senior political figures in the People’s Party, Caja Madrid — now the rotting rump of Grupo Bankia — was used for years as an Aladdin’s den of political favours and cheap, easy money.
And the man guarding the door to that den was Miguel Blesa.
Politics and Banking: The Worst of Both Worlds
In this golden age of revolving-door democracy, we have become all but inured to the sight of deeply compromised senior figures flitting between the hallowed halls of government and the gilded corner offices of some of the world’s most powerful banks, and making a packet along the way.
In the U.S. mass migrations of senior banking figures (Robert Rubin, John Corzine, Hank Paulson, Gary Gensler…) from Wall Street to government helped pave the way to the financial sector’s takeover of government.
In Blesa’s case, however, his movement was in the opposite direction: from government into banking. Indeed, when appointed to Caja Madrid’s board in 1996 by his close friend and then-prime minister of Spain, José María Aznar, Blesa had zero experience of banking, having spent his entire career in government and civil service. That did not stop him, however, from rising the ranks to CEO in the short space of just four months — a position he would occupy until 2009.
The question is: who was actually running the bank’s operations during that period? And for whose benefit?
Pulling the Strings From PP HQ
Many of the emails sent and received by Blesa reveal how his position as CEO was exploited by former colleagues in the People’s Party to gain strategic influence over the bank’s board, request million-euro investments for white elephant projects and demand favorable treatment for friends.
One person who figures prominently in the emails is the former regional premier of Madrid’s regional government, Esperanza Aguirre. Like Teflon Tony (Blair), Aguirre has an uncanny knack of skirting scandal. Indeed, the populist, hyper-connected, regular Bilderberg attendee remains a hot favourite to succeed Rajoy, though perhaps not for much longer.
Multiple emails show how both Aguirre and her second-in-command and eventual successor, Ignacio Gonzalez, pressured Blesa into granting the faltering regional television station Telemadrid financing so that it could buy the broadcast rights to Real Madrid games (a deal that would ultimately fall through); giving jobs or seats on the bank’s board to friends or associates (many of whom had no experience whatsoever in the financial sector); and even enhancing the payment conditions of a friend’s mortgage.
However, as El País reports, by far the most eye-catching messages focus on an attempt by former Prime Minister José María Aznar and his namesake son, José María Aznar Botella, to convince the Caja Madrid Foundation to purchase an art collection belonging to the late artist and sculptor Gerardo Rueda:
[Aznar] had asked Blesa to help Gerardo Rueda’s son, José Luis, in the sale of his father’s art collection, for which the asking price was put at 54 million euros. Aznar and José Luis Rueda gave the bank several appraisals that put the total value of all the pieces at more than 50 million euros. But the Caja Madrid Foundation commissioned its own experts, which appraised the works at three million euros….
Despite the scandalously inflated price, Blesa did all he could to get the board on board with the project, and it was only serious opposition from senior colleagues that put paid to the deal. Soon thereafter, the former prime minister’s son, José María Aznar Botella, gave Blesa a scathing dressing down.
“Of all the things we have done for you — and there have been many — it seems to me an utter disgrace what you have done or better yet, haven’t done. We didn’t deserve this kind of disappointment,” Aznar Botella wrote in an SMS on July 16, 2009.
Aznar Jr is clearly cut from the same cloth as his father. Although he retired from public life more than a decade ago, José María I, continues to cast his long dark shadow over Spanish politics. Despite the accumulating evidence against him, both in the Bárcenas affair and the Blesa case, he denies all allegations of impropriety and is threatening to sue just about anybody who uses his name in vain.
For that reason, I will try to phrase the next sentence as prudently as possible. As the man alleged to have helped put in place the political kickbacks system operated by the PP for the last 20 years; who took Spain into war in Iraq in 2003 despite overwhelming (90 percent) public opposition; who was reputedly involved in lucrative arms sales to Libya, Venezuela and other governments; and who is now facing allegations of involvement in dodgy art deals, Aznar might just want to think twice before airing his linen in public.
My guess is that as soon as all the dust dies down from this scandal, which it inevitably will, Aznar will quietly withdraw the lawsuits.
The Coup de Grace
By far the biggest scandal during Blesa’s 13 year tenure as CEO of Caja Madrid took place in 2009, his last year at the bank.
As the global financial markets ground to a standstill in the wake of Lehman Brothers’ collapse, liquidity had all but dried up and many Spanish banks suddenly found themselves priced out of the money markets.
For big private banks such as Santander and BBVA there was always the option of issuing new shares to raise capital — but not so for Spain’s unlisted cajas. And with Spain’s “socialist” prime-minister Zapatero in a state of chronic denial about the health of the Spanish banking system and determined to avoid a bailout at literally all costs, the cajas had to find more imaginative ways to raise capital.
The solution they stumbled on was to tap — and eventually half-inch — the life savings of thousands of their longest standing, most loyal, most trusting (A.K.A. gullible) customers. And this they did by getting branch managers to sell them high-risk investment vehicles called preferentes as if they were as safe as houses, all with the tacit approval of the Zapatero government, the Bank of Spain and market regulators.
What bank sales staff forgot to mention to most of these unsuspecting customers — customers that included people who were illiterate or who suffered from learning disabilities; pensioners with Alzheimer’s or dementia; and even children — was that preferentes are hybrid debt instruments (that is, half-bonds, half- shares) that pay higher levels of interest for one simple reason: they can never be cashed in with the issuing entity.
Instead, they must be sold on the open markets. When the market is buoyant, as was the case in the late ’90s in Spain, the instruments could be offloaded with relative ease. However, when the market is seized by panic and distrust, as has been the case since 2010, holders of preferentes have literally no chance of divesting their holdings. What they are left with is a tiny fraction of their life savings.
The biggest culprit in this Maddoff-ian scam was (yeah, you guessed it) Caja Madrid. Of its first batch of 29,000 preferentes, over 99 percent were sold to families. The second batch of 140,000 instruments were sold on the open international markets, but, as Diario Vasco notes, hardly any of them ended up in the hands of large institutional investors, the actual intended target market for such high-risk instruments.
The two people who oversaw this gigantic plunder were Blesa and his replacement as CEO in 2009, Rodrigo Rato (for more on Rato and his illustrious career in politics and finance, read Portrait of a Kleptocrat). On the eve of the launch of the product Blesa wrote an email to his second in command Matías Amat Roca in which he confessed his concerns about “the excessive zeal” of the banks’ branch staff.
But such fears quickly evaporated the moment the money began pouring in. In the first day alone the bank sold 2.7 billion dollars of preferentes — 48 percent of the total target for the month. As El Mundo reports, four days later Blesa sent another email to Amat Roca in which he expressed his disbelief at the success of the project:
“It’s amazing. And all of it by fleecing our customers!”
A Rotten Edifice
This email should be enough alone to warrant a one-way ticket for Blesa back to the can, but it won’t — for the simple fact that criminality is everywhere in Spain these days. Business model du jour, it extends to the highest reaches of government, the judiciary and the monarchy, and has infected the C-suites of the nation’s banks and a fair share of its biggest businesses.
If the likes of Blesa or Rato were actually made to pay for their crimes, so would most other people in high position, and the whole rotten edifice would come crumbling down. And for that reason alone, no matter what emerges from his trail of emails, Blesa will almost certainly remain a free man.
For Silva, by contrast, what awaits is a long, hard battle to clear his name and hold onto his career. Like former judge Balthazar Garzon, he risks paying a heavy price indeed, for in this country of corrupt and highly corruptible men (and women) of high position there is scant room, if any, for honour or integrity.