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BBVA: the investigations explained

A staff reporter

30 January 2005

A two-year-old Spanish judicial investigation into suspected money laundering at BBVA Privanza, a private banking operation in Jersey, has ballooned into a series of investigations that are reverberating throughout the world’s banking system. Spain’s best known judge, Baltasar Garzon, has spent two years investigating the possibility that the Jersey affiliate of Banco Bilbao Vizcaya Argentaria, his country’s second largest bank, washed money that was used to fund various political activities in Seville in 1992. The occasion, according to a BBVA spokesman, was a trade fair called the Expo; various political bribes are said to have been distributed using money funnelled through the bank. The spokesman was at pains to deny that any such thing had occurred, but gave Complinet a useful run-down of the process whereby this small investigation had grown into a chain of large ones. He stressed that only the board members of BBVA, rather than the bank itself, have been involved in other judicial investigations. In the past month, public controversy spread to the bank’s headquarters in Madrid when the Spanish press discovered that the Bank of Spain was investigating 16 directors or former directors of BBVA for their hand in setting up and operating a string of 'secret' offshore accounts. The press alleged that these secret funds were used by the bank to trade in its own shares, bribe politicians in Latin America, and top up the pensions of some of its board members. The spokesman denied this. He did, however, reveal that the political allegations centred around the secret spending of money on political campaigns in Venezuela, but added that no laws could have been broken in this instance because there are no legal constraints on campaign spending in that country. The Bank of Spain's investigation, a separate matter from the original Jersey investigation, was suspended earlier this month. Judge Garzon then took it over on the grounds that a regulatory investigation could only result in the levying of fines. Garzon's investigation will now determine whether there are prison sentences to be meted out. The number of board members and other ex-BBVA men under investigation has since jumped from 16 under the Bank of Spain to between 20 and 23 under Garzon. Garzon's writ contains some illustrious names. The BBVA official confirmed that the 23 suspects included Alfonso Cortina, chairman of Repsol, Spain's oil and gas giant; Juan Entrecanales, a construction mogul whose family owns a large slice of BBVA; Pedro Luis Uarte, BBVA's previous CEO; and Emilio Ybarra, the bank's Basque former chairman who claims that he was ousted from his position by Francisco Gonzalez, his co-chairman after BBV Bank merged with Argentaria in 2000 to form BBVA. The BBVA spokesman said that he had heard Ybarra's claims that Gonzalez had ousted him under the influence of the Spanish government and that Gonzalez forced Ybarra, who was the prime mover in setting up the accounts in the 1980s, to inform the Bank of Spain about the accounts in the company's report for 2000 by refusing to counter-sign the report until Ybarra complied. He was at pains, however, to say that these stories were untrue and that the press had been wrong about other details. "There were funds in the Cayman Islands, Jersey, Liechtenstein and Switzerland, but they were not, as some people think, all in accounts. They were a mixture of accounts, corporations, foundations…all sorts of stuff. The total came to €225m or £139m. The funds were used for trading shares, derivatives and other things on the market. "After our merger in 2000 we closed the accounts, brought the money back to Spain and paid the tax. We actually informed the Bank of Spain ourselves; nobody knew about it beforehand. We didn't want to make it public, but there it is. "The papers are saying that the accounts were used to influence politicians, pay Basque terrorists and provide sweeteners for business deals but that isn't on the charge sheets. In fact, we deny any illegal use of money." The reference to the payment of Basque terrorists harks back to the time in the 1970s when ETA, the separatist group, kidnapped a relative of Ybarra’s, and a ransom demanded of the bank. The bank did not pay up and the hostage was killed. Ybarra has been accused of being soft on terrorists ever since, although the spokesman denied that BBV had ever paid any protection money to shield its executives from kidnapping with embezzled money that was washed through the offshore accounts, trusts and institutions. The relevant mergers in the story began in 1987, the year the offshore entities came into being. Banco de Vizcaya was in the process of merging with Banco de Bilbao, a task it completed in 1988. The resulting entity, Banco Bilbao Vizcaya or BBV, then merged with Argentaria in 2000 to form BBVA. The merged entity today has a market capitalisation of €43bn and is second only to Banco Santander among Spain's banks. Santander has blazed the trail for Spanish banks in South America over the last three years and represents the first massive incursion by a new private creditor country into that part of the world since US banking interests took over from the British at the end of the Second World War. The €225m in the accounts, according to the BBVA spokesman, included 22 special pension accounts worth about €21.2m . These were set up in the names of various top executives at Banco Bilbao before BBV was created. The spokesman said that Judge Garzon's charge sheet did not mention the commonly held assertions that these accounts were used as a vehicle to acquire shares in Bancomer, the Mexican bank. "The thing about the money being put into these accounts is this. Garzon said that he didn't think it was used for the Mexican bank. The Bank of Spain had already reached that conclusion when he took its investigation over." The spokesman also had a few words to say about the allegations of money laundering at the bank’s branches in the Americas. Judge Garzon has been visiting Puerto Rico to investigate this as well as further allegations that the bank made contributions to Alberto Fujimori, the disgraced ex-president of Peru who is wanted on laundering charges in the Andean nation and is currently in exile in Japan. Some papers, said the spokesman, also said that prosecutors thought they had evidence that the bank’s CEO, Jose Ignacio Goirigolzarri, was involved in bribery and money laundering by BBV affiliates in Peru, Mexico and Colombia. Complinet asked him whether the firm was standing by its chief. "These are all allegations from a former employee, Nelson Rodriguez, whom we sacked for embezzlement; a typical Latin American story. He was fired and accused of bank fraud by the Feds and he got a five-month imprisonment sentence and three years’ community service. He was our legal counsel out there. "The ex-governor of Puerto Rico has been under investigation for past deals with the bank. He sold his stock market company to BBV in 1999 and continued to work for the new BBV Capital Markets for some time after. This is true so far, but the investigation has come up with nothing. Judge Garzon doesn’t want to touch it; he isn’t taking this seriously so far. "So this is the sequence of investigations. The Expo one went back to 1992. Garzon thinks that some political bribes were channelled through the Jersey private bank. He started with that, and then when the Bank of Spain investigation began recently he moved on to that. The Nelson Rodriguez affair came up and he then looked at that. All the allegations of laundering and other things are untrue; it’s just bad luck for us that people made them. We’ve had some good years and now it’s raining. But the rain in Spain doesn’t fall all the time and one day the sun will be shining again." One beam of sunlight is peeping through the clouds that hover over BBVA, however. Anti-corruption prosecutors recently asked Judge Garzon to indict the bank’s CEO, Jose Goirigolzarri, for suspected money laundering and corrupt ties to Fujimori while he ran BBVA’s Latin American accounts. At the end of last week he was cleared of any wrongdoing by Garzon’s preliminary investigation.