Bankers have fun with 'invisible' credit cards
OH WHAT jolly good fun and games our esteemed bank and business leaders have been enjoying with their ' secret' company credit cards.
It seems these cards were invisible to everyone except their holders - there was no justification asked for or needed for lavish spending.
And, of course, no tax to pay on these ' ghost cards' as they have been nicknamed.
In the case of some of the worst ' caja' savings banks, the luxuries continued to flow unabated from these magic cards while the banks themselves bled to death and small savers lost all their hard-earned money.
And it must be stressed these special cards were only for those 'little extras' that go with a comfortable life, on top of the directors' already huge salaries and 'representation expenses'.
Court investigations into how these banks crashed and finally needed bailing out with public cash are just starting to find out about these ghost cards… and this is just the tip of the iceberg.
So far it has been revealed that directors of failed bank Caja Madrid/Bankia (Caja Madrid was one of seven ailing 'caja' savings banks that merged disastrously to form Bankia) enjoyed using these special cards for at least nine years between 2003 and 2012.
During that time representatives allegedly spent at least €15.5 million euros on 'personal expenses' such as jewellery, luxury clothes and goods and dream holidays in New York, no expense spared.
What's more, these excellent administrators of the bank that needed to be bailed out with more than €4.4 billion of public funds in 2011, withdrew at least €2.1 million in cash from ATM dispensing machines.
Latest revelations show that €3 million was spent in restaurants, more than €2 million in cash withdrawals, more than €1.5 million on travel and holidays, more than a million in department stores, about €800,000 in hotels and €700,000 on clothes.
Among the most prolific users of these ghost cards were the ex-president of Caja Madrid Miguel Blesa and his successor at Bankia Rodrigo Rato (a former government finance minister).
Then of course there were all the bank's ' advisors' planted on the board by the major political parties, along with those placed by the main trade unions.
Of those now under investigation, 28 were linked to the centre-right Partido Popular (now in government under PM Mariano Rajoy) 15 to the socialist PSOE, four to the left-wing coalition Izquierda Unida and 10 to trade unions. There are also several businessmen including the former president of the national employers' association CEOE (Spain's equivalent of the CBI) and the current head of the Madrid business association.
But more about the banks' scandalous political links later…
First details of these ghost cards were originally presented to the FROB, the public entity that is managing the merging and refloating of financial institutions (as well as trying to flog off their unsold property and land portfolios).
The FROB then sent the reports off to the top anti-corruption public prosecutor who in turn has passed information on to the tax office. A total of 86 former board members of the bank will now be investigated by both the high-court judge and the tax office to see if they used the special cards without declaring it as income.
Incredibly, the monthly limit on the use of these cards had been set at €900 in 1999 but was hiked to €2,000 in the middle of the financial crisis when the bank was already on the verge of meltdown. There were no written contracts establishing the conditions of use of these cards - it was all done by word of mouth.
In the case of Caja Madrid, the 65 members of the management board from 2003 and 2012 apparently used their secret silver-rated Mastercards to spend €8.9 million.
Among the biggest-spending board members were the bank's 'number two' and financial director Ildefonso Sánchez Barcoj with €484,200 and José Antonio Moral Santín, vice-president of the 'caja' put forward by Izquierda Unida, who allegedly spent €456,000.
Apparently, 22 of these 65 members used their cards within one and eight months after they lost their positions.
But the 'privilege' became even greater on the executive board led by Miguel Blesa, who used his gold-rated invisible credit card to spend €436,700 between 2003 and 2010.
Once Caja Madrid merged into Bankia, there were the 'big four' executive directors enjoying their secret cards with Rodrigo Rato (€54,000) José Manuel Fernández Norniella (€9,700) Sánchez Barcoj (€90,000) and Matías Amat.
It is said that once the internal investigation of the bank's collapse asked these directors to justify the ' black' spending, all four executive directors immediately paid all the money back by bank transfers.
Investigators believe that first Caja Madrid and then Bankia, under the leadership of Miguel Blesa and Rodrigo Rato, established a system of hiding spending on the cards so that it could not be detected.
They are looking into the possibility that the directors rounded off many large quantities in the bank's turnover in order to create a slush fund for the credit card payments.
It's not as if they needed these under-the-table payments because they were struggling to make ends meet - figures released this week show that the main directors of Caja Madrid had average annual salaries of between €740,000 and €3.1 million.
Indeed seven Caja Madrid board members maintained average annual salaries of more than half a million euros from 2007 to 2011, the very years when the bank went bust, was swallowed into Bankia, and then bailed out/nationalised with public funds.
If you take in the board members of the other six cajas in Bankia (Bancaja, Ávila, Insular de Canarias, Segovia, Laietana and Rioja) there were still 20 directors being paid between €500,000 and €3 million while it all went pear-shaped.
What's more, of the 86 ex board members and 'assessors' of Caja Madrid who benefitted from the invisible cards during eight years, 34 of them also had beneficial mortgages and personal or business loans totalling €62 million. In some cases these loans were at zero interest.
The most striking of these was Gerardo Díaz Ferrán, exCaja Madrid director and disgraced ex-president of Spain's CEOE employers' association, who received finance of €32.4 million for him, his family and his businesses.
If you wonder how this could have happened, look no further than the finally disastrous link between the 'cajas' and local and regional politics.
Caja Madrid - which in the property boom became the fourth biggest financial entity in Spain - was governed by politicians of all colours who received large salaries for doing nothing… they had no knowledge whatsoever of banking.
In this way Madrid's PP, PSOE and IU were able to pay all sorts of party expenses through the bank that they themselves governed and were able to offer juicy well-paid bank jobs to those who 'did them favours'.
It was also a good ploy to help your own family members - the wives of two PP Madrid regional government councillors sat on the board of Caja Madrid Pensiones earning €1,800 a month each when neither had any experience of finance.