Thursday, October 16, 2014

The Black Card Of Caja Madrid

A credit card operates according to a simple rule. Use the card for credit and then pay the credit back. There is another rule. Use the card for credit and don't pay the credit back. Not because you can't afford to pay it back but because the card isn't credit at all, it is a payment card. Draw a certain amount each month, pay for the groceries, clothes, meals or whatever you like and treat this as "representation expenses". Such a card might be fair enough or legitimate enough so long as there is a tax declaration to include these expenses, but legitimacy is not a word that can be applied to a bank at the centre of the scandal of these expenses; a bank which no longer exists as such and which has become a by-word for all that was wrong with the pre-crash Spanish banking system and with political and business influence. Caja Madrid.

Today, the Supreme Court in Madrid is due to hear a declaration from Rodrigo Rato, a banker and politician at the heart of the Caja Madrid expenses scandal. Rato was a vice-president of Spain (or deputy prime minister if you prefer) in José María Aznar's Partido Popular government from 1996 to 2004. He was also the minister for the economy and for finance. In 2004 he became the director-general of the IMF, succeeding Dominique Strauss-Kahn. In early 2010 he was made president of Caja Madrid and then president of Bankia, the bank formed by mergers (of which Caja Madrid was one component). Rato once had ambition to be leader of the PP and so head of Spain's government. As things turned out, Mariano Rajoy succeeded Aznar, but Rajoy was magnanimous and helped smooth the way for Rato to become the president of Caja Madrid.

Though the court is interested to hear from Rato, the scandal of the "opaque" or "black" credit cards goes back several years. It covers a period from at least 2003 to 2012. Primarily the cards were given out to executives or board members of the bank who were nearly all members of the PP, though not exclusively. This was a bank which acquired a certain notoriety when it became clear during all the fallout from Spain's banking crisis that there were certain board members who had no right to be anywhere near a bank's board, let alone draw some remuneration. They were board members who knew nothing about banking and were representative of the cronyism that had been practised for years.

The total amount of money that went out through these cards is reckoned to be in the region of 15.5 million euros, and it is money that is alleged to constitute a misuse of funds. But the amount may be greater as Caja Madrid appeared to have been giving out the cards for longer than the 2003-2012 period which is commonly being cited. The practice was drawn attention to in the media in 1999, though in fact it would seem that the scheme started earlier than this. When there was press exposure in 1999, the practice was scaled back, but it clearly grew again and nothing was done about it. Indeed, it has become increasingly clear that the Tax Agency was fully aware of what was going on and its role is now under scrutiny.

The amounts on an individual basis may not typically have been huge but they were substantial enough, very much more substantial than might have been deemed to be legitimate representation expenses (as has been noted by a report from Spain's bank bailout fund). The monthly limit on the card was actually increased from 900 euros to 2,000 euros at precisely the time the banking crisis took hold and when Caja Madrid was on the point of collapse.

But there have to have been higher limits. The revelations have been coming thick and fast over the past few days. One is that ten directors of the bank spent between them nearly 350,000 euros basically on overnight stays in hotels and meals. The itemising of expenditure and by whom shows, for example, a bill of 1,800 euros at the famed El Bulli restaurant in 2006. There are other restaurant bills, like the one for 2,801 euros at Madrid's Principe de Viana in 2010. And then there were the peaks in expenditure, such as at Christmas time, and so the shopping sprees at El Corte Inglés. The former secretary of state for tourism, José Manuel Fernández Norniella, would appear to have given El Corte Inglés over 94,000 euros worth of sales.

The list goes on and on, a virtual who's who of political and business life and a who's what of Spanish luxury. The PP says it will expel anyone who is found to have been abusing privileges. The courts might consider some other retributions.

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