CEO of Santander sentenced to 6 months jail

The chief executive of Banco Santander has been sentenced by a Barcelona court to 6 months in prison for falsely accusing four clients of Banco Espanol de Credito of fraud and concealment of assets in a case dating back to 1994, court documents released on Monday show.

Alfredo Saenz, the former chairman of the bank known as Banesto, also was ordered by the Barcelona court to pay a 9,000 Euro fine. Another Banesto executive and a lawyer working for Banesto also were sentenced by the same court to pay 9,000 Euros each in fines. A fourth accused was acquitted.

A spokesperson for Santander said Saenz declined to comment and referred questions on the case to Banesto, which said it will appeal against the sentences.

Saenz is unlikely to serve any time in prison if the sentence is confirmed due to having no prior criminal record. It's customary in Spain that convicts with no previous convictions don't have to serve time when the prison term is under two years and a day.

Saenz was appointed chairman of Banesto after the Bank of Spain stepped in to prevent its collapse in December 1993. As chairman, he focused on getting the then-ailing lender back into shape by pursuing troubled debtors aggressively. Banesto, currently Spain's fourth-largest bank by market capitalization, was bought by Santander in 1994 in an auction.

Saenz was named chief executive of Santander in February 2002.

According to the court documents, Banesto in July 1994 presented an illicit criminal complaint against four clients in an attempt to force them to pay back a debt of some 600 million Spanish pesetas, about 3.6 million Euros.

The court said that the only motive for filing the complaint against these clients was as an "intimidation" tactic to allow the bank to recoup the loans.

The four clients in question were named as Pedro Olabarria, Luis and Jose Ignacio Romero, and Modesto Gonzalez Mestre, who owed the money through a business they owned named Harry Walker.

A judge initially pressed charges against the four businessmen, sending them to protective custody. However, the charges against them were later dismissed.

Olabarria, the Romeros and Mestre pressed counter charges against Banesto and Saenz, claiming that as chairman of the bank he was fully aware of the filing of the complaint against the four clients. The Barcelona court backed up this claim.

Santander, the largest bank in the euro zone by market value, has had to fend off several legal threats in the past year. It had about $3 billion of its clients' money invested with Bernard Madoff through Optimal, its Geneva-based hedge-fund group. Santander later offered its clients compensation for losses from the fraud, and it also agreed to settle a claw-back claim from the trustee of the now-defunct Madoff firm.