Jan. 26 (Bloomberg) -- Santander Central Hispano SA Chairman Emilio Botin goes on trial today in Madrid, the second criminal prosecution of a European banking chief in the past year over payments related to multibillion-dollar mergers.

Botin faces charges of mismanagement and misuse of company funds for approving 164 million euros ($214 million) in bonus and pension payments to two former executives from Banco Central Hispano, which Santander bought for $12.6 billion in 1999. Botin, who built the Spanish bank through more than $40 billion of acquisitions since taking over in 1986, denies wrongdoing.

The trial starts six months after Deutsche Bank AG Chief Executive Josef Ackermann was acquitted of charges he wasted shareholders' money as a director of Mannesmann AG. European executives, like those in the U.S., are facing increasing scrutiny from investors demanding more accountability after the collapse of companies such as Enron Corp. and Parmalat Finanziaria SpA.

``It's well overdue that prosecutors and the justice system start holding more executives accountable,'' said Umberto Mosetti, an Italian law professor and partner at Deminor, an investor consulting firm in Brussels. Mosetti wasn't commenting directly about Botin.

`Respect for the Law'

Santander shareholder Juan Francisco Franco Otegui is accusing the 70-year-old Botin, along with Santander's former co- chairman Jose Maria Amusategui, 72, and ex-chief executive Angel Corcostegui, 53, of misusing funds when signing agreements that provided pension and bonus payments to Amusategui and Corcostegui. Amusategui and Corcostegui also are on trial.

Amusategui and Corcostegui received the bonus and pension payments and left the Santander, Spain-based bank in the three- year transition period that followed Santander's purchase of Central Hispano, which was billed as a ``merger of equals.'' Central Hispano investors didn't get a premium for their shares.

Santander's board has repeatedly defended Botin as well as Amusategui and Corcostegui. The decisions on the payments were made by directors and adopted unanimously ``with the utmost respect for the law and bylaws, and benefiting the bank and shareholders,'' Santander's board said in a statement last March.

Botin denied any wrongdoing before shareholders at a special meeting on Oct. 21 to approve the company's $15 billion purchase of U.K. mortgage lender Abbey National Plc. The case ``runs contrary to the company's interests and to the loyalty that shareholders ought to have to the bank,'' Botin said at the meeting.

Ramon Hermosilla Martin and Javier Sanchez-Jun, defense attorneys for Amusategui and Corcostegui, didn't return calls.

`Difficult to Prove'

``It will be very difficult to prove there was a crime,'' said Rafael Alcacer, a criminal law professor at King Juan Carlos University in Madrid, who has studied the case. ``You would have to show Botin abused power in his role and that's tough when the accords were ratified by the board, and the amounts paid were included in annual accounts that were approved by stockholders.''

Spanish state prosecutor Jesus Caballero Klink in June said in an opinion to the National Court in Madrid that Botin should be cleared of charges because ``the related facts don't constitute a criminal offense.'' Civil laws also weren't violated, he said.

A German court in July acquitted Ackermann and five others of criminal charges related to approving 57 million euros of bonus and pension payments to 23 managers of Mannesmann after Vodafone Group Plc bought the German wireless operator for $154 billion in 2000.

Botin in April posted bonds equal to the 164 million euros that Santander awarded the two managers. He would face a prison term prison if convicted in a criminal court. He may have to pay damages were he to lose a civil suit.

New Judge

``Financial and corporate crimes require proof of outright fraud,'' said Javier Divar Garteizaurrecoa, who directs the corporate law department at Deusto University in Bilbao, Spain.

Central Hispano was one of dozens of companies that Santander has bought since Botin took over from his father, Emilio Botin II, in 1986. Botin turned Santander into the world's ninth-biggest bank by market value from a regional lender on Spain's northern coast through acquisitions including last year's takeover of Abbey, Europe's biggest cross-border bank acquisition.

The trial gets underway as Botin begins folding Abbey's business into Santander, which the bank expects to lead to 670 million euros in annual savings and revenue growth by 2007. Santander reports first-quarter results on Feb. 25, its first earnings statement since the purchase of London-based Abbey.

Shares of Santander dropped 5.1 percent in the past year, compared with the 7.8 percent gain of the Bloomberg Europe Banks and Financial Services Index.

Spain's National Court removed Judge Javier Gomez-Bermudez, who was scheduled to preside over the trial, after he was accused of bias. The court yesterday named Judge Antonio Diaz Delgado to replace Gomez-Bermudez as chairman of the three-member judge panel.

``The whole process, including appeals through the Supreme Court level, could add another two years before we have a final decision,'' said Alcacer of King Juan Carlos University.

To contact the reporter on this story: Todd White in Madrid at at twhite2@bloomberg.net

Last Updated: January 25, 2005 19:11 EST