Fernando Andreu, a judge at the National Court in Madrid, agreed to investigate a complaint made by Union, Progreso y Democracia, a left-wing party, over allegations including deception, false accounting and fraudulent administration, according to a ruling distributed by the court today. The judge will probe Bankia, its parent and 33 board members including the 63-year-old Rato.
The judge will look into the initial public offering of Bankia SA in July of last year, the restatement of its earnings that turned up 2.79 billion euros ($3.5 billion) of losses, and Spain’s takeover and rescue of the Bankia group with 23.5 billion euros of state support. Spain nationalized the parent company last week after experts appointed by the country’s bank rescue fund said it had a negative value of 13.6 billion euros.
“Obviously, as many people who collaborated in the creation and maintenance of such a fiction would have to answer for such facts,” the ruling said. The cost of cleaning up the group “means without doubt grave damage to the national economy.”
A Bankia official declined to comment when reached by phone. A call to Caja Madrid, where Rato is chairman, went unanswered. The decision made public today can still be appealed, the judge said in his ruling.
Francisco Verdu resigned as chief executive officer of Bankia, the banking group said today in a one-sentence statement. The resignation is effective immediately, Bankia said without specifying who would replace him.
Verdu and board member Angel Acebes, a former interior minister in the government of Jose Maria Aznar, are also to be investigated.
While the facts of the case merit a criminal investigation, it’s still “not possible to establish in a concrete and definite way the level of responsibility” of each of the parties, the ruling said.
The Bankia group was formed in 2010 from the merger of seven savings banks, including Caja Madrid and Bancaja. The shares of Bankia SA have lost three-quarters of their value since the IPO.
The judge has called former Bank of Spain Governor Miguel Angel Fernandez Ordonez and Julio Seguro, head of the market regulator, as witnesses in the case, as well as Francisco Celma, a partner at Deloitte. He ordered Bankia and BFA, its parent, to submit minutes of board meetings since December 2010.
He told the Bank of Spain to provide all of its inspection reports for Bankia and asked the lender to provide details of payments to board members and executives after December 2010, when it received a first 4.47 billion-euro installment of state support.
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