• Bankia's IPO offer to investors hits specialist-claims lawyers
  • Lender expects to fully reimburse 200,000 small IPO investors

Jesus Maria Ruiz de Arriaga, a former Catholic friar who built up his law firm by suing Bankia SA over its 2011 share offering, may be about to lose a slice of his daily bread.

Bankia on Wednesday said it would fully reimburse an estimated 200,000 small investors for the full amounts they invested in the sale and also pay them 1 percent annual interest. Spain’s fourth-biggest lender says the offer means investors won’t need lawyers like Ruiz de Arriaga to help them get their money back and will itself save 400 million euros ($443 million) in legal and interest costs from the process.

“The opportunistic law firms that were born when they saw a market niche caused by the bank’s excesses will most probably disappear,” Carlos Sancho, a lawyer and senior lecturer of financial management at IESE Business School in Barcelona. “They have transformed lawsuits into a commodity and they now don’t have a reason to be around.”

Bankia raised more than 3 billion euros from a share sale in 2011, including 1.85 billion euros from retail investors, a year before its near-collapse forced Spain to seek 41 billion euros in European bailout funds to shore up its banking system. Failings in the share sale process, tainted by “serious inaccuracies” in the words of Spain’s Supreme Court, created a business opportunity for law firms such as Ruiz de Arriaga’s that set about making claims on behalf of investors.

Ruiz de Arriaga, 55, became one of the best-known faces of the industry that built up around the Bankia claims process, taking out ads in Spanish newspapers and publicity slots on the radio.

Soccer star

Iker Casillas, the soccer goal-keeper who captained the Spanish side that won the World Cup in 2010, began appearing in ads for Ruiz de Arriaga’s firm in October last year. The former Real Madrid star said at the time he had invested in Bankia shares.

Ruiz de Arriaga said the Bankia offer to investors would mean he wouldn’t get many new clients to pursue claims against the bank in the courts.

Even so, the firm has work to keep it going for the next few years as it also prepares to fight banks over other conflicts with customers such as minimum interest rates written into mortgage contracts, he said in a phone interview Thursday. The so-called “floor” clauses have become controversial as the benchmark Euribor interest rate used as a reference for home loans has hit a record low.

Tough Campaign

“Law firms like us and others have launched a tough campaign reminding people that they have a right to get their money back and the courts have been agreeing with us every day,” Ruiz de Arriaga said. “We have won thousands of lawsuits.”

In an interview last year with El Mundo newspaper, Ruiz de Arriaga said he was born into poor family that had a pig farm and took his vows to become a friar after being schooled by priests. Aged 20, he left the religious life behind him “due to women and hormones,” he told the newspaper.

He then turned to the law. After completing his legal studies in 2009, Ruiz de Arriaga set up his law firm in 2011. It grew exponentially as he took his fight to banks, including over Banco Santander SA’s sale of products such as convertible bonds and preferred shares to retail clients and the Bankia IPO.

He now has about 360 lawyers and at least 22 offices across Spain serving 37,000 clients, of which about 25,000 are Bankia investors. About 90 percent of the 239 million euros he has won back for clients relates to Bankia claims, he said.

Legal claims

Bankia expects to return about 1.5 billion euros to retail investors and has provisioned about 1.8 billion euros to cover the costs. On the first day of the offer, 28,306 investors accepted it, the bank said in e-mailed statement.

Clients who have already started legal claims will have to pay for the cost of the process even if they accept Bankia’s offer, Ruiz de Arriaga’s firm said Wednesday in a statement.  Arriaga Asociados said clients could get better interest terms if they seek reimbursement through the courts.

Bufete Rosales, another law firm that’s been fighting Bankia over the IPO claims, said in a statement on its website that the bank’s offer excluded investors who bought shares after its IPO and that those people could keep fighting the bank in the courts.

Under the typical client agreement for a Bankia investor, Ruiz de Arriaga’s firm would get to keep costs and the interest that the judge typically orders the bank to pay back to clients in a successful claim, Ruiz de Arriaga said.

“We have been the law firm that has persisted the most,” he said. “We have provoked this outcome by encouraging people to claim.”

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