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Tuesday, 9 April, 2002, 16:43 GMT 17:43 UK
Spanish bank BBVA under criminal probe
Member of Spanish separatist group ETA
BBVA allegedly paid ETA protection money
A Spanish judge has launched a criminal investigation into the country's second largest bank, Banco Bilbao Vizcaya Argentaria (BBVA), over secret accounts which, it is alleged, were used to make political pay-offs at home and abroad.

Judge Baltasar Garzon - famous for his attempt to prosecute former Chilean dictator Augusto Pinochet for the murder of Spanish citizens - has taken over the probe from the central bank.

Judge Baltasar Garzon
Judge Baltasar Garzon has pursued many high profile cases
In a court order, Judge Garzon cited alleged misuse of funds and falsification of accounts, which reportedly contained nearly $200m.

The bank, speaking to BBC News Online, has rejected any allegations of wrongdoing.

Spanish news reports have claimed the accounts were used to influence politicians and business deals, pay protection money to ETA - the armed Basque separatist group - and fund Hugo Chavez's successful bid for president of Venezuela, where the bank has significant interests.

"We are in the beginning stages of a scandal that will grow," Juan Mari Juaristi, leader of the Basque Nationalist Party in Guipuzcoa province, told Spanish news agency Efe.

Denial of wrongdoing

Spain's Economy Minister Rodrigo Rato said at the weekend the affair did not threaten either the Spanish financial system or BBVA itself.

There is the probability of investigations ongoing abroad could end up with other probes being opened by other regulatory entities, such as the SEC

Ibersecurities ActivoBank
But the court order reportedly instructed the central bank to suspend its investigation because of possible "penal responsibilities by the board members".

Judge Garzon has the power to lay criminal charges whereas the worst punishment the Bank of Spain could mete out was fines.

He rarely handles cases over financial misdealings, but as a National Court judge his jurisdiction covers all of Spain where BBVA, with thousands of branches and more than 300bn euros in assets, is a major force.

Directors named

Last Friday BBVA published a list of 16 current and former executives under investigation, including former co-chairman Emilio Ybarra and former chief executive Pedro Luis Uriarte, who both resigned unexpectedly in December.

Two directors, who are still with the bank, are expected to resign shortly.

Part of the investigation also involves an executive pension fund which could embarrass current BBVA board members.

"Although the secret accounts were known since the end of 2000 by the Bank of Spain, there is a risk that all the investigations could affect the group, not just those named," said broker Ibersecurities ActivoBank in a note to clients.

"Additionally there is the probability of investigations ongoing abroad could end up with other probes being opened by other regulatory entities, such as the [US] Securities and Exchange Commission," it added.

Political manoeuvring

Newspapers have said the accounts were used to oust Mr Ybarra and Mr Uriarte and embarrass the Basque Nationalist Party (BNP).

A number of former senior BBVA bankers are mainstream Basque nationalists allied to the BNP, which is at odds with the central government over Basque independence.

The two are said to have had a difficult relationship with chairman Francisco Gonzalez, a close ally of the centre-right government.

The opposition Socialist Party has demanded an inquiry into the affair, asking that the government clarify what role, if any, it has had.

More investigations

The secret BBVA accounts - reportedly held in Lichtenstein, the Cayman Islands, Jersey and elsewhere - were opened as far back as 1987 by Banco de Vizcaya, which merged with Banco de Bilbao in 1988.

The income from the accounts, mainly profits from buying and selling stock, was not reported to the government until 2000, when they were closed.

Judge Garzon has already spent more than two years investigating alleged money laundering by BBVA in Puerto Rico and the Isle of Jersey.

The Banco Bilbao Vizcaya, merged with Argentaria in 1999 to form BBVA.

Keith Johnson, Wall Street Journal in Madrid
"The very naming of him gives the case a different feel, in the same league as the Pinochet case."
See also:

16 Dec 01 | Americas
Chavez warns Venezuela banks
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