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Major corruption trial gets underway in Spain

rodrigoRatoThe trial of a former IMF director and leading politician in Spain begins on Monday.

Rodrigo Rato stands accused of overseeing a “corrupt system” in which he, and other executives of the Spanish bank he headed, spent widely on hotels, parties and luxury items.

He and 64 other former bank officials and board members at Caja Madrid and Bankia are alleged to have spent €12 million on themselves by using credit cards put at their disposal by both banks, without ever justifying them or informing the tax authorities.

The allegations cover the period from 2003 to 2012, which includes the years of economic collapse, swingeing austerity, escalated unemployment and general hardship for millions of citizens.

Rato, 67, was formerly the economy minister of Spain, a deputy prime minister and head of the IMF before becoming the chief executive at Caja Madrid in 2010 and then head of Bankia in 2011.

A member of the Popular Party, the allegations, if proven, will be another corruption scandal blow for the party. Under its current leadership of Mariano Rajoy, it has failed in two recent general elections to gain the required majority to return it to power. This situation has left Spain with only a caretaker government for the last nine months and the country could well be headed for yet another election round.

It was in 2013 when a journalist tripped over a hacked email which alluded to “black credit cards”. This opened a spotlight onto the spending spree scandal.

The prosecution alleges that Rato maintained the “corrupt system” which his predecessor at Caja Madrid had set up. Furthermore, that he replicated the system when he took over at Bankia, which had been created in 2011 when Caja Madrid merged with six other savings banks.

Rato resigned from Bankia in 2012 but not before thousands of small-scale investors were persuaded to convert their savings to shares before Bankia was floated in 2011. They subsequently lost their money.

Bankia nearly collapsed only to be rescued by an EU bailout of Spain’s banks worth €41 billion.

This banking scandal is considered to be the biggest in the country has ever experienced.

The trial beginning today, in which Rato is accused of having spent €99,000 in two years on luxuries, is a separate, smaller part of the much deeper scandal involving Bankia.

Rato, once a leading light of the ruling conservative Popular Party, has denied doing anything wrong, saying the credit cards were for discretionary spending as part of his pay deal.

Prosecutors are seeking a prison sentence of four-and-a-half years and a fine of €2.6 million.