SPAIN'S economic outlook has not been affected by the upheaval in Catalunya, according to the International Monetary Fund (FMI) in its recent report. Although the global organisation said on Friday that the banned...
Court revokes Bankia share sales: Firm gave 'inaccurate' information about its financial health, rules judge
ANOTHER mis-selling scandal has struck State-owned financial entity Bankia with share purchases being annulled due to 'seriously incorrect' information in the brochure.
Spain's Supreme Court ruled that the details about Bankia's financial situation given when the bailed-out company first floated on the stock market were 'gravely misleading', and has ordered the firm to refund two customers' investments with interest.
This verdict could open the door to a flood of shareholders legitimately demanding their money back, forcing Bankia to create a €1.8-billion contingency fund.
So far, the cash due for the misrepresentation scandal has fallen far short of this figure – one shareholder invested just under €10,000 and another, nearly €21,000.
The verdict, which follows a pattern of a string of other claims against Bankia for financial misinformation, is a separate incident to that of the preferential shares hard-sold to customers who did not know what they were buying.
Ex-employees of Caja Madrid and other firms which have now been swallowed up by Bankia say they were instructed to convince ordinary savers to buy shares, disguising them as simple deposit accounts, and using inaccurate details about the company's solvency.
It was known internally that the banks involved were about to go under, and account-holders who have successfully reclaimed their money or who are attempting to do so include the very elderly, one with Alzheimer's, a toddler, a girl with life-threatening anorexia, dozens who are illiterate, and a high number of clients with little or no knowledge of how finances work.
But the share flotation financial cover-up is a brand-new scourge on the company which has been unearthed this week.
A merger of the bankrupt entities Caja Madrid and Bancaja - along with five other building societies - enforced by the State, which seized control of the books nearly four years ago via its Ordered Banking Restructure Fund (FROB), Bankia threatened to fold because of property bad debts combined with poor, and suspected fraudulent, management.
Bankia's and Caja Madrid's former chairman Rodrigo Rato, ex-economy minister for the PP, is facing jail for tax fraud and misuse of funds during his time in the driving seat of the two entities.
Spain's government needed to invest €22bn to save Bankia, which received most of the European bail-out fund applied for in 2012 – a loan which led to extreme austerity measures being enforced by Brussels, including tax hikes, bank branch closures, and cuts in wages and public funding for social programmes.
Some economists have refuted claims by Bankia that it will soon be able to refund all the cash it received from the EU, warning it was very unlikely the corporation would ever be able to do so.
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