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Spanish court opens Bankia fraud case

by fwire  Jul 4, 2012 23:00 IST

#editing   #european  

MADRID (Reuters) - A Spanish court opened a fraud case on Wednesday against former executives of state-rescued lender Bankia (BKIA.MC) including one-time IMF chief Rodrigo Rato, as public anger grows against a bank in line for the biggest share of an EU bailout.

The lawsuit was brought by one of Spain's smaller political parties and accuses 33 officials including Rato - who stood down as Bankia chairman in May - of fraud, price-fixing and falsifying accounts.

The High Court is demanding that Rato and the other executives appear in person, and that former Bank of Spain governor Miguel Angel Fernandez Ordonez appears as a witness.

The government took over Bankia in May after it became clear the bank could not cope with losses stemming from indiscriminate lending during a property boom that crashed four years ago. The bailout forced Spain to seek a European rescue package.

Rato, who was also a minister in a former Spanish government of the ruling centre-right People's Party, was IMF managing director in 2004-2007 before Frenchman Dominique Strauss-Kahn, who was forced to resign as head of the Washington-based Fund last year.

Bankia holds more than 10 percent of Spanish deposits and is the biggest bank likely to receive a capital injection when European bailout funds materialise later this year. Under new management, the bank has requested a 19-billion-euro bailout.

Bankia's rescue, and the subsequent heavy losses for thousands of retail investors who took part in a stock market flotation of the bank last year, has angered Spaniards who are suffering from swingeing government spending cuts.

Protestors have staged street demonstrations in their thousands, banging pots and pans and blowing whistles outside bank branches.

Small-scale investors vented their fury at Bankia's new head Jose Ignacio Goirigolzarri at a shareholder meeting last week.

Strauss-Kahn is facing an investigation into his alleged involvement with a prostitution ring in France.

(Reporting by Andres Gonzalez and Blanca Rodriguez; Writing by Sonya Dowsett; Editing by Julien Toyer and David Stamp)

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