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Bank boss faces jail time in Florida takeover row

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Bank boss faces jail time in Florida takeover row
The landmark Caja Madrid tower in Madrid. File photo:aditza121/Flickr
08:19 CEST+02:00
A Spanish court on Wednesday ordered the detention of the former head of the savings bank Caja Madrid who is under investigation over alleged mismanagement, three weeks after he was released on bail after spending a night in prison.

Miguel Blesa, 65, who has links to senior members of Spain's governing Popular Party, spent the night of May 16–17 in a Madrid jail but was released on bail after stumping up 2.5 million euros ($3.2 million).

He is accused of leaving the bank saddled with huge losses because of an ill-advised takeover by Caja Madrid in 2008 of the City National Bank of Florida, which was caught up in the US subprime mortgage meltdown that year.

Judge Elpidio Jose Silva, who had agreed to release Blesa on bail last month, on Wednesday ordered he be jailed this time without bail citing new evidence in the case, the court said in a statement.

In his court ruling last month the judge said he saw "reasonable indications of criminal responsibility" in Caja Madrid's takeover of City National Bank of Florida.

Caja Madrid paid $1.17 billion to take over the Florida bank, about double what it was worth, the judge said.

Silva said this was a sign of "very bad banking management" that posed "a systemic risk to Caja Madrid in the context of the economic crisis".

Prosecution lawyers have said that the takeover was carried out without authorization from the relevant authorities and that managers of Caja Madrid pocketed hefty commissions in the deal.

Blesa left Caja Madrid in 2009 shortly before it was merged with six other savings banks to form Bankia, as part of a major overhaul of Spain's financial sector.

Bankia was nationalized in 2012, prompting Spain to turn to its eurozone partners for tens of billions of euros of emergency aid to rescue the financial sector.

That bailout fuelled angry popular protests in Spain, where the recession brought on by the financial crisis has driven unemployment above 27 percent.

Dozens of suspects have been questioned by a judge in a separate investigation of alleged fraud in the running of Bankia.

Blesa was the first major banking figure to even briefly go behind bars in the course of Spain's banking saga.

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