Sunday, June 28, 2009

Is BOA next?

Madoff victims offered settlement
Santander Spanish branch in Madrid
Many financial institutions have been hit by Mr Madoff's alleged fraud

Spanish bank Santander says it will compensate private clients who suffered
losses from the alleged fraud run by US businessman Bernard Madoff.

The bank said it will offer clients a 1.38bn euro ($1.8bn;£1.3bn) settlement.

Santander is being sued over claims it did not do enough to prevent losses in
funds that invested with Mr Madoff.

He is accused of perpetrating one of the largest-ever Wall Street frauds,
through a $50bn (£33.2bn) scheme that wiped out many investors.

Santander is the largest bank in the eurozone and owns Abbey and Alliance &
Leicester in the UK.

'Exceptional circumstances'

Santander has said its customers have exposure of 2.3bn euros to Mr Madoff
through its private banking business, Optimal.

The bank will issue 1.38bn euros worth of preferred shares to compensate
individual customers. The move will cost the bank 500m euros.

It said that it had decided to offer compensation because of the "exceptional
circumstances" and to maintain its business relationships with clients affected
by the alleged fraud.

Spanish law firm Cremades & Calvo-Sotelo said that it had filed a class action
suit in Florida with its US partner firm Labaton Sucharow.

The lawsuit claims that Santander was negligent in allowing its Optimal
Strategic US equity fund to invest with Mr Madoff.

Santander said in a statement that it acted in accordance with all applicable
laws and sound banking practices and procedures.

"Grupo Santander has acted at all times with the due diligence in the management
of its clients' investments," it said in a statement.

The Madoff scandal has hurt a number of high-profile banks and financial

Austria has taken control of Bank Medici, a small, private bank, because of the
losses it sustained.

In the UK, the Serious Fraud Office has said it would investigate Mr Madoff's
business operations.

Marc Gross, of the US law firm Pomerantz, which represents some of Mr Madoff's
clients, told the BBC that the compensation was "very significant".

"I think it's taking ownership of the problem, taking accountability and
standing up and saying we are going to reimburse... those who've been defrauded

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