Spain’s Supreme Court upheld a conviction against Banco Santander SA (SAN) Chief Executive Officer Alfredo Saenz and suspended him from banking for three months.
Santander will appeal the sentence handed down to Saenz for making a false accusation, an official for the bank said in a telephone interview, while the lender said in a filing to regulators its board backed Saenz to continue as CEO. As well as suspending him from his banking duties, the Madrid-based court imposed a three-month jail term on Saenz, although he’s unlikely to serve it, a court official said in a phone interview.
Saenz, 68, has been CEO of Spain’s biggest bank since 2002, helping Chairman Emilio Botin lead acquisitions in the U.K. and Brazil that have enabled the lender to become the second biggest in Europe by market value and diversify its earnings beyond Spain. Botin described Saenz, who has helped Santander more than triple its profit since 2002, as the “best chief executive in banking” in a speech in February.
“With maximum respect for the judicial decisions, the board confirms its confidence in Mr. Alfredo Saenz so that he may continue to carry out his responsibilities as the bank’s chief executive officer,” Santander said in a statement.
The case relates to efforts made by Banesto, a consumer- banking unit of Santander, to recover loans in 1994. During the proceedings, the company sued for fraud, prompting counter- allegations of false accusation, Banesto said in 2009, when news of Saenz’s conviction by a court in Barcelona first broke.
Saenz Appeal
The proceedings initiated by Banesto were begun with the blessing of Saenz, who was chairman of the bank at the time, according to the original ruling by the Barcelona court. That court handed Saenz and two others a six-month jail term and a fine on a single count of making a false accusation, according to the ruling.
The Bank of Spain, the banking regulator, declined to comment on the ruling. According to a 1995 Royal decree, “professional virtue” is a prerequisite for those working in the industry and can be lost by anyone with a criminal record.
Santander is awaiting approval by the U.K. Financial Services Authority for Saenz’s appointment as non-executive director of its British unit, which is led by Botin’s eldest daughter, Ana Patricia Botin. When banks put forward candidates for roles that carry significant influence, the FSA takes into account different factors to see if he or she is fit and proper, said a spokeswoman for the U.K.’s financial regulator.
U.K. Role
If someone has a criminal conviction, it doesn’t necessarily follow that the person is unfit, although the FSA will examine the facts of the case because integrity is one of the factors it weighs when approving banking appointments, the spokeswoman said. The FSA only comments on its general policy and not on individual cases, she said.
Saenz will appeal the Supreme Court sentence at the constitutional court and will ask the government to commute it, said a spokesman for the bank, who asked not to be named in line with company policy. He will also ask the Barcelona court to suspend imposing the sentence while the appeal goes through, the bank said.
Saenz, accused with two others, was also fined 400 euros ($553), the Supreme Court ruling said. The ruling carried a dissenting vote from one of the five judges, the court said. Saenz, who has accrued pension rights of 85.7 million euros at the bank, is obliged to observe Santander’s group general code, which regulates compliance with laws and ethical behavior.
“It’s negative because Santander really wants to be an industry leader from a reputational point of view,” said Bernhard Bauhofer, founder of Sparring Partners GmbH, which advises financial companies on managing their reputations.
Assuming the Barcelona court agrees to suspend the carrying out of the sentence for now, the appeal presented by Saenz may take two to four years to proceed, Santander said.
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