A Spanish court on Wednesday opened the case against former executives of Bankia [corporate website, in Spanish], including former IMF-chief Rodrigo Rato [IMF profile], for allegations of fraud, price-fixing and falsifying accounts. The Supreme Court of Spain [official website, in Spanish] accepted the case [Reuters report] but did not determine a specific date for the hearings. The lawsuit was brought by one of the smaller political parties, and alleges fraud on a total of 33 officials. If convicted the accused may face a prison sentence from six months to six years, although Spanish corruption cases rarely end in convictions. Regardless Bankia has been the target of recent public ire since last year when the bank engaged in crowd funding, a method to raise money by drawing cash from ordinary citizens, many of whom lost their investments. Over 500 minority investors, most of whom were attracted to invest by the bank's drawing last July and suffered financial losses because of the fall of the bank's stock prices, are seeking to start preparing next week for a class action against the bank for compensation. Last month Bankia requested a government bailout [Telegraph report] in the amount of 19 billion euros (USD $24 billion) to help lift itself out of its current financial crisis.
Last month, Spain's public prosecutor's anti-corruption unit had began its investigation [JURIST report] against the bank to determine whether there was sufficient ground to take penal action against it. Protesters from the "indignados" [advocacy website] movement announced that it will take civil and criminal legal action against the bank and its former chairman on June 14 and that they have already raised 15,000 euros. The same day, the European Commission [official website] announced [JURIST report] a proposal that would address the problems of bailing out large banks with public funds during financial crises in the future. The 171-page proposal is a response to the financial crisis of 2008 in which the European public authorities, including Spain, had to bail out large financial institutions, leading the European Commission to approve 4.5 trillion euros (equivalent to 37 percent of EU GDP) to go to those failing companies. Several EU member states face financial instability which may have detrimental effects on other member states. Earlier this month, Ireland voters approved [JURIST report] the Treaty on Stability, Coordination and Governance [text, PDF] aimed at improving fiscal discipline and promoting greater financial information disclosure between EU member states because of its current financial situation. Similarly, Spain's major political parties reached an agreement [JURIST report] in last August to modify the country's constitution that was to regulate the limits of the national deficit in order to avoid risks of debt crisis and a bailout.