Rajoy Apologizes as New Wave of Graft Allegations Hits Spain

By Charles Penty  

Prime Minister Mariano Rajoy apologized to the Spanish people yesterday amid mounting public outrage at a new wave of corruption allegations against officials from his party.
All members of the governing People’s Party among the 51 arrested this week on bribery allegations have had their party membership suspended and will be expelled if the charges are proved, Rajoy told the Senate in Madrid.
“I understand and share fully the indignation of so many Spaniards at the accumulation of scandals,” Rajoy said. “In the name of the People’s Party I want to apologize to all Spaniards for having appointed to positions for which they were not worthy those who would seem to have abused them.”
Rajoy is battling to retain his moral authority amid evidence that local officials took bribes to hand out public contracts while he was administering the
harshest budget cuts in Spain’s democratic history. This week’s arrests follow allegations from the former PP treasurer, Luis Barcenas, that Rajoy and other senior party officials including Rodrigo Rato, a former deputy prime minister, accepted cash from a party slush fund.
Rajoy has denied the allegations against him. Barcenas produced handwritten ledgers to back up his claims that he handed out envelopes of cash to party officials and received text messages of support from Rajoy during the early part of the investigation. He’s in jail while the National Court probes his financial affairs.

Rajoy Attacked

A survey by the state pollster in July showed political corruption is the second-biggest concern for Spaniards after the country’s 24 percent unemployment rate, the second highest in the European Union.
“Explain about the envelopes, explain about the messages you sent to Barcenas, explain about the secret financing of your party,” the opposition Socialist leader in the Senate, Maria Chivite, told Rajoy in response. “Explain to all Spaniards how many senior official from your party will appear before the courts because of their accounts in Switzerland.”
The state prosecutor’s office said this week that an investigation into money laundering through Switzerland led to the arrest of local officials suspected of handing out 250 million euros ($320 million) of contracts in exchange for bribes. The prosecutor’s office declined to identify the individuals involved.

Fraud Cases

The roundup included local officials from four regions and a former senior member of the Madrid regional government, as well as construction executives, El Pais newspaper reported. One of the local officials from Madrid was a Socialist, El Pais said.
Spaniards have also had to swallow more revelations about the banking practices that helped drive the country into a financial crash. Economy Minister Luis de Guindos told parliament yesterday prosecutors are investigating about 2.6 billion euros of potential fraud cases.
Among those is a National Court probe into Rato’s handling of the 2012 collapse of Bankia SA (BKIA), which helped push Spain into a 41 billion-euro European bank bailout. Rato was questioned on Oct. 16 about the use of unofficial credit cards at the lender, where officials ran up 15 million euros of bills on items including clothes, jewelry and cash withdrawals.

Rato, Castellanos

Rato, who served as managing director of the International Monetary Fund before taking the helm at the lender, has also drawn renewed scrutiny over his relationship with New York-based investment bank Lazard Ltd. (LAZ) after telling the court he received a 6 million-euro payment from Lazard while running Bankia.
The former IMF head said he received the funds in 2011 for stock rights accrued when he worked for Lazard between 2008 and January 2010, according to a court document seen by Bloomberg. Lazard’s Spanish country head, Jaime Castellanos, whom Rato has described as his friend, told the court in February that all relations with Rato ended when he left the firm and that no payments were made to him after that date, according to the document.
Rato’s lawyer, Ignacio Ayala, wasn’t immediately available to comment when contacted by Bloomberg yesterday. Judi Mackey, a spokeswoman for Lazard in New York, did not respond to a phone call and an e-mail seeking comment. Rato told the Spanish parliament in 2012 that he strictly obeyed the law at Bankia.
The PP said this week it has suspended all party members involved in the Bankia credit-card scandal, including Rato.
“This conduct is particularly hurtful when the Spanish have had to make so many sacrifices and make such an effort to get our country out of the crisis,” Rajoy said yesterday.