Bank offers to reimburse clients

January 28, 2009|Associated Press

MADRID - Spain's Banco Santander offered $1.82 billion yesterday to reimburse clients who lost money in New York financier Bernard Madoff's alleged pyramid scheme in the United States.

Spain's largest bank, one of the institutions hardest hit in the scandal, said it was offering the compensation to private customers. It made no mention of institutional investors.

The bank has been sued in Miami by investors who say it didn't adequately scrutinize the investments made with Madoff.

Santander is expected to close on a deal by February to purchase Sovereign Bank, Massachusetts' third-largest lender.

The lawsuit, filed in federal court Monday, claims Banco Santander was negligent, contending there was a "plethora of red flags" that should have alerted the bank that Madoff was running what the lawsuit says was Ponzi scheme. The suit seeks class-action status.

A New York lawyer for Madoff didn't immediately return a call seeking comment.

The bank said in a statement yesterday that it acted with "due diligence" when one of its funds, Optimal Strategic US Equity, commissioned Madoff to handle investments by some Santander clients.

The bank says it is offering to give clients back their initial investment, in the form of preferred securities, but not interest accrued through Madoff funds.

"The group has taken this decision in view of the confluence of exceptional circumstances in the case at hand and on the basis of exclusively business considerations, namely the group's interest in maintaining its business relationships with those clients," the statement said.

Santander is one of the companies most exposed in the $50 billion scam allegedly run by Madoff.

It has said it has total exposure of $3.1 billion in the case, the vast majority of it client money, not its own.