Former Banco Pastor officials named as official suspects in fraud case

A court in A Coruña has named the former chairman of Galician-based bank Banco Pastor, José María Arias Mosquera, and ex-chief executive, Jorge Gost Gijón, as formal suspects in a case involving criminal mismanagement, falsifying documents and fraud, judicial sources said Monday.

The court subpoenaed both for questioning on Tuesday after accepting a criminal lawsuit filed by a minority shareholder of Banco Pastor, sources at the law firm Frade Gobeo, which is representing the shareholder, have said.

The case concerns the period 2008-2010 when, according to the lawsuit, “the company’s accounts were falsified through a financial operation linked to companies that Banco Pastor owned.” The suit is accompanied by two reports that seek to show that during the period in question the bank hid the losses of seven real estate companies that it had created in its balance sheets.

It claimed that the companies in question also failed to pay interest due on loans granted to them by Banco Pastor. The suit claimed the losses amounted to 1.325 billion euros in 2009 and that if these had been acknowledged, the bank would have been in a situation of technical bankruptcy. “The operation was designed to give the appearance of solvency to a bank that was technically bankrupt and which in this situation tapped the market through the issue of preferred shares and common stock subscribed to by minority shareholders,” it said.

Banco Pastor was acquired by Banco Popular for 1.246 billion euros but subsequently was obliged to clean up its balance sheet at a cost of 3.343 billion euros after meaning that after taking into account goodwill and tax credits it bought a bank which has a negative net worth of 497.1 million euros.