Spain's Banco Santander offered euro1.3 billion ($1.7 billion) Tuesday to reimburse clients who lost money in New York financier Bernard Madoff's alleged pyramid scheme in the U.S.
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.
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-based lawyer for Madoff didn't immediately return a call seeking comment.
The bank said in a statement Tuesday 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.
These preferred securities will have an annual coupon of 2 percent, the bank said.
"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.
"Grupo Santander has acted at all times with the due diligence in the management of its clients' investments in the Optimal Strategic fund and in accordance with all applicable laws and sound banking practices and procedures with respect to those investments," it added.
Santander, one of the euro zone's largest banks by market capitalization, is one of the companies most exposed in the $50 billion scam allegedly run by Madoff. It has said it has total exposure of euro2.3 billion ($3.1 billion) in the case, the vast majority of it client money, not its own.
In late December, Spain's anti-corruption prosecutor opened a probe into the alleged investment fraud run by Madoff to determine if any persons or organizations in Spain had cooperated in the scheme.
Source: AP News
