A unit of Banco Santander is being investigated by Geneva's public prosecutor for apparently defrauding clients by misrepresenting its relationship with Bernard Madoff.
Optimal Investment Services, the Geneva-based hedge fund arm of family-controlled Santander, faces a criminal probe after a complaint was filed from a former client who lost money invested in the Madoff scheme. Franck Berlamont, head of investment asset management firm Geneva Partners. who filed the claim, said: "I was scammed by my neighbours. Santander and Optimal repeatedly presented false information to investors, and the list of false and misleading statements is simply mind boggling."
Optimal was ordered on Tuesday to pay $235 million to help reimburse victims of the fraudulent scheme. Its clients lost around $3.2 billion investing with Madoff, just a small percentage of the $60 billion he lost overall.
This is the latest in a series of investigations into the links between Santander and Madoff's Ponzi scheme. Although the family declined to comment about this morning's news, Emilio Botin (pictured), president of Banco Santander, recently wrote about the changes rocking the banking world and the importance of risk management.
"The banks that have suffered most in the current crisis are those that lost sight of the fundamentals of good credit risk management and control. Many ignored the trade-off between risk and profit, and forgot the distinction between market risk and credit risk. As a result, they strayed far from their core businesses," he wrote Euromoney magazine.
"Going forward, risk management must be independent from business areas, with independent reporting lines; risk policies must be decided and scrutinised at the level of the board of directors; risk management must be focused on knowing the customer. This requires time and resources at all levels of a bank, from the boardroom to the branch. There are no short cuts. The banks that do this best will thrive."
The Botin family has managed Banco Santander since 1857, but until Emilio took over in 1986 it was a small, regional bank. It is now Spain's largest bank and has approximate revenues of $32.524 billion.
Botin was voted Campden FB's Family Business Leader of the Year 2008, but has had a difficult 2009 with the collapse of investment bank Lehman Brothers, then the Madoff case.