Fraud charges overshadow new Bank of Spain governor: Predecessor may face jail term for alleged insider trading

THE Bank of Spain's governor, Luis Angel Rojo, was sworn in by King Juan Carlos yesterday for a non-renewable six-year term. The ceremony was overshadowed, however, by the news that Mr Rojo's predecessor, Mariano Rubio, could face corruption charges more serious than previously thought, with a potential jail term of up to 24 years.

The additional charges announced by the public prosecutor investigating Mr Rubio, 62, raised new questions as to how Mr Rojo, as deputy governor, remained in the dark over the activities of his boss, who was governor for two four-year terms until 1992.

Mr Rojo took over as governor that year after Mr Rubio was linked with a failed bank, Ibercorp, whose directors were penalised for improper practices.

Mr Rubio, named both times by Prime Minister Felipe Gonzalez, evaded investigation at the time but backed off an expected third term. The scandal resurfaced this year when newspapers uncovered details of a secret bank account for equity trading allegedly held by Mr Rubio and handled by leading stockbroker Manuel de la Concha, a former chairman of the Madrid stock exchange. Mr de la Concha now also faces charges of fraud and insider trading.

A new law granting the Bank of Spain autonomy from the finance ministry lengthened the governor's term to six years, but made it non-renewable. As a result of the Rubio scandal, the law also places restrictions on central bank officials, barring them from holding equity investments.

Mr Rojo is widely seen as an honest man but he has been criticised for failing to detect Mr Rubio's alleged illegal activities, which the prosecutor yesterday said included bribery, falsifying documents, illegal use of privileged information, illegal trading and 'trafficking in influence'. Previously, Mr Rubio, who spent two weeks in preventive detention in May, had been accused only of tax fraud.

Mr Rojo admitted he had once invested in Ibercorp but declared his gains to the tax authorities.

He was also criticised for the Bank of Spain's delay in recognising the gravity of the losses run up by Banesto bank. The central bank took control of Banesto last December - it has since been bought by Banco Santander - but Mr Rojo admitted the central bank had known of its problems for more than a year.

A secret report on Banesto's then chairman, Mario Conde, carried out in 1992 by Kroll Associates, the investigative firm based in the US and paid for by the government's reserved or secret funds, said: 'It will be difficult or impossible to sustain the (Banesto) balance during 1993, depending on the Bank of Spain's attitude.'

The government was widely perceived to have ordered the report to block Mr Conde's political ambitions. Immediately after the report was completed, Mr Conde abruptly stopped making highly political statements which had suggested he could become a serious centre-right threat to Mr Gonzalez's fading Socialists.

Mr Conde also accused Mr Rojo and the Bank of Spain of political motives in taking over Banesto last December, when its assets were estimated to have been overvalued by about pounds 3bn. Mr Conde insisted his restructuring plans were adequate.