RBS may face legal wrangle over Santander

ROGER TRAPP

and ELIZABETH NASH

Royal Bank of Scotland, the clearing bank chaired by former defence secretary Lord Younger, faces being involved in a legal wrangle arising from its connections with Banco Santander, Spain's largest bank.

Santander owns about 10 per cent of RBS, which has a stake of approximately 2 per cent in Santander. It is also the largest shareholder in First Union, the seventh-largest US bank after last summer's merger with First Fidelity, the New Jersey-based bank in which Santander had built up a 29.9 per cent stake over the previous four years.

The bank, controlled by the family of chairman Emilio Botin, is facing a lawsuit from Jacques Hachuel Moreno of the Hachuel Corporation, a trading company that had a significant shareholding and related agreements with the management of Banco Espanol de Credito (Banesto), the troubled bank that Santander acquired in 1994. Mr Hachuel is basing his $70m lawsuit on his claim that Santander did not honour the agreements he had made with the previous management.

Mr Hachuel is a former associate of Mario Conde, chairman of Banesto until his alleged improper dealings brought the institution to its knees in 1993. He has always denied responsibility for the bank's "black hole" and has kept a low profile since being released on record bail of 2 billion pesetas (pounds 10m) exactly a year ago after the Spanish high court ruled the crimes of fraud and embezzlement of which he was accused were insufficient to keep him in detention.

Mr Hachuel, who has retained Arthur Liman of the New York firm Paul Weiss Rifkind Wharton and Garrison to represent him, also alleges that Banco Santander made significant gains from "laundering" nearly $4bn of money from Spain's "black economy" during the late 1980s.

Mr Hachuel's advisers say they are proceeding in the US because the UK authorities, including the Bank of England, are unconvinced that the RBS involvement is enough to make the matter appropriate for being dealt with in Britain.

A spokesman for RBS, on whose board Mr Botin and his brother Jaime sit, said the bank was satisfied the two men "had acted entirely properly". The allegations were the subject of a legal action by Mr Botin, it said.

Banco Santander could not be reached for comment.