MercoPress. South Atlantic News Agency

Spanish bank Santander will pay back for Madoff

Santander CEO Botin has an extraordinay meeting with their shareholders

Two law firms have filed a class action lawsuit in the United States against Spain's Banco Santander and one of its subsidiaries to recover money lost in an alleged $50 billion Ponzi scheme orchestrated by U.S. financier Bernard Madoff.

Santander, Spain's biggest bank, acknowledged having invested - and lost - more than 2.3 billion euros ($3.28 billion) in Madoff's funds. The lawsuit was filed by Spanish law firm Cremades & Calvo Sotelo and U.S.-based Lobaton and Sucharow in U.S. federal court in Miami. Banco Santander has decided to return 100 percent of the initial investment made by individuals in the Madoff funds by giving them preferred shares at a cost of some 500 million euros (about $659 million), securities industry sources said Tuesday. The sources said Santander would take a charge to its 2008 earnings, which will be released on Feb. 5, but it would not reimburse clients for lost earnings, which averaged about 7 percent annually. Attorney Javier Cremades told EFE the lawsuit was initially filed on behalf of two Santander clients in Chile and Venezuela, but other clients who invested in Miami-based funds may join the proceedings. Cremades said clients who could not join the lawsuit in the United States could sue in Spain. The attorney said he planned to meet soon with a score of law firms from around the world to come up with a joint strategy to deal with the "global problem" created by Madoff. In addition to Banco Santander and its Optimal Strategic US Equity fund, the lawsuit targets the custodian bank for the funds affected by the alleged fraud, HSBC, and auditor PricewaterhouseCoopers, among others. Madoff allegedly bilked investors out of $50 billion, with his Ponzi scheme affecting investors around the world, including individuals, most of them members of the U.S. Jewish community, banks, universities and foundations. Wealthy Latin Americans are among the biggest victims of Madoff's scheme, The Wall Street Journal reported last month. Even so, the Journal said, "many in the region are reluctant to step forward due to the private nature of Latin American fortunes, worries about security, and concerns about tipping off local tax authorities." It added that some of those affected were brought into the Madoff investment fund through Santander, which has major operations in Latin America. Madoff was arrested Dec. 11 on charges of running a Ponzi scheme, whereby early investors are rewarded with high returns financed by money pouring in from subsequent investors. Such schemes are destined to collapse because no real economic activity or underlying earnings exist to justify the exorbitant init