SPAIN: Case of the Fugitive Treasure

“If Franco could afford it politically,” said an American businessman last summer, “he could throw a scandal that would make vicuña coats look tawdry.” Last week Franco decided he had to afford it. A mass police roundup hit Spain, and this time the victims were not radical opponents, but some of the nation’s biggest and richest names—bankers, industrialists, Cabinet ministers, even members of Franco’s own family. Though details were carefully concealed from the public, the roundup was the climax of the most sensational financial scandal in the history of the regime. The crime common to all: setting up secret accounts overseas, mounting to at least $280 million in Switzerland and to millions more in banks elsewhere.

The practice of banking hard money outside is an old one, and the Spanish government had tended to wink at the practice. Businessmen swore that they could not operate without external balances, and even some government agencies had undeclared accounts of their own. But Spain’s sick economy has been going from bad to worse. In the first nine months of 1958 the country suffered a trade deficit of $263 million. Its exports of citrus fruits are down more than 60%. It has so little left in gold reserves ($57 million) that it cannot even scrape up enough money to pay for the crude petroleum it needs each year. Desperate for hard currency, and shocked by the size of the sums involved, Franco decided to get the fugitive capital back, no matter who might get hurt in the process.

Sign Here. For months, under the supervision of the Ministers of Commerce and the Interior, the police dug for evidence. One big break came when a secret service agent managed to pry out of a Swiss bank the name of an official who regularly commutes to Spain to see his clients. Early this month the official was arrested while on one of his trips, and the police soon had enough information to swoop down upon the office of a notary public in Barcelona. There they found a list of 1,363 names, each accompanied by a secret account number.

Last week the Spanish borders were closed to all those named. A letter went out to each, inviting him to drop in at police headquarters at the earliest convenience. As the suspects arrived, each got two pieces of paper to sign. One contained the government’s reckoning of his secret accounts, the other an agreement to bring the money home within 30 days. The police were always polite—but they were also deadly accurate. Said one man of his own account: “They had me down to my last centime.”

No Favorites. To soften the blow a bit, the government offered a special rate of 57 pesetas to the dollar compared to the official rate of 42. But Franco seemed to be playing no favorites. Among those caught were such men as the powerful Conde de Arteche, chairman of the Banco de Bilbao, and Juan March, one of the world’s richest men. Also involved were Franco-sponsored organizations, such as the giant Institute Nacional de Industria, which controls everything from airlines to steel mills.

The shock was not confined to Spain alone. Last week Franco’s police arrested two Swiss bankers, one of whom is Joseph Rivera, Geneva director of the Société de Banque Suisse, the other a top, unnamed official of the Union de Banques Suisse. For Switzerland, whose banks have for so long prospered in peace or war (other people’s wars) on the secret accounts of the high and mighty, Franco’s arrest of Swiss bankers was a rude and unexpected blow. Said an official of Société de Banque Suisse: “We are taking a very serious view. The matter concerns all banks and our entire banking system.”