Corporate Governance

Santander?s Offer to Madoff Clients Questioned

By Fei-Lu Qian

Yesterday, we discussed Banco Santander?s offer to compensate its private banking clients for money lost in Madoff?s $50 billion Ponzi scheme. Taking a closer look at the offer, the Wall Street Journal reports in an article entitled ?Santander?s Clients React Coolly to Offer,? that many clients are not impressed with it. Well for one thing, the offer applies only to individuals, not institutional investors. Also, the amount ?repaid only the original principal, not the supposed gains earned over years invested in Santander?s funds.? More importantly, the compensation comes in the form of Santander preferred shares where customers may not be able to trade on an open market and with the possibility that Santander might not buy back the shares in the future. In an article by Bloomberg News, it highlights that ?Santander?s own offer document states in its section describing risks that there is no market for the shares at the moment and no guarantee one will develop.? Santander?s offering document states that the ?liquidity of the preferred shares could be limited by the absence of an active trading market.?

The Wall Street Journal noted that in return, ?clients must sign away their right to sue Santander and pledge to keep all their current business and deposits at the bank.?

Full post as published by PomTalk on January 29, 2009 (boomark / email).