A (not so) brief ‘criminal’ history of the ECB

Malta’s central bank chief Edward Scicluna will be formally charged with fraud and misappropriation in court this week, joining an illustrious group of European Central Bank policymakers who have faced criminal charges, convictions or even jail time. 

Most such brushes with the law relate to periods when policymakers either operated as bank supervisors or served as finance ministers. By contrast, none of them appear to have resulted from the conduct of monetary policy, the ECB’s original core mission.

In Scicluna’s case, the charges relate to his alleged knowledge, while finance minister, of various schemes around a hospital privatization plan pushed by government colleagues. Scicluna is set to file a formal plea on Wednesday, having thus far neither admitted any wrongdoing nor indicated any readiness to resign from his current post.

Here’s a run-through of the most notable affairs.

The champagne socialist — Welteke:  The first ECB policymaker to fall foul of the law did so in almost laughably venal style, a far cry from the politically-tinged affairs that have become more prevalent in recent years.

When the first euro banknotes started circulating on New Year’s eve 2001, Europe’s financial elite celebrated the introduction of the new money in style at Berlin’s famous Adlon Hotel, at a party hosted by Dresdner Bank. Among the champagne-sipping guests at the Brandenburg Gate was Bundesbank President Ernst Welteke. 

It later transpired that the Social Democrat not only accepted the bank’s party invitation but indulged in a four-night stay at the hotel’s 80 square meter Pariser Platz suite, including a separate room for his son and son’s girlfriend. Welteke’s party ran up a bill of €7,700. 

When that bill was leaked in 2004, Welteke was forced to step down. A corruption probe ended with him having to pay a fine of €25,000, although he avoided a criminal record. Despite the lack of a conviction, Welteke’s career never recovered. 

Leniency for Lagarde:  President Christine Lagarde’s career, by contrast, has never left the fast lane — even after a special French court in 2016 found her guilty of negligence for a decision while serving as finance minister in 2008.

Lagarde had chosen not to contest a government arbitration panel ruling to pay €404 million in compensation to French tycoon Bernard Tapie, over a dispute with state-owned Crédit Lyonnais. Tapie had accused the bank of defrauding him when it bought his controlling stake in Adidas in the early 1990s.

Lagarde, who was serving as IMF managing director at the time, escaped a hefty fine, a one-year prison stint and a criminal record, after the court showed her clemency due to her “personality and national and international reputation.”

A 2015 ruling ordered Tapie to repay the €404 million, and appeals by Tapie to overturn that ruling failed. However, efforts to prove that the arbitration panel’s decision in 2008 had been corrupted also failed, when Tapie was formally acquitted of fraud in 2019.

Tapie and the French state were still battling over the case when the tycoon died in 2021. By then, the former finance minister had installed herself at the helm of the ECB in Frankfurt. 

Trichet to the top:  The same institution, Crédit Lyonnais, had previously landed former ECB President Jean-Claude Trichet in trouble too. Trichet was accused by French prosecutors of falsifying the bank’s financial reports when he was director-general of the French Treasury, or Trésor, back in the 1990s.

Trichet’s job was to oversee the finances of all state enterprises and he was accused of manipulating accounts to mask problems at the bank when it came close to collapse. Prosecutors sought a 10-month jail term, but Trichet was eventually acquitted in time to take up his duties as the ECB’s second president in 2004.

No offense Ordoñez:  In 2017, Spain’s top court charged former Bank of Spain Governor Miguel Angel Fernández Ordoñez for failing to stop Spanish lender Bankia from being listed on the stock exchange “despite repeated warnings from the inspection team of the Bank of Spain about the non-viability of the group.” Bankia had been created in one of the messiest and most politicized bank rescues in Europe after the 2008 crisis. The merger was blessed by both of the country’s biggest political parties, and was led by another former IMF boss, Rodrigo Rato. Rato was subsequently jailed, but Ordoñez was cleared of any wrongdoing.

Four for Fazio: Neither a winning personality nor a good reputation have been enough to spare other central bankers from ending up behind bars.

In 2011, former Italian central bank chief Antonio Fazio, a devout Catholic, was sentenced to four years in jail — later reduced to two and a half on appeal — for market rigging. The case pertained to Fazio using his influence to favor an Italian bank over Dutch-based ABN AMRO in the takeover battle for Banca Antonveneta, a regional lender.

The nearly man: Another central banker to serve jail time was Cyprus’ Christodoulos Christodoulou. While he never sat on the ECB’s Governing Council, his story is seminal to the crisis that unfolded in Cyprus in 2012-2013, when the ECB had to oversee a multi-billion euro bailout for the island.

Christodoulou was sentenced in 2014 to five months in jail after pleading guilty to five counts of tax evasion in 2007, just after he left the central bank. Specifically, he failed to declare a €1 million transfer to a consultancy from a Greek-based group linked to the late financier Andreas Vgenopoulos, who gained notoriety for running Cyprus’ second-largest bank Laiki into the ground.

Prosecutors spent years trying to build a case that showed what that money had been meant for. They alleged that it constituted a slush fund for paying officials and politicians in Cyprus to turn a blind eye to irregularities in Vgenopoulos’ acquisition of Laiki in 2006. Laiki subsequently ran wild, channeling billions of euros in largely Russian deposits into various dubious Greek assets (including Greek sovereign bonds). However, a Nicosia court dismissed the charges against Christoudoulou in 2020, ruling that they amounted to double jeopardy. Christodoulou has always denied ever taking any bribe.

Racketeering Rimšēvičs: Currently fighting to get his prison sentence overruled, former Latvian central bank chief Ilmārs Rimšēvičs was found guilty last December of accepting bribes and a fishing trip to Russia, from shareholders of a now-defunct bank. Rimšēvičs, who has protested his innocence throughout, was sentenced to six years in jail and the confiscation of assets. The ECB initially weighed in heavily on Rimšēvičs’ side, defending one of its own in the name of protecting the central bank from political interference. But after scoring an initial victory, it was defeated in 2021 when the European Court of Justice found that his actions were “manifestly not committed in his official capacity” and thus not covered by institutional immunity.

Rimšēvičs was not immediately jailed, but rather walked free (somewhat despondently) pending his appeal. In addition to his appeal, he is now also battling two separate criminal charges, for pressing a witness to give false testimony and for the alleged purchase and use of a Covid-19 vaccination certificate. Rimšēvičs denies any wrongdoing.  He has claimed to be the victim of a concerted campaign by several banks to have him removed because he was pushing for more transparency in Latvia’s outsized non-resident banking sector, which was once a conduit for large-scale money-laundering across the former Soviet Union.

Kažimír’s call to court:  In 2023, a criminal court judge ruled that Slovakia’s central bank chief, Peter Kažimír, had offered bribes during his time as finance minister, handing down a two-year suspended sentence and a €100,000 fine. The ruling was issued without a trial. Both the state prosecution service and Kažimír appealed against the ruling, calling for a full trial. This is currently underway with the outcome still pending. Kažimír was finance minister from 2012 to 2019 under Robert Fico’s second premiership. His nomination was criticized by the opposition as an attempt to expand government control over the central bank. Slovakia’s politics have become increasingly polarized in recent years, as an assassination attempt against Fico earlier this month illustrated.

All that Jazbec: In 2013, former Slovenian central bank chief Boštjan Jazbec found himself under investigation for possible “criminal abuse of office” after his overhaul of Nova Ljubljanska banka (NLB) — one of the country’s largest — ended up wiping out its shareholders and many of its creditors, some of whom were very well politically connected. NLB had previously been suspected of laundering money for Iran, among other lax practices.

An initial investigation into the central bank’s actions in 2013 had run into the sand: Slovenian police overstepped the mark when raiding Jazbec’s offices in 201`6, confiscating documents that contained privileged ECB information. ECB archives enjoy the same protection as those of any EU institution, a court ruled in 2020. As such, the Slovenian prosecutors lost the evidence they needed to press their case.

By that time, Jazbec — who received death threats after the recapitalization of NLB and another institution — had left the bank. In 2018, he moved to the EU’s Luxembourg-based Single Resolution Board, an implicit vote of confidence from the EU institutions in the face of personal danger. He left the SRB in 2023.

However, the NLB issue refuses to die. National media reported at the end of last year that prosecutors have revived the charges of abuse of office against him and his former colleagues. Contacted by POLITICO, prosecutors only confirmed that “investigative measures pertaining to five people for the offence of abuse of official position are under way.”

Fast forward to Valletta: Scicluna’s charges relate to a 2015 deal between the Maltese government and Vitals Global Healthcare regulating the privatization of three state hospitals, at a time when Scicluna was finance minister.  The deal has become the focus of a corruption scandal that has since prompted deputy prime minister and EU Commission candidate Chris Fearne to resign.

Scicluna testified in a related court case in 2020 that he had not known about the details of negotiations between then-Health Minister Konrad Mizzi and VGH. He also emerged unscathed from an investigation into the deal by Malta’s National Audit Office last May.

CORRECTION: This article has been updated to reflect that Peter Kažimír was ruled to have offered bribes, not accepted them.