The giant Spanish bank's patriarch is in the dock as the pricey acquisition of Abbey National plays out.
On a Tuesday morning in February the waiting room of the National Court in central Madrid was packed. Judges jostled with clerks, lawyers and security guards in the too-small courthouse. Against one wall stood Emilio Botín, one of Spain's wealthiest and most powerful men, his hands bound, awaiting the start of a trial that could land him with a six-year jail sentence.

Botín, age 70, is the head of Banco Santander Central Hispano, an $18.7 billion bank (net operating revenue) that has 10,000 branches mainly in Spain, Portugal, the U.K. and Latin America. The billionaire has now fulfilled his lifelong ambition: to transform a small regional bank once run by his grandfather into an international player. Already the largest bank in Latin America by assets, it made a series of large acquisitions over the last six years, culminating in the $15 billion purchase of Britain's Abbey National in 2004, a deal that thrust Botín's company into the global spotlight and its position as the ninth-largest banking institution by market capitalization (see table, where sales are before interest expense).

Yet the rapid expansion took its toll. Like nearly all foreign investments in Latin America, Santander's holdings there crashed with the currency crisis of 2002. Closer to home, prosecutors say Botín defrauded shareholders with massive $200 million retirement payments to two executives of Banco Central Hispano during a 1999 merger with Santander. Under a quirk of Spanish law shareholders may bring criminal charges, and the aggrieved in this case claim the severance packages were actually a payoff to induce executives to relinquish control to Botín.

Botín has denied the allegations from the beginning, arguing he acted fully within the bounds of the law and with the approval of Santander's board. He claims the payments were merely retirement packages that were part of the executives' contracts. His supporters say the charges are the result of a longtime grudge, noting the two shareholders who brought this case have filed some 28 others against Botín in the last decade. Eight have been dismissed; the rest are pending.

Banking analysts also expect the case to come to nothing; Santander's share price has been holding steady at $12. Yet for Botín--quick decision maker, 6 a.m. golfer, former African elephant hunter and holder of Sunday management meetings--the trial casts an unwelcome spotlight. Famously publicity shy, Botín, one apocryphal story has it, used to pay off newspapers not to publish his picture. He barely spoke throughout the trial and refused to answer questions from the shareholders' lawyer. Through a spokesman he declined to speak for this story as well. "I think that what he resents the most about these trials is that he's been forced to be a public personality," says a Madrid financier who once worked for Botín.

By all accounts, building the Santander empire has been Botín's raison d'être. Founded in 1857, it has been controlled by the Botín family since the early 1900s. When Emilio Botín took over from his father in 1986, it was still just the sixth-largest bank in Spain, measured by assets. But Santander's fortunes improved with the Spanish economy, and in the last decade the stock price jumped 400% to a high of $15, fueled largely by a customer-friendly retail banking strategy and a series of domestic acquisitions.

In 1994 Santander paid $2 billion to buy a 60% stake in Banesto, a well-known retail bank that had been taken over by the Bank of Spain a year earlier, after nearly collapsing. Five years later Santander merged with Banco Central Hispano in an exchange of shares valued at $11.3 billion. The group also invested heavily in Latin America and Italy and even snapped up (and later sold) stakes in the Royal Bank of Scotland and the American bank First Union, now known as Wachovia. Finally, in 2004, Santander announced its boldest bid yet: to buy Britain's Abbey National. Markets reacted poorly to news of the acquisition; shares tumbled 8%. Yet Botín saw a bargain. Years earlier Lloyds TSB had offered a whopping $26 billion for Abbey, and he thought he could pay less, cut costs and import new customer service practices.

As far as Santander was concerned, Abbey was behind the times. It enlisted outside consultants to sell its products, and the average customer had only 1.5 banking products, according to Alvaro Garcia, an Ibersecurities banking analyst in Madrid. By contrast, Santander sales are done in-house, and when a client comes in for a loan, the banker can pull up the entire range of business. Result: The average customer has five Santander products. "Their people are highly focused on what they are selling," says Deutsche Bank banking analyst Carlos Berastain. "They are able to sell very interesting products, simple things that make the life of the client much easier."

Further expansion could lie ahead: In February the bank announced the "best results in the history" of the company. Earnings jumped 20% to a record $4 billion. And 6,400 employees will soon move into the bank's $730 million headquarters, Santander Group City. Envisioned by Botín in 1997 and now "nearly operational," the 370-acre campus outside Madrid consists of nine glass-and-steel buildings, a 61,000-square-foot employee-training complex and hotel, an 18-hole golf course and its own transportation system.

Yet still more clouds may be on the horizon. The healthy 2004 profits do not include Abbey, which lost money in 2003 and isn't yet fully integrated into the company. And Botín faces another criminal trial, scheduled for later this year, for allegedly submitting falsified information regarding tax shelters. Again, Santander officials say Botín did nothing wrong. Meantime the Madrid banking community is wondering who will succeed Botín. Keeping the company in the family is a tradition, and the smart money, so far, is on Ana Patricia, Botín's 44-year-old daughter and the boss at Santander subsidiary Banesto. Bank officials maintain succession is still an open question. But at least for the moment Botín appears to have no plans to relinquish control. Three years ago the 70-year-old eliminated Santander's mandatory retirement age.

Correction: In "Santander's Trials" (Mar. 14), about Emilio Botin, the head of Banco Santander Central Hispano, we stated incorrectly that Botin's hands were bound as he awaited court proceedings in a shareholder action. His hands were not bound. The article should also have noted that Abbey National Bank significantly improved results in 2004 and that 6,400 employees had moved into Banco Santander's new headquarters by December.