In a significant development in the Spanish banking sector, the National Court has acquitted the former top executives of Banco de Valencia, concluding that there was insufficient evidence to prove the allegations of falsifying financial statements.

This decision comes nearly twelve years after the bank came under scrutiny in 2011, when the Bank of Spain detected a financial shortfall of approximately 600 million euros, leading to the intervention of the bank.

The case involved key figures, including former president José Luis Olivas and former CEO Domingo Parra, along with ten other executives from the bank’s board.

Presiding over the case, Judge José Manuel Fernández Prieto González delivered an 85-page ruling, asserting the difficulty in establishing intent or 'dolo' among the accused to falsify the bank's accounts during the financial years of 2009 and 2010. He noted the continuous oversight by the Bank of Spain since 2008, implying that any inaccurate financial reporting would likely have been detected by the regulators closely monitoring the bank’s operations.

The investigation stemmed from suspicions that the bank’s executives had manipulated its financial accounts to obscure the true state of its financial health.

The Anti-Corruption Prosecutor’s Office had initially sought prison sentences of three years and nine months for Olivas and Parra.

However, this was later reduced to two years and six months for Olivas and two years and a day for Parra, after Parra's involvement in separate charges of disloyal management in loans.

The prosecution also sought increased penalties for the bank’s auditor while retracting charges against other board members.

In detailing the reasons for acquittal, the court pointed out that the charges against the executives centered on alleged manipulations not specified in the previous procedural orders.

These accusations were primarily based on the provisioning deficits identified by the Bank of Spain during those years, without clear substantiation of deliberate falsification of accounts.

The court's judgment also critiqued the prosecution’s approach, which was described as vague, causing a sense of 'indefensibility' for the accused.

This uncertainty compelled the defense to 'search and delve into the case to uncover specific accounting entries deemed false.', The ruling emphasized the unsupported reliance on internal reports from the Bank of Spain to substantiate the financial allegations against the executives.

This acquittal highlights ongoing challenges in holding banking executives accountable for financial misreporting, a theme seen globally following the financial crises of the late 2000s.

The case also underscores the crucial role of precise legal framework and due diligence in such high-stake financial litigations.

As financial institutions across the globe face increased regulatory scrutiny, this ruling reinforces the importance of clear evidence in legal proceedings against corporate executives.