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Argentine police have raided the Buenos Aires offices of an oil and gas company that is a client of Bank of Nova Scotia's Argentine subsidiary, as part of their investigation into fraud allegations against a number of financial institutions.

The Thursday night raid on Pecom Energia SA - part of a series of similar raids on banks and companies over the past week - was ordered by Judge Mariano Berges in the court's investigation of details of money lent by Scotiabank Quilmes SA in 2001, court spokesman Andres Traversa said yesterday.

He is the same judge who barred executives from Scotiabank and four other banks from leaving the country, in order to give the court time to investigate accusations from angry depositors that the financial institutions have defrauded them.

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Five Scotiabank executives are subject to the travel ban, but one of them, Bill Sutton, was in Toronto at the time of the court order.

Another was given permission yesterday to leave the country for a few days as long as he posted a bond of 10 million pesos (about $5-million U.S.), Mr. Traversa said.

The second executive is an outside director of the bank who works for another major international firm, and needed to go to Europe for a three-day business trip, confirmed Scotiabank spokeswoman Diane Flanagan in Toronto. She said Scotiabank made arrangements through the court to "establish a letter of credit."

The president of Citibank's Argentine operations was also given permission to leave the country on Thursday on the condition he deposited a bond of 20 million pesos.

Italy's Banco Sudameris, U.S.-based BankBoston and Argentina's Banco Galicia are also covered by the travel ban on executives.

The ban does not mean that the executives are being directly investigated or that there are any accusations of fraud levelled against them personally, Argentine officials say.

Scotiabank did not want to comment directly on the raid, saying it was confined by customer confidentiality. But Ms. Flanagan did say: "We are in full co-operation with the Argentine authorities and in full compliance with the law."

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International law experts say they doubt Argentina should be able to get away with trapping executives in the country without laying specific charges; however, the Canadian government has not taken any action to counter the court order.

"I think this is just another consequence of the chaotic existence in Argentina," commented Annette Hester, director of Latin American research at the University of Calgary.

Argentine police also raided Spanish-owned Banco Rio this week, officials said yesterday.

Middle- and upper-class Argentines have been furious for much of the past two months after the government froze bank deposits in December. While the government has tried to relax parts of the banking restrictions, the frequent changes in rules have led to confusion, for the public and for the banks.

Protests have raged in the streets for weeks with many demonstrators targeting banks, breaking their windows and trashing automated banking machines. Yesterday, the Argentine Bankers Association took out full-page ads in daily newspapers to beg protesters to stop attacking bank staff.

Thousands of people have lined up to start court cases against the banks for holding back on their deposits. The banking restrictions resulted after Argentina launched the largest debt default in history. The curbs were imposed to prevent a run on the banks.

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The travel ban on Scotiabank executives is only related to accusations by depositors of fraud, and not related to another court case investigating capital flight, Mr. Traversa said yesterday.

Meanwhile, former president Carlos Menem, who still carries significant political weight, has urged the government to force all international banks to return the frozen savings accounts to the depositors - a measure that would cause massive losses for the banks.

Yesterday, Argentina's largest private bank, Banco Galicia, asked the central bank for a bailout, heightening fears that the banking sector was on the brink of collapse.

However, a bailout looked unlikely, since the government is almost bankrupt after defaulting on its $141-billion (U.S.).

"This is an issue that goes beyond a strictly financial and banking realm, but it is not in our spirit to take on private banks. We want private banks to strengthen themselves," said economy minister Jorge Remes Lenicov.



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