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SANTIAGO (Reuters) - The son of Chilean President Michelle Bachelet resigned as head of her charitable foundation on Friday and asked for forgiveness for a bank-loan scandal that has tarnished the government's image, though he denied doing anything illegal.
Sebastian Davalos and his wife Natalia Compagnon are accused of using their political connections to get privileged access to a bank loan worth around $10 million to buy land on behalf of a company that Compagnon half owns.
"I'm aware of the discontent this situation has generated and I assume that (this) has damaged the presidency and Chile's government," said Davalos from the Moneda presidential palace.
"For this reason I've decided to step aside and resign."
Bachelet's daughter-in-law clinched the loan during the 2013 election campaign after meeting with Banco de Chile vice-president Andronico Luksic, one of Chile's wealthiest men and a member of the family that controls the bank. Davalos was also present at the meeting.
Compagnon's company sold the land in question earlier this week at a profit of about 2.5 billion pesos ($4.04 million), according to estimates by local newspaper La Tercera.
Chile's bank regulator said there did not appear to be anything illegal about the loan, but the claims of influence peddling have caused waves in Chile.
The opposition coalition has pounced on the accusations to turn attention away from a probe into its campaign-financing, accusing Compagnon and Davalos of taking advantage of their family's position to make a quick profit.
Even members of Bachelet's center-left coalition called for Davalos to resign.
The scandal, which has been dubbed locally as 'nueragate', or daughter-in-law gate, could hurt the popularity of Bachelet, who already has her hands full pushing through an ambitious and at times controversial reform agenda against the backdrop of a slowing economy.
The president, who is on vacation during the parliamentary summer recess, has not commented.
($1 = 618.4000 pesos)
Reporting by Anthony Esposito; editing by Andrew Hay