* Head of Espirito Santo family named as suspect in probe
* Investigation into alleged fraud, money-laundering
* Family problems mount as holdings seek creditor protection (Recasts with investigating judge statement, comments, updates share price)
By Andrei Khalip
LISBON, July 24 An investigating judge has named Ricardo Salgado, head of Portugal's Espirito Santo banking family and former chief of Banco Espirito Santo (BES), as a suspect in a long-running money-laundering and tax evasion investigation.
Portugal's prosecutor general's office said on Thursday it was investigating Salgado for alleged fraud, money-laundering and falsification of documents.
Salgado was released on bail of 3 million euros ($4 million)after being detained and questioned, it said in a statement.
Salgado's lawyer Francisco Proenca told reporters his client would continue to collaborate with authorities and "justice will prevail". Salgado has not been charged.
The detention of Salgado comes as the Espirito Santo family is separately trying to save its business empire from financial collapse following the disclosure of accounting irregularities at one of its companies.
Judicial and market authorities in Portugal, Luxembourg and Panama are examining the family holdings. There is no suggestion that the money-laundering investigation is related to the family's recent financial problems.
Salgado, 70, was brought before a judge at Lisbon's Central Criminal Custody Court at around 0930 GMT and stayed for several hours, a court official said.
Salgado had previously been classified by prosecutors as a witness in the three-year-old investigation.
Under Portuguese law the status of "arguido", or formal suspect, differs from the suspect status in other legal systems as it gives the person certain legal advantages in being questioned and does not per se involve a formal accusation.
Separately on Thursday, Carlos Tavares, head of Portugal's CMVM securities markets watchdog, said the regulator had examined Espirito Santo companies various times over the past six years and had alerted prosecutors about possible illegal activity.
There were "signs of abuse of insider information and possible crime of confidence abuse," Tavares said before a parliamentary committee.
Portugal's prosecutor general's office did not comment on Tavares' remarks. It said last week that there were several investigations underway into the situation around the Espirito Santo empire.
The Espirito Santo family has been under regulator and market scrutiny since a central bank-ordered audit earlier this year discovered irregularities at ESI, a Luxembourg-registered family holding company. ESI and its subholdings Rioforte and ESFG filed for creditor protection in the past week.
The money-laundering investigation, codenamed Monte Branco by prosecutors, possibly in a reference to the Swiss mountain Mont Blanc, has so far focused on the activities of Swiss-based asset manager Akoya, which worked with Portuguese customers via a local intermediary with links to local banks.
Akoya was run by two former managers of Swiss bank UBS, one of them Portuguese. A former chief executive of Banco Espirito Santo's Angolan unit, or BESA, was a shareholder in Akoya.
The investigation, which began in 2011, has resulted in brief detentions and interrogations of various individuals. No one has been charged.
BES shares, which have rebounded from near record lows in the past two days after two major investors bought into the bank, pared their morning gains of up to 10 percent to close 1.9 percent higher. Traders now say they see the bank as mostly isolated from the family problems.
The Espirito Santo family lost control of BES after a billion euros share issue last month. An independent management team took over the country's largest listed bank by assets weeks later, though the family remains the largest single shareholder.
Ricardo Costa, director of Expresso weekly, said Salgado's detention on Thursday was indicative of the family's declining influence. "The idea that one gets from this is that the Portuguese justice system acts fast when people cease being powerful," Costa said in a television interview.
($1 = 0.7426 Euros) (Editing by Alessandra Galloni and Mark Potter)