Corruption is Drowning Spain
I started writing Deadly Secrets, which involves urban planning based corruption in southern Spain, in early 2006. Soon after the Marbella Malaya case broke and since then there have been a plethora of corruption cases across all of Spain.
My article on corruption in Spain which was published in October 2009 (see synopsis below) explains why I think corruption is rife in Spain and that Spain is still politically and socio-economically immature versus the other democratic G8 countries which it aspires to be a part of.
On 1 November 2009, ABC, Spain's leading centre newspaper, published a comprehensive report on corruption throughout Spain with the front page headline "Corruption is Drowning Spain" (http://www.abcdesevilla.es/20091101/nacional-politica/corrupcion-ahoga-espana-200911010755.html) The ABC articles and editorial comment confirmed that the majority of corruption is based around urban planning, especially the re-classification of rustic land to urban land (the main theme of Deadly Secrets), and the granting of favourable contracts to services companies owned and operated by “friends” of the political party in power. It stressed that corruption was endemic across all political parties and that it was greed and power which drove it rather than any particular political ideology. It also confirmed that lack of accountability and transparency, poor planning regulations and failures in the judicial system are compounding, if not encouraging, large scale corruption.
So what does it all mean? Well, in the words of ABC “We either stop this bleeding away of what prestige is left of our model or we bleed dry as a democracy, at the same time as we disappear down the foul smelling sewage pipe of corruption.”
Harsh? I don’t think so. Now, let’s be fair, we have corruption all over the world, but it is the scale of corruption in Spain – the European Union's 4th largest economy, and the fact it is so engrained throughout the system which makes it different. Bribes can range from 100,000 euros for an “introduction” to the mayor or urban planning officer to ten million euros for the reclassification of land (not including the gain made once reclassification has been granted).
For those of you interested my article on what shapes Spanish character and culture may help to put some of this into perspective at:http://www.eyeonspain.com/spain-magazine/spaniards.aspx.
Other Spanish press articles about corruption in Spain include:
El Mundo 2 March 2011: 5 arrested in Puerto Santa Maria in urban corruption investigation. Arrests are related to Operation Tequila and those arrested included Fernando Jiménez Fornell, ex head of planning licenses and Juan Carlos Rodrígue ex urban planning counselor. The National Police serached offices of the Planning Department of the Town Hall and the Judge placed reporting restrictions on the case. Sources claim the arrests are related to Operation Tequila in which 11 people, including the ex-mayoress of El Puerto de Santa, María, Hernán Díaz (IP), were arrested last year for suspicion of being involved in real estate speculation.
El Mundo 10 December 2010: Los españoles perciben ahora más corrupción y señalan a los partidos políticos (Spaniards see more corruption and point the finger at the political parties). From Transparency International survey
El Pais 22 February 2011: PSOE y PP evitan excluir de sus listas a todos los imputados por corrupción (Partido Popular (PP) and PSOE (Socialist Party) manage to avoid excluding candidates indicted for corruption from ballot lists)
ABC 15 February 2011: Blanco ofrece cobertura a los candidatos imputados del PSPV (Blanco offers "cover" for implicated PSPV candidates)
Publico.es 22 February 2011:Rajoy entierra su código ético y abraza al imputado Camps (Rajoy buries his ethics and embraces the implicated PP candidate for Valencia, Francisco Camps)
Examples of urban corruption and planning scandals follow the next article.
Corruption and Urban Planning in Spain (synopsis of article written for The Olive Press in 2009)
Consider the following list: Chile, Slovenia, Qatar, Uruguay and Barbados. Well, incredibly, each comes above Spain when it comes to corruption according to Transparency International (TI), the German-based NGO that tracks corruption levels around the world. Much to do with slack laws and the real estate sector.
Following the publication of my novel, Deadly Secrets - a fictional story of corruption and money laundering – with the odd murder thrown in, in Andalucia, I am often asked why do I think Spain is so corrupt?
A major contributing factor is the high degree of autonomy Town Halls have over planning, which generates the majority of their income in the form of building licences.
In addition, many Town Halls are run as personal fiefdoms by the mayor or other senior officials, such as Juan Antonio Roca in Marbella who was unelected. And many of them have got into power not due to their qualifications or experience but because of who they are and who they know. With little transparency in the planning process and no sense of accountability – then clearly you have a recipe for disaster.
Throw in confusion over the competences of the local, regional and even central authorities, e.g. Valencia’s land grab law, combine it with an economy heavily reliant on tourism and construction – and it’s not so surprising corruption is rife.
Socio-economic factors are also important drivers as to why corruption occurs on such a large scale in Spain which, until relatively recently was poor and the gap between the haves and have-nots large. The advent of democracy in 1976, the affluence brought on by membership of the EU did little to change this. In fact, a booming economy, combined with a de-centralisation of power to the regional and local authorities, only made matters worse, as it also did in Russia and, to a lesser extent, Bulgaria and Rumania. Going from dictatorship to democracy and from bust to boom involved a shift from limited/controlled corruption to wide scale corruption as politicians and businessmen used their new found political and economic power to get rich quick.
Large scale property
related corruption is most commonly undertaken, as described in Deadly Secrets, by
buying rustic land cheap with the promise that it will be re-classified for
urbanisation/construction. Bribes are
paid to the relevant officials and the buyers (who may include town hall
officials or their friends or relatives) make lots of money by selling on the
land once it has been reclassified or by developing it and selling the
properties.
Related transactions may include paying cash and/or “gifts” of cars and other valuable assets to officials and their relatives to secure planning permissions, building and opening licences, municipal contracts etc.
Take two examples, in Alcaucin police found 150,000 euros in cash under the bed of the so-called Flamenco mayor, Jose Martin Alba, while in Alhaurin el Grande, police discovered that mayor JuanMartin Seron had bought nine properties in just a few years without a mortgage.
Meanwhile, in nearby Estepona it has recently emerged that most of the bribes paid in the Astapa corruption scandal were in cash, banked in Gibraltar and then transferred to Morocco were it was invested land and building projects. Brazil seems another popular place to invest those “surplus” undeclared cash payments.
The true mastermind of laundering this so-called B-money (or Caja B) was Juan Antonio Roca, the mastermind behind the massive Malaya corruption scandal in Marbella (two billion euro and counting). When finally arrested in 2007 police found 600,000 euros in cash and assets worth hundreds of millions, from office buildings and hotels throughout Spain, to residential properties, art, luxury cars, race horses and even a helicopter. It has since emerged that he used tax havens such as the Cayman Islands, Isle of Man, Lichtenstein, Virgin Island and Andorra to receive bribes and also proceeds of the sale of land and properties. The scale was enormous, for example New Routes Corp, an Andorran company linked to Roca, received a €1.15bn transfer from an unknown company in the Cayman Islands.
He also had an extensive network of Spanish SL companies which he controlled via his lawyers and “advisers”. These companies were involved in lots of inter-company transactions, loans etc. and also in the acquisition and sale of assets at below and above market values to create tax losses etc. A real maze to befuddle most accountants or tax inspectors.
In Roca’s case, when the police found 600,000 euros in the house he simply claimed that he, his wife and his daughter had one the lottery several times. Given that in Spain lottery tickets and their winners are anonymous, this seemed plausible. It truth he was in cahoots with a “friendly” bank manager (his son in-law!!) who was responsible for paying out winning lottery tickets. When a winner came to make a claim he would pay the winner B cash for the winning ticket and then pay Roca the legitimate winnings thus laundering the B cash.
So what are the Spanish authorities doing to clamp down on corruption?
The only meaningful measure that I am aware of is that since 2008 local politicians have to declare their business interests – but we all know how easy it is to get round that, in Spain and elsewhere. What, in my opinion, would make a big difference would be a fully accountable and transparent planning procedure/ process along with the clarification (and possibly re-balancing away from local authorities) of the planning powers of the local town halls and the regional governments. Of course, making Spain’s judicial process faster and more efficient would also make a big difference but that really would require a change in culture and attitude so don’t hold your breath!Robert Tenison
Examples of urban corruption and money laundering scandals in Spain over the last 5 years include:
February 2011: For
more than 2 years Colonel Gaddafi of Libya has been trying to
pressurise the Junta de Andalucia to grant permission for nearly 2,000
houses, a golf course and a conference centre in the municipality of
Benhavis, close to Marbella and where Michelle Obama stayed in the
summer of 2010.
Despite his current "troubles" it was reported on 24 February that his
representatives had in recent days re-submitted the application. Read El Mundo Article
January 2010: Carlos Farré, ex head of UDYCO (national police's organised crime unit) of Costa del Sol, along with section head Alfredo Marijuán, were arrested and charged with encubrimiento, malversación de caudales públicos y tenencia ilícita de armas. Two other officers, as well as the head of UDYCO MArbella, were also charged with similar offences.
Operation Pretoria - City of Santa Coloma de Gramenet (Barcelona). According to the judge's detention order, the main activities of this alleged corruption involved urban management, collection of commissions, kickbacks, fraud involving the Treasury, fraud in obtaining grants from the European Union.
Operation Gurtel - Valencia/Madrid bribery and corruption scandal involving urban planning, permissions etc. with leading members of Valencia's PP party implicated. Francisco Camps, the PPs preferred candidate for the forthcoming (May 2011) regional elections in Valencia, has been indicted on corruption and bribery charges but the courts in Madrid and Valencia are unable to decide who has jurisdiction.
Operation White Whale (Ballena Blanca), Marbella – allegedly the largest money laundering case in Europe with 21 people accused of investing proceeds from drug trafficking and prostitution in real estate via over 1,000 companies.
Operation Malaya, Marbella – in March 2006 UDYCO arrested 29
people, including Juan Antonio Roca, Marbella’s
Town Planning Adviser in connection with urban planning fraud. Over €2.4bn of assets, including villas, 200
works of art, jewellery, luxury cars, a helicopter and thoroughbred horses were
seized. In subsequent phases another 41
people were arrested, including the ex-Mayor of Marbella, several leading property developers
and a judge.
Juan
Antonio Roca was the mastermind behind the fraud and used tax havens such as
Cayman Islands, Isle of Man, Lichtenstein, Virgin
Island and Andorra. The scale was enormous, for example New
Routes Corp, an Andorran company linked to Roca, receive a €1.15bn transfer
from an unknown company in the Cayman Islands.
Operation Astapa, Estepona – in June 2008 the UDYCO unit of the National Police arrested the mayor of Estepona, Antonio Barrientos, and 24 other people, including local politicians, town hall officials, and real estate developers, in connection with town hall corruption. As in Marbella, allegedly developers had been paying millions of euros for building licenses and also buying land which was subsequently re-classified. Most of the bribes were paid in cash, banked in Gibraltar and then transferred to Morocco were it was invested land and building projects. The police are also investigating more than 40 jobs in the town hall and other public bodies which were given to friends and family of the accused.
Operation Biblioteca, Librilla, Murcia – November 2008, ten people,
including an official of the Regional Government, the mayor of Librilla and
various property developers were arrested by agents of the Unidad
Central Operativa (UCO) of the Guardia Civil in connection with money
laundering, bribery and planning irregularities under Librilla’s PGOU (Urban
Development Plan).
Caso Nevada, Armilla, Granada – in 2007 the police and tax authorities launched an investigation in to the circumstances surrounding the approval by the Armilla Town Hall of the construction of, Parque Nevada, a large shopping centre in Granada by Tomas Olivo. This ex-chauffer and petrol station employee has close links to Juan Antonio Roca and made his fortune building the La Canada shopping centre in Marbella (some of the land this was built in being re-classified to allow its construction). In January 2009, the judge formally charged 11 people, including Tomas Olivo, the ex-Mayor of Armilla and its planning officer, with various offences related to the case.
Avila Rojas –
in 2008, the well known Granada based developer,
Avila Rojas, was convicted of tax fraud related to the sale of land in Marbella. He was sentenced to 8 years in prison with a
fine of €10m – he is appealing! He is
also closely linked to Operation Malaya.
Operation Hidalgo, Marbella – in April 2007 the UDYCO unit of National Police arrested 19 people, including 3 notaries and 4 lawyers, involved in laundering over €250m for organised crime.
Almunecar, Granada – in May 2008, the Granada High Court annulled various agreements between the Almunecar Town Hall and land owners regarding payments of up to €3.2m by the land owners to the Town Hall relating to the as yet unapproved PGOU (Urban Development Plan). In recent years Mayor Benavides has signed around 40 such agreements with landowners, many of which have not been debated and approved by the council.
Operation Gürtel, Madrid and Valencia – in February 2009 “Super” Judge Garzon accuses 37 people, including Mayor of Boadilla del Monte, the ex-Mayor of Majahonda and the manager of Bancaja Miami, of money laundering, tax evasion and bribery relating to granting of public sector contracts and land transactions.
"Illegal! Los Merinos slammed in Transparency International report
THE huge double golf macroproject of Los Merinos has landed Ronda town hall on the annual Global Corruption Report. It was described as “a typical vote-winning election promise” to bring in more jobs, but did not have any provision of water. With the blessing of city officials, developers want to build a resort called Los Merinos that includes 800 homes, two luxury hotels and two golf courses. The dispute over the project’s legality, the area’s ability to provide water and the risk of pollution has created a tangled governance crisis.
http://www.theolivepress.es/2008/08/08/ronda-makes-the-global-corruption-list/
Orcheta Underhand Dealings Selling Land | AMLA Spain
4 Apr 2009
The company involved was Construcciones Valencia
Constitucion SL and they gave a down payment of 196,000 euros for the land , 10
% of its value when it was reclassified under the town plan . ...
documents came to light , showing that there was a plot to commit urban
development corruption in Orcheta by buying up land at low prices and
then selling it for inflated prices to developers on the understanding that the
PGOU town plan was amended and the land reclassified.
AMLA Spain - http://blog.amlaspain.com/
3 Mar 2009
The Mayor of Alcaucín, José Manuel Martín Alba (PSOE),
has been formally charged with bribery, money laundering, breach of public
duty, influence peddling and falsification as a result of operation 'Arcos'
against town-planning.
Into
Spain: Costa Blanca Forum: News, Property,... - http://www.intospain.com/
November 2007 – the Guardia Civil arrest 16 employees from Madrid Town Hall suspected of bribery and corruption relating to the granting of licences for commercial premises.