Bankruptcy, Missing Client Money, and a file for Tax Amnesty

Grete Chan, 3 December 2012

Misappropriation and Concealment of Assets: Gerardo Diaz Ferrán Photo Credit: euronews.es

Misappropriation and Concealment of Assets: Gerardo Diaz Ferrán
Photo Credit: euronews.es

On the series of Fraud in the Mediterranean, the crackdown of white collar crime intensified as Gerardo Díaz Ferrán, ex-president of the Spanish Confederation of Employers’ Organizations (CEOE) and founder of Marsans, a travel company, was arrested this morning along with 8 others on charges of money laundering and concealment of assets.

An arrest order was issued by the Central Court and was carried out by the National Police Brigade on Money Laundering Corporations. The arrests included Ángel de Cabo, alleged liquidator of Ferrán’s travel company, Marsans, along with Iván M.L.C, Susana M.C., Teodoro G.O., Rafael T.A., Carmelo José E. G., Antonio G.E., y José Enrique P. M.

Ferrán’s arrest was realized after he applied for “Tax Amnesty” which was recently approved under Royal Decree to allow tax evaders to come forward and repatriate undeclared taxable assets and income at a 10% levy without facing criminal charges and administrative action. Unfortunately for Ferrán, concealment of assets and fraud are not protected by this amnesty and are subject to provisions under the Spanish Penal Code.

Protesters who were mainly ex-employees of the bankrupt Marsans Travel Group. The sign reads: Marsans Diaz-Pascual; They should personally pay their salaries. Photo Credit: El Pais/EFE

Protesters who were mainly ex-employees of the bankrupt Marsans Travel Group. The sign reads: Marsans Diaz-Pascual; They should personally pay their salaries. Photo Credit: El Pais/EFE

Misappropriating Funds and Fraudulent Bankruptcy

It was alleged that Ferrán misappropriated funds from an Irish domiciled office of Marsans between 2007-2009, transferring up to 4.9 million euros to a Swiss bank account under the name of Ángel de Cabo, who is a Valencian businessman. The very same businessman bought out Ferrán’s travel company, Marsans, at a later date at a bargain price.

Marsans filed for bankruptcy in the summer of 2010, affecting 4,700 customers whilst accumulated a debt of 417 million euros. As Ferrán claimed that he could not pay this debt, he also filed for individual bankruptcy to discharge this obligation.

When the current president of Spain, Mariano Rajoy, approved the Tax Amnesty scheme, Ferrán thought it was a good idea to come clean, holding onto the provisions that provides amnesty against criminal charges and administrative action. What his accountant didn’t tell him was that the authorities retained the right to investigate the source of the assets, and as in Ferrán’s case, they were fraudulently acquired and illegally concealed and liable under provisions of the Spanish Penal Code, particularly Article 252 on Misappropriation. The misappropriated funds allegedly include payments by clients in return for travel tickets, which they never received.

The court will proceed shortly on this case.

https://i2.wp.com/www.banking-consulting.es/index_clip_image002_0001.jpgSpanish Anti-Money Laundering Task forces

A note on the operations within Spain on Anti-Money laundering – while all is well to see the pro-activity of the national police department in capturing fraudsters and money launderers and keeping an up-to-date site on their operations, the lesser known Spanish Commission on Anti-Money Laundering and Monetary Violations (SEPBLAC) seem to have disappeared off the grid. It was shocking to see that their last Annual Reports were published in 2008, and only 15 entities were audited in 2011 under their supervisory activity. Their guidelines and educational material on capital market risks are clearly in need of an update, with the last English version issued in 2004. It seems that the only thing up to date on their website are the latest legislation, that is easily linked to the published law.

For a supervisory body that receives obligatory communication from 321 financial entities and intermediaries seeing a 44% decrease in the number of entities audited in 2011 (15) from 2010 (27), is a dismal regardless of any excuse. Furthermore, the lack of engagement with the public – no transparent publications, public releases, etc., and no known investigation clearly shows that this supervisory body is as good as non-existence. Understandably it was initially created to cater for the global requirement of anti-terrorism task forces and the European Money Laundering Directive, but seeing the poor activity stream, I cannot help but question its existence.

With the Third Money Laundering Directive around the corner, there is a great need of a stronger Supervisory presence and a more streamlined approach. While the Spanish police are doing a great job in the crackdown, where are the corporate supervisors and the cooperation between authorities?

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3 responses to “Bankruptcy, Missing Client Money, and a file for Tax Amnesty

  1. Pingback: Swiss accounts, ill-gotten gains, tax evasion declared – it’s all brewing in the Mediterranean | Inside Reg·

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