Not a day had elapsed since elections to the board of directors at the Sociedad General de Autores y Editores (SGAE), Spain's largest copyright collection society, when civil guard officers suddenly raided its headquarters at Palacio de Longoria, in downtown Madrid. Workers were quickly sent out of the landmark modernist building, following orders from High Court judge Pablo Ruz. The agents were looking for evidence of a large-scale corruption scheme allegedly involving four of SGAE's executives, including the long-serving chairman of the board, Eduardo "Teddy" Bautista, who was about to confirm his leadership of an organization that is as powerful as it is controversial.
They and five other people were arrested on Friday and charged with embezzlement, fraud and gross misadministration over a racket that allegedly diverted large sums (possibly in the order of millions of euros) from SGAE to private firms controlled by executives from the collection agency. The fraud, which is being investigated by the Anticorruption Attorney's Office, allegedly went on between 2003 and 2007. These firms appear to have received 26.4 million eurosfrom SGAE's digital unit between 2003 and 2009. Investigators who looked at the services the companies provided said "it is difficult to claim" that this amount corresponded to market prices.
The racket allegedly diverted millions to firms controlled by SGAE executives
Microgénesis may have sent invoices that charged for non-existent services
The raid involved searches at 16 other premises as well as the suspects' homes
Besides Bautista, whom investigators believe must have been aware of what was going on, police arrested director general Enrique Loras and financial director Ricardo Azcoaga. But the main suspect in the case is José Luis Rodríguez Neri, a former board member and the current director of the Sociedad Digital de Autores y Editores (SDAE), a unit of SGAE created in 2000 to protect intellectual property rights on the internet and in digital media. This unit contracted most of its work out to a private consulting and IT firm called Microgénesis, which was alternately run or controlled by Neri, his wife, his sister-in-law and various other business partners.
Microgénesis developed some of SGAE's main digital projects, such as the Teseo system, which designs computer applications for the defense of intellectual property rights on the internet; it also created Portal Latino, a website devised to disseminate Spanish-speaking culture and provide online services to authors. The company allegedly sent SDAE invoices that overcharged for its services and possibly even charged for non-existent ones.
Judge Ruz is also looking into a second set of companies that worked with Microgénesis and were equally linked to the suspects. Ruz referred to these companies as a "parasitic business network."
The role played by Teddy Bautista, a former musician-turned-copyright manager, seems secondary in principle, according to investigators. Yet Rodríguez Neri was one of his most trusted aides, and Bautista personally appointed him to lead SGAE's digital unit. Sources familiar with the investigation said that, considering how Bautista personally oversaw most aspects of the organization's operations, it is difficult to believe that he was unaware of Neri's activities, and probably tolerated them or, in the words used by Judge Ruz, "authorized, tolerated and also fomented" the fraud.
The investigation was triggered by an accusation filed in 2007 with the Anticorruption Attorney's Office by several restaurant, internet and computer business associations who considered themselves victims of the "digital canon," a controversial tax levied pre-emptively by SGAE on gadgets able to store copyrighted digital material, regardless of what their eventual use would be. Recently, SGAE lost a court case against a computer store owner who refused to pay thousands of euros to SGAE for selling this kind of technology.
In 2010, then-High Court Judge Baltasar Garzón began proceedings in a case that was eventually shelved (Garzón himself was suspended from his duties over unrelated cases in May 2010) and reopened last Thursday, when the Civil Guard asked Judge Ruz for permission to carry out the raid.
The suspects involved in Microgénesis, besides Neri himself, are his wife María Antonia García Pombo, former president of the company; his sister-in-law Eva García Pombo, former CEO; Rafael Ramos, the manager, and an employee named Celedonio Marín. Eva García Pombo and Rafael Ramos also held positions of responsibility at SDAE. A woman named Elena Vázquez, who held most of the shares in Microgénesis, was also arrested.
Around 50 Civil Guard officers took part in a raid that was dubbed Operation Saga and also involved searches at 16 other business premises as well as the suspects' homes. The operation took place just hours after SGAE announced the winners of the elections to the board of directors: the team backed by Teddy Bautista. It would have meant four more years of rule for him and his followers and supporters. The opposition obtained 43 percent of the votes, yet failed to get a single seat on the board.
Now, with Bautista and several other SGAE chiefs under arrest, the people left behind are scrambling to put together a new team to run, at least temporarily, a giant operation that collected 365 million euros last year alone on behalf of its 100,000 members - and now, it seems, on behalf of some executives as well.