A serious approach to fraud

On the same day as the arrest of the entrepreneur and former president of the Spanish Confederation of Business Organizations (CEOE), Gerardo Díaz Ferrán, the government released an estimate of provisional data on the tax amnesty, aimed at the recovery of undeclared funds. The sum of the revenue thus brought in stands at about 1.2 billion euros, a little under half the forecast amount. Lacking anything much to boast of, the respective finance and economy ministers, Cristóbal Montoro and Luis de Guindos, highlighted that tax bases amounting to 12 billion euros had been brought to the surface and will henceforth be liable to duties.

Aside from the questionable aspects of this “legal laundering” in exchange for a very modest tax of 10 percent, it seems obvious that large amounts of money still exist beyond the reach of the Spanish Treasury. And this is unsustainable for a government that is supposed to be prioritizing the reduction of the public deficit — which is caused not only by excessive spending, but by lack of income. The consequences of tax fraud are being paid by the poorer sectors of society, in the form of severe cutbacks on social expenditure. The amnesty’s revenue results have been poor, in spite of the government’s warnings to tax consulting firms about its intention to employ a legal reform — which will soon come into effect — to neutralize the immunity that applies to bank accounts and real estate holdings discovered by the Finance Ministry in other countries.

This is why a serious line in the struggle against fraud is all the more important in a country that has lately come under increasingly intense international scrutiny.

Whether or not the arrest of Díaz Ferrán right after the end of the amnesty period is merely coincidental, it is hard to say. But moves such as this one can act as a reminder that the easy-going attitude to concealed assets and opaque accounts may be about to change. Díaz Ferrán built up an unorthodox cluster of companies to form an empire with reciprocally crossed shareholdings, where cash flow was utilized to fill holes. This was until cash ran short and the alleged asset stripping of companies such as Marsans and Air Comet began. The action for which he has been arrested stems from a lawsuit by tourist-industry businessmen who accuse him and his partners of concealment of assets, in order to escape payment of a debt of tens of millions. The investigation has so far located 4.8 million euros in Switzerland, with more money — believed to total up to 50 million — being pursued in tax havens.

All this is hardly exemplary conduct from one who declared that the only solution to the economic crisis was for Spaniards to “work harder for less,” and admitted he would not himself care to fly on his own airline. But it is not his extravagances that have brought him before a court, but presumed crimes — asset stripping and money laundering — as well as other pending matters in connection with the purchase of Aerolíneas Argentinas in 2001. The point of judicial investigations such as this one is to separate honest businessmen from those who are not.