The perfect storm
Prime Minister Rajoy’s popularity was already at an all-time low before his party’s treasurer accused him and other PP bigwigs of financial wrongdoing. Can he survive the latest scandal to hit the party?
Prime Minister Mariano Rajoy’s first year in office has been tough by any standards, and has seen his popularity wane as growing numbers of voters turn against an austerity program that has worsened unemployment and so far failed to kick start the economy.
Now, after the publication by EL PAÍS of secret accounts kept by Luis Bárcenas, the man he appointed as treasurer of the Popular Party in 2008, the credibility of his party — already under question amid a long-running corruption scandal — has been further dented, and Rajoy’s political survival is now at stake.
Bárcenas’ unofficial, handwritten, bookkeeping system shows hundreds of donations in small amounts, seemingly for tax purposes, from companies, mostly builders, and regular payments of thousands of euros to a number of party leaders.
A statement by the PP insists the party's payments to its leaders and staff were always legal and followed tax rules. The party also denied there were systematic payments to people other than through their official paychecks.
High Court Judge Pablo Ruz, who for the last four years has been investigating the Gürtel corruption case involving the PP, has asked prosecutors to look into the new allegations and could open another line of investigation.
Rajoy knew that Bárcenas was an accident waiting to happen
Meanwhile, the PP has ordered an external audit of its accounts, and the Prime Minister has promised to publish his recent tax declarations.
The alleged payments may not necessarily be illegal if the party leaders declared the income in tax statements. Until recently, Spanish political parties were allowed to receive anonymous donations. However, it would have been illegal not to book those donations in the party's official, regulated accounts.
In private, senior PP officials defend themselves against Bárcenas, accusing him of using the party for his own financial gain, saying he is taking his revenge after he was forced to step down as treasurer in 2009 after he was indicted in the Gürtel case.
In public, the PP says the secret accounts are an invention, and has criticized EL PAÍS for publishing them. But so far it has not attacked Bárcenas, perhaps fearful that he is still holding back more revelations about the inner workings of the party during his time as a senior administrator over the last two decades. During his televised address to party leaders on Saturday afternoon Mariano Rajoy did not mention Bárcenas by name.
The Prime Minister knew long before the recent revelations that Bárcenas was an accident waiting to happen: he had promoted him to the post of party treasurer in 2008. Bárcenas was familiar with the way the party was financed. He knew the name of the business leaders who funded the party, the senior officials who had been helped by the party, and any number of matters that were best kept secret. But the day in July 2009 that Bárcenas was indicted in the Gürtel case, Rajoy knew that he was a danger to the party. And if Bárcenas decided to tell the courts all that he knew about the party’s financing, Rajoy knew that he had most to lose.
If I have lost your trust, then I will go, but don’t send me messages through third parties”
For the last four years, the judicial net has been closing ever tighter on Bárcenas: his initials are to be found in many of the documents seized by police during the investigation into the Gürtel kickbacks-for-contracts scandal using front companies to supply the Popular Party with a range of services run by businessman Francisco Correa. Things took a turn for the worse for Bárcenas when investigators began looking into Bárcenas’ own business affairs and realized that Gürtel might just be the tip of the iceberg. For example, they wanted to know why he had withdrawn 330,000 euros in 500-euro notes from a bank, only to pay the same amount back in two weeks later. Bárcenas said that he had used the money to buy two oil paintings that he had then sold immediately for a profit.
Investigators subsequently discovered that in 2006, Bárcenas’ wife had paid half a million euros into a Caja Madrid account, prompting the tax authorities to investigate her. Bárcenas gave a complicated account of another supposed killing on the art market: his wife had bought some paintings in 1987, selling them at a hefty profit 19 years later.
Meanwhile, the courts continued their investigation into Gürtel. By the end of 2012, the authorities had learned about Bárcenas’ Swiss bank account, where he had hoarded away some 22 million euros.
But Bárcenas had taken measures to protect himself. In July 2009, shortly before he was due to appear before magistrates for the first time in the Gürtel case, he removed nine boxes of documents from the Popular Party’s headquarters in Madrid.
Rajoy continues to insist that he knows nothing about monthly payments of cash in plain brown envelopes to senior party officials, or of any other wrongdoing. But PP sources say that he has been following the Gürtel case closely for the last four years, and has spoken with Bárcenas on several occasions about the matter, and has done all in his power to prevent Bárcenas from revealing what he knows about the PP’s financing.
Bárcenas stood down as senator so the Gürtel case would no longer be investigated by the Supreme Court
This might explain why Rajoy never pressed Bárcenas to resign —although he reportedly put his team to work on trying to isolate the ex-treasurer. “You appointed me, you sack me. If I have lost your trust, then I will go, but don’t send me messages through third parties,” Bárcenas reportedly told Rajoy at a meeting in July 2009 after he was indicted in the Gürtel case.
Rajoy initially stood behind his former treasurer, authorizing the party to pay his legal fees — until this was revealed by EL PAÍS —and allowing him to maintain his official car and keep an office at the PP’s headquarters, from where his former secretary continued to make calls in his name.
But even Bárcenas’ friends knew that sooner or later, if he found himself cornered, he was likely to tell the courts all he knew about the PP’s finances. When the news broke in late 2012 about his Swiss bank accounts, Bárcenas had already distanced himself from the party, but many former colleagues cast their minds back to the summer of 2011, when the PP was still organizing his defense.
Over the course of the summer, Bárcenas complained to colleagues about the Gürtel defense strategy being prepared by former defense minister — and current ambassador to the UK — Federico Trillo. Bárcenas said that the party had thrown its support behind the head of the regional government of Valencia, Francisco Camps, who faced corruption charges, and had turned its back on him. He is reported during this time to have repeatedly insinuated that somebody in his position, knowing what he knows, deserved more respect. He said he knew, for example, that many senior party figures had regularly received payments that could not be justified. He knew this, he added, because he had made the payments, and had documentary proof.
In response, Rajoy and the senior leadership began to design a strategy to handle any possible revelations by Bárcenas. “The little accounts book that Bárcenas has been showing around Madrid is false. He wrote it to defend himself, but he can write what he likes. It is a lie, there have never been any extra-official salary payments,” was the official line.
So far, the party has not used this argument in public, and instead of attacking Bárcenas, is opting to question the authenticity of his paperwork, which would seem to suggest that the PP still fears what he might reveal and would prefer not to provoke him. But in private, senior party figures believe that the whole thing is an invention. Asked why there are entries that have turned out to be true, such as the loan the party made to Senate speaker Pío García Escudero, they answer that these were included to give credibility to Bárcenas’ accusations.
Many in the PP still believed right up to the last minute that Bárcenas was bluffing
In response to this, some senior PP regional leaders are more worried, saying that it is not enough to simply say the accounts are a complete invention; they need to be explained item by item. Nobody really believes that Rajoy has received illicit payments: nevertheless the accusations have to be refuted by providing detailed explanations of Bárcenas’ accounts.
Those who were around Bárcenas during the summer of 2009 say that despite his problems, he was calm, and that he also traveled to Argentina, saying very little about his stays there.
Bárcenas believed, rightly as it turned out, that as long as the case was kept to the Madrid regional High Court, under the aegis of Judge Antonio Pedreira, he stood a reasonable chance of being absolved of any involvement in the Gürtel case. He said that the reason he has stood down as a senator in 2010 was not because of pressure from the PP, but because by doing so, his case would no longer be investigated by the Supreme Court, but return to the Madrid court of Antonio Pedreira.
Eventually, in September 2011, Pedreira dropped the Gürtel charges against Bárcenas, saying it was the former party treasurer who had warned the party about the Gürtel conspirators.
With a general election coming up that the PP was already forecast to win by a landslide, Bárcenas began to believe his troubles were over. But they weren’t. Anti-corruption prosecutors filed an appeal against Pedreira’s ruling with the national High Court, which allowed the case to be reopened. Bárcenas was once again under the spotlight. By now he was claiming to be the victim of a conspiracy, on one occasion having to be reprimanded by the judge in court for his comments to this effect.
When investigators discovered Bárcenas’ secret account in Switzerland, the former treasurer said that it was a joint fund, insinuating that senior members of the PP might be involved. Since then, Bárcenas' lawyer has provided documentary evidence showing that in 2012 his company applied for a tax amnesty passed by the government last year on funds in the Swiss bank account.
Last week, Bárcenas told the High Court that he repatriated 10 million euros he held under one of his businesses in a Swiss bank account and paid the Spanish Treasury one million euros in taxes through the government's amnesty plan approved last March.
Bárcenas turned over evidence to Judge Pablo Ruz that purportedly shows the money he declared under the amnesty had been held in an account in the name of a company called Tesedul. In court papers filed by his lawyers, Bárcenas said he was turning over the information so that Ruz "can have a clear idea of what has occurred."
Finance Minister Cristóbal Montoro has said that he couldn't find the former treasurer's name among the 29,065 people who took advantage of the amnesty, which has now ended. But the minister said he didn't know whether any of 618 companies also in the list belonged to Bárcenas.
Meanwhile, the right-leaning daily El Mundo says that the extra-official payments Bárcenas says he made to party leaders were systematic, but that neither Rajoy nor PP secretary general María Dolores de Cospedal received money in this way. The newspaper does not provide evidence for its claims.
EL PAÍS added that the extra-official payments date back to the late 1990s, during the mandate of PP Prime Minister José María Aznar. In response, the former premier says he is to sue EL PAÍS for defamation. Rajoy ordered an internal audit of the party’s finances to be carried out by treasurer Carmen Navarro, the results of which have already been published an claim to exonerate the grouping.
Many in the PP still believed right up to the last minute that Bárcenas was bluffing and that he would not publish his secret accounts. On January 31, after speaking with senior PP leaders and carrying out exhaustive checking to ascertain their authenticity, EL PAÍS published Bárcenas’ papers, which include the names of every senior PP figure over the last two decades, including that of Mariano Rajoy.
In response, the party rolled out its defense strategy: deny everything and say the whole thing is a conspiracy. De Cospedal accused the media of stirring up trouble “just as we are beginning to get on top of things.” But it is clear that the Cabinet has been wrong-footed, and the grassroots of the party is deeply concerned at the mounting anger among voters.
The Bárcenas affair is just the latest in a long line of scandals, and further undermines the public’s already low opinion of the country’s institutions. And the government knows it. “If things continue like this, we’ll be thrown out of office,” says one senior PP leader. “The opinion polls will show that we have lost half our votes,” says another.
Deputy Prime Minister Soraya Sáenz de Santamaría insists that the government is standing firm, while promising at the same time to improve transparency and to strengthen the institutions of the state. The sense of crisis is heightened by further revelations about the Gürtel corruption case: Health Minister Ana Mato and her ex-husband, the former mayor of a PP-controlled suburb of Madrid, are accused of taking holidays paid for out of the Gürtel slush fund.
Rajoy’s approach has been to hunker down and refuse to speak to the media. On Saturday he called a meeting of senior party officials, using the occasion to read out a speech before the cameras in which he denied any wrongdoing and said that the accusations are completely unfounded. He added that he would publish his tax returns, promising greater transparency.
Rajoy is the master of waiting out the storm, having survived two electoral terms in opposition while many in his own party plotted against him. Eventually, when the Socialist Party had run itself into the ground, and his enemies had burned themselves out, his time came. What’s more, three years of media coverage of the Gürtel scandal did nothing to damage his party’s performance in the general elections of November 2011.
But some in the PP say that this time “things are different." In private, Rajoy says that he will fight the accusations, and that he will win, as he has won in the past. He says that if he can get through this second year of austerity and recession, and if the economy begins to improve in 2014, the electorate will forget about Gürtel, and vote him back into power in 2015. Time, which until now has sided with him, will tell.