Spanish businessmen accuse private equity fund Blackstone of fraud

Spanish businessman Joaquín Rivero has filed a suit with a Madrid court against global private equity fund Blackstone and other financial institutions alleging fraud and commercial document falsification in connection with the appropriation of a 31-percent stake valued at 1.6 billion euros in leading French real estate company Gecina.

Rivero is seeking the return of his shares and those of his business partner, Juan Bautista Soler, which were deposited in Luxembourg as a guarantee against loans and which are now in the hands of the US private equity firm.

The conflict dates back to 2012 when Blackstone and the investment fund Ivanhoé Cambridge, a subsidiary of the Caisse de dépôt et placement du Québec public pension fund, began to buy up debt taken on by Rivero and Soler after their companies Alteco y MAG Import, the owners of the 31-percent stake in Gecina that is in dispute, went into receivership.

Two judges in Madrid in charge of the receivership proceedings in 2013 ordered as a cautionary measure that the Gecina shares not be sold or transferred until the situation of the companies that owned them was clarified. Blackstone and Ivanhoé took the case to a Luxembourg court, which ordered Calux, the bank where the shares had been deposited, to hand them over to the new owners of Rivero and Soler’s debt.

Rivero and Soler’s lawyers argue that the issue of the shares should be dealt with by the Spanish justice system and that the two funds had contrived in a suspicious way to have the Luxembourg court execute the guarantees on the loans. They allege that Blackstone and Ivanhoé have committed a “corporate crime, an insolvency offense, falsification of commercial documents and fraud.”

Creditor banks named

In accepting the suit, the Madrid judge argued that the allegations of Soler and Rivero’s lawyers “suggest the possible existence of a criminal offense.”

Rivero’s suit also names Alteco y MAG Import’s former creditor banks: Natixis, Bankia and Bank of America Merrill Lynch, which sold the debt. It claims Blackstone and Ivanhoé bought the debt of Rivero and Soler without telling the court to avoid any judge from preventing the execution of the guarantees on the debt while the receivership proceedings went ahead. Soler and Rivero’s lawyers believe Blackstone and Ivanhoé had the complicity of the banks in their actions. According to sources with knowledge of the case, it is not known how many Gecina shares remain in deposit with Calux.

The Luxembourg judge considered herself to have competent jurisdiction to deal with the case and ruled that the reference price for the appropriation of the Gecina shares should be its stock market value at the close of trading when Blackstone and Ivanhoé were in possession of the shares. That price was close to 91 euros per share. She pointed to the fact that the documents relating to the guarantee of the loans state that any controversy regarding the contract would be dealt with under Luxembourg legislation but left the door open for the creditors to take legal action in any other competent judiciary body.

The Luxembourg judge also argued that Blackstone and Ivanhoé were free to act as they did because the execution of the guarantee was an action independent of the receivership proceedings. After securing the shares, Blackstone informed Gecina’s board of directors that it had a 22.9-percent stake in the company.

The case is the latest chapter in the history of the fall of the real estate empire Rivero built up around Spanish property firm Metrovacesa. Rivero lost out in a fight for control of Metrovacesa and was left — along with partner Soler — with the Spanish firm’s stake in Gecina, acquired in 2004.