Forum offered credits to their clients to buy the stamps, although the plans also served for paying the mortgages -in Spain most people have mortgages-. Finance Minister, Pedro Solbes denied on March 17th, that these kind of credits had a “financial nature”, what would have risen the supervision from both Spanish Central Bank and the National Assets Market Commision (CNMV) and also the guarantees to the investors, who would have had a Deposit Fund. He had denied that cualification when the firms assured a yearly minimum interest of 5-6.5%, which was qualified by the experts of the Tax Bureau -dependant from the Financial and Economy Ministry- as a “financial activity“.
Wikipedia explains this much more clearly:
As with equity investment, investment in tangible goods is not protected by a mandatory warranty fund under Spanish law (available only to registered financial institutions, which allowed the victims of the earlier Banesto and Gescartera scandals to recover a small part of their assets). Such investment is overseen by the Consumption departments of the regional governments instead of the Comisión Nacional del Mercado de Valores. Customers of Afinsa affected by the situation have formed several associations, as have customers of Forum.
As the majority owner of NASDAQ traded company Escala Group, the scandal deeply affected Escala’s share price, which plummeted more than 85% in the days after the arrests before recovering slightly.
They went up again after (103%) the Spanish authorities assured Escala was not affected.
Investors were told they may not recover their money after the raids. Afinsa is not registered as a financial institution and is not subject to the same regulatory guidelines affecting other companies. Under Spanish law, Afinsa simply acts as an intermediary to buy investments for its clients.
As a result investors are not entitled to the same standard of protection as if they had bought shares or put their money in a bank.
Alfredo Pérez Rubalcaba, the Interior Minister, said yesterday the police operation was important and had been carried out with the co-operation of some of the alleged victims.
Feelings were running high among worried investors outside the companies’ offices. One investor, who gave his name as Felix, protested outside the offices of Fórum Filatélico in Madrid. He had looked forward to cashing in profits from his stamp investment when he retires in August. “My whole life is here,” he said. “Clearly I am nervous, but this is not the only reason. My wife is going to kill me. She wanted to take my money out of the company.” Another investor, called Roberto, said: “I have put a lot of money into this. This could ruin my life. I want my money back now.”
PP has accused the Government of leaving the affected unprotected. But Elena Salgado, Minister of Health and Consumption, has denied the consitution of a Fund, which was requested by PP and the affected, because “it would be unjust, because it would mean that the contributors ahould be ready to finance the haigher risk united to a higher interest rate these inversions have“. This proposal has been critisized hardly because of the conception of State that this happens to be based upon: a nanny State who provides about everything. The affected people have demonstrated in front of Central Offices of PSOE in Madrid.
More than 350.000 people are affected because of this fraud, who were eager to invest, as the rate was, in some cases between 14 and 16%, when the normal rates in other pension plans were 7,22%. The total compromised inversion was about the 10% of all the inversion in pensions plans at the end of 2005. The most affacted are people with very low income and self-workers, but the Government is going to give a very low payment for the affected people who are retired and do not have any other pension.
To pay the accumulated debt the Judges had to ask for help to determinate the real value of the stamps. But the operation is going to be difficult and if all the stamps they own are sold in the market, the price will fall completely as these two firms moved 80% of Spanish stamp’s market. Any of them determinated the value according to Edifil and Manfilsa’s catalogs. This has produced various abuses: Afinsa’s stamps have a value 10 times higher than the ones any other stamp collector would have payed for them.
The fact that the Financial Ministry had the proofs for the intervention of the societies 9 months ago and the proximity to the debate of the Statute of Catalonia and to the prosecution of 3 policeman for illegal detention of 2 PP militants -who had been accused of an inexistent aggression to Defense Minister Bono-made a lot of people guess this was not a mere “coincidence”. Although the Anti-Corruption prosecutor said that a lapse of 9 months is normal to ionvestigate this kind of cases, this margin was sufficient for Fórum to pick up 16.000 more investors. In the first report, the Tax Bureau pointed out that “the stamps were valued for more than 13 times its market value“. But the investigation went further to detect that the firms were destroying stamps for a total value of 5 million of euros and buying others for a much larger quantity than the ones accounted. Both are signs of a possible transfer of actives to foreign countries.
And today it has begun the process for the liquidation of Fórum Filatélico, which has a financial hole of 2.700-3.400 millions of euros. The total compromises of the firm were between 3.500 and 4.200 millions of euros but its assets were only 410 millions. This is one of the causes of opposition to the provisional freedom of the ex-president of the company, Mr. Briones, now in prison, and other three members of the Mangement Council. They are accused of aggravated swindle, unloyal management, punishable bankruptcy, fraud against Public Treasury and money laundering -although it’s not clear this last one and they have risen the prohibition of the banks account’s disposal of several of the accused-.
The two of the have a “financial hole” of 4.166 euros, greater than the one discovered in Banesto in 1993.
The prosecutors have said that the firms were lying twice to the investors: first, when they were selling at prices much higher than real and then, by telling them, the rates came from a rise in their value, which was non-existent.
The bitter critics is for the Consumer’s Associations who did not make any move till today, when they are demanding the affected investors to affiliate themselves and, as a result to pay the respective fee.
Libertad Digital asks other questions. Among others:
Why Socialist Minister Rubalcaba filtered this operation when the offices of the firms had not even begun?
Why if the auditors alerted about some irregularities in Afinsa’s documents and the assurance firm Lloyds did not renew the insurance policy, no one raised the alarm about the stamps’ value?
Can two societies like Afinsa and Fórum set up a swindle that last 25 years without any authority taking notice of it?
How on earth a firm whose objective is to attract savings is under the control of the Health and Consumer Ministry.
There are other obscure things in this case: never has any Autonomous Community renounced to a exclusive competence of the granted to them by the Constitution. Well, in this case they have.
Last news are that Escala Group is going to sue Spanish Government for unjustified alarm.
Blogs treating this:
ZP no es bueno: Gestynsa, the auditor firm of Afinsa, is owned by Francisco Blázquez Ortiz, father of Jorge Blázquez, who works with Miguel Sebastian, Chief of Economical Office of Mr Zapatero’s Government. Mr. Blázquez pressured the Institute of Accountancy and Business Administration (ICAC, in Spanish) not to begin any process -administrative- against Gestynsa.
Nescencia Necat: the post about the scandal by an affected of it. Compares this scandal with RUMASA, holding expropriated to its owner, Ruiz Mateos.