Net Finally Closing Over Bogus Insurer Compagnie Des Guaranties
Last Sunday morning, while cycling around La Cala area, I spotted what looked like an isolated bored Spanish donkey with what looked like a kind of a smallish stork on its back, the latter presumably going about the job of cleansing the animal from parasites, and the former happily accepting it. This is what they call symbiosis, or a mutually beneficial relationship involving close physical contact between two organisms that aren’t the same species. I took some pictures but the mobile was not powerful, unfortunately. In a strange mental composition exercise whilst negotiating the curves, I immediately thought of more than a handful of Spanish property developers and Mr. Carlo S. Mottola, in what could be one of the biggest cases or fraud in the Spanish property sector, and the relationship they had struck to bring misery, anguish and pain to, once again, off-plan property buyers. On the one side of the fraud, sitting comfortably on top of the donkey, Mr. Mottola, the man behind the bogus Compagnie Des Garanties de Du Luxembourg S.A., Company of Guaranties Ltd. and Cauzione, flouting every mandatory insurance legislation provision and without a penny behind him, and with the Spanish Insurance watchdog DGS (Dirección General de Seguros) warning about his activities as early as 2003 (and who incidentally have done nothing since), erected himself as the provider of surety contracts worth tens of millions of pounds knowing full well he could have never honoured them, if we notice the following:
- His Luxembourg company, boasting a share capital of €24,283,800 on the letter head of the policies given out by the hundreds in the years 2003-2008, had actually been referred to the Courts on the 10th of November 2003 by the Luxembourg Prosecution Service and, after a remarkably quick Court process (which we can only dream of here), the company was “pronounced dissolved and ordered its liquidation” for what was deemed as grave legal contraventions, these being not submitting a Balance Sheet nor a Profit Loss Statement since the company’s incorporation, in 1999, nor having a known address since the company was reported to the authorities in 2003. Just as his insured property buyers have been used to, he failed to turn up to the hearing…
- His accountants in London, Arram Berlyn Gardner, had already warned, in early 2009, that the company was not a viable enterprise.
- Lack of any recorded payments on claims (or perhaps one or two smallish at the beginning to give himself a credibility that he lacked) to any of the hundreds of people who would have been entitled to a payout.
- Record of payments made to companies under his control, or directly related to him, one in the Channel Islands and the other one in the US:
And again in 2008, another payment: 
And what about the American company? 
At the other end of the scam, the Spanish developers, the donkeys in the symbiosis relationship and in real life too, real quadrupeds who, after having their applications for bank guarantees or insurance policies turned down by the likes of Santander, BBVA, AXA, Zurich and many others, resorted to the unscrupulous Mr. Mottola, who would, oblivious to what is right or honourable, and legal too, print off as many policies as required to provide sham covers to the unsuspecting property purchasers. If you wish to know what these policies look like think about the lottery prize certificates that Nigerians send you by email on a monthly basis, when you strike lucky with them: they actually look genuine in comparison to Mottola’s “monopoly” policies.
But the net is now closing: already, the Malaga High Court, in a civil ruling involving a developer currently serving time for tax fraud and indicted on further corruption and swindle charges, stated that: Lastly, to have a perspective on the behaviour of Naviro in this matter, we need to refer also to the surety policy invoked by the defendant, which happens to be completely bogus for the company “Compagnie Des Garanties S.A. is not authorized to operate in Spain, as has been proven in 2 reports, one from the Bank of Spain and a further one from the Insurance Directorate General. And recently, a story about one bogus insurer which is being investigated by the police for insurance fraud for having offered bogus insurance cover and will be presumably soon accused of criminal swindle. The lady in particular was registered with the Companies House to…distribute electrical appliances. Compagnies des Garanties Ltd. is equally currently registered in Spain as a branch operation, and duly registered too with the tax office to carry out the activity of…Maintenance and Repairs of Motor Vehicles. This further dent on Spain’s already appalling reputation for not looking after foreign investors bodes badly for the Government’s plan to bring back foreign investment (a child would see this), not to mention nationals of Spain who have also been caught out in this scam.
And so, who will pay for this? Well, difficult to say now but it seems that a the spectrum of responsibilities will range from possibly criminal to civil and potentially, administrative, given the supervisor’s failure to bring this man to justice, but more importantly, for having allowed him to operate since he was discovered, back in 2003!
And what does the law say?
- Article 4.2 of the 2004 Private Insurance Organization and Supervision Act (Real Decreto Legislativo 6/2004, de 29 de octubre, por el que se aprueba el texto refundido de la Ley de ordenación y supervisión de los seguros privados) states that any “contracts signed with an unauthorized entity, or one whose authorization was revoked, will be deemed null and void…in the event of a claim being registered the persons or entities responsible will have to pay as if the policy had been valid…The obligation will be joint of the company and any persons who would have authorized or permitted the conclusion of a contract.”
- Article 48.3 of the same, when stipulating the administrative fines, states that…the dispositions of this article will be understood to be applicable without prejudice to any other responsibilities, including criminal, that may be incurred in.
- Article 248 of Spain’s Penal Code: A person who, with the intent of gaining a benefit, uses deceit to produce error in another person, inducing him/her to dispose of own or third party valuables, will be liable to be sentenced to imprisonment for 1 to 6 years.
And what about the regulator, the DGS, who did have knowledge of this since, at least, 2003? In my opinion much more could have been done, in 9 years, to prevent this individual from ripping customers off through unscrupulous developers even if that meant filing a denuncia via the Prosecution Service, a job that would have taken a civil servant one morning. To our knowledge, Mottola’s offices are still open, except for the processing claims side of things, which is what he never intended to anyway. This inaction is consistent with nonfeasance in public office, or negligence, which would constitute grounds for a claim against the Spanish State. Documents
- 2007 audited accounts (PDF 275 Kb)
- 2008 and 1st half 2009 accounts (PDF 466 Kb)
- 2005 French Branch of Compagnie des Garanties Forced Liquidation (PDF 1,095 Kb)
Hi can anyone determine the date when Compagnie Des Garanties De Luxembourg were deemed unauthorised to trade in Spain or when they were made insolvent,or if possible both
John,
It is possible to determine when where they registered with the DGS (in their blacklist I mean) by writing to them. However, this should not be a requirement because the professional job should have been carried out differently: that they were actually registered to operate in Spain.