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The Spanish Lawyer Online

Antonio Flores’ Blog

Thoughts about laws and regulations which affect foreigners in Spain


Archive for September, 2011

The Equity Release Victims Association Up and Running

September 24th, 2011

The Equity Release Victims Association (ERVA) – ( is now up and running. Having been formally incorporated last Wednesday, through a Marbella Notary Public, it has, among its aims, denouncing the magnitude of the infringements committed by a number of banks, mostly Scandinavian who, in clear breach of applicable legislation (regulatory, consumer protection, civil, banking, financial, and not the least, ethical), devised a tax-evading scheme that would be offered to pensioners to profit from them, using the illicit excuse that it was suicidal not to have a mortgage registered against their properties.

The ERVA will be formally filing claims with the appropriate Government offices, requesting formally not only that these products are banned in future but also, that the banks that offered them are disciplined in accordance to the seriousness of the offences committed. Of particular importance are:

  • Denunciation at the Spanish Prosecution Office (Fiscalia), requesting that a full investigation is conducted into the alleged tax-evasion proposition that constituted the main selling feature of these Equity Release schemes, and consequently, the well-defined target market this scheme was aimed at: financially conservative and vulnerable pensioners owners of an unencumbered retirement homes. Equally, of great significance is the financial state these schemes have left countless numbers of victims, as well as the major implications for their state of mental health and well-being  (typically, the infliction of mental and emotional anguish of being deprived of their life-savings ultimately and more immediately, a roof to live under). Even if these banks are no longer offering these obnoxious products, the writ will specifically request that the Spanish Prosecution Office, by application of article 26 of the 34/1988 Publicity Act, in relation to article 29, pursues the cessation action to prevent them from offering them in future.
  • Denunciation at the financial and insurance regulators (Comisión Nacional Mercado de Valores and Dirección General de Seguros), and the Bank of Spain (Banco de España), who will be requested that a thorough study is made into the validity of a contract of Equity Release, not approved for use in Spain under 2007 Reverse Mortgages Act and prior to its enactment, by the uses and customs of banking practices (as the Spanish equity release equivalent was not regulated formally until then although, it was specifically described as a product to allow asset “rich” pensioners access to this wealth, all the while having full guarantees of living in the property for the rest of their lives). The ERVA will specifically request that disciplinary and exemplary fines are imposed on the infringing banks, inclusive of a temporary suspension of their activities within Spain.
  • Denunciation at the Regional and National Consumers Association, to obtain a ruling condemning the publicity as false or deceptive advertising and fining these entities proportionally, in accordance to article 36 of the 26/ 1984 Consumers and Users Protection Act, applicable prior to 2007. Given the impact, relevance and geographical scope of the mis-selling of Equity Release schemes, the ERVA should request that the infractions committed by these banks are deemed “very serious” and the highest possible fines imposed (from €600,000 to 5 times the amount of the product mis-sold, as well the closing of the branch offices of the offending banks wherefrom the products were sold, for up to 5 years).

The list of proposed actions is not exhaustive and may include other proposals in the countries of origin of the offending banks.


Net Finally Closing Over Bogus Insurer Compagnie Des Guaranties

September 6th, 2011

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:

  1. 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…
  2. His accountants in London, Arram Berlyn Gardner, had already warned, in early 2009, that the company was not a viable enterprise.

  3. 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.
  4. 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

Property, Scams , , , ,