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Spanish Equity Release Fiasco

Exposing Danske Bank, Rothschild, Nykredit, Sydbank and Others

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Spanish Equity Release Fiasco Legal Action – February 2012 Update

February 24th, 2012

Antonio Flores of Lawbird explains the next actions in respect of the Equity Release Fiasco Case. Antonio comments on the demonstration to be held on the 8th of April Monday, at the offices of the Spanish Inland Revenue in Malaga. This will be done prior to reporting/filing a “denuncia” against the banks involved in allegedly scheming, together with unregulated, unqualified Costa del Sol pseudo-financial advisers, to defraud the Spanish Revenue on inheritance and wealth taxes of pensioners, as confirmed by the largest Danish newspaper.

Originally posted on ERVA.

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Danish Government to Investigate the Equity Release Scam

January 16th, 2012

Early this week the Audiencia Nacional chose to reject the investigation of the “Equity Release” alleged fraud on grounds that include, on the one side, the argument that they lack “geographical” jurisdiction and on the other, that there is not enough evidence within the claim (250 pages) to merit starting a criminal investigation by their Courts. And if those grounds were not enough, to further convince themselves of the wisdom of their decision, they also mentioned that we had not managed to prove enough the relationship between the cowboy coastal IFAs and the reported banks (informally known in Spain as “chiringuitos financieros”), as if to suggest that we should have eavesdropped on their board meetings or tapped their telephone conversations. I would be lying if I said that we were not aware that it would very be difficult to get these elitist Magistrates to deal with white-collar crime, even if as serious as this.

In our opinion, this is a clear case of judicial apathy by the Court which, after probably not reading the claim, considered it nevertheless irrelevant in what is a steadily worsening record of protecting rights of consumers.

In stark contrast to this indignant “skimping over”, the Danish Government has reacted forcefully to the allegations published by the largest newspaper in Denmark, the Morgenavisen Jyllands-Posten. According to the daily newspaper, Sydbank targeted wealthy expat residents of Spain, encouraging them to take out a Danish mortgage on their property and offering to transfer the released money to Switzerland. Jyllands-Posten claims that the Aabenraa-based bank was aware that Swiss bank secrecy rules would allow these assets to be hidden from the Spanish tax authorities.

The newspaper points to an internal mail sent from a director of Sydbank Switzerland to senior management in Denmark, including CEO Karen Frøsig. EPN.dk quoted the email admitting that in Spain, tax on inheritance on real estate only applies on the equity. Mortgaging serves primarily the purpose of inheritance tax reduction. It was also mentioned that Sydbank may not even have had a license for operating in Spain, let alone offering tax evasion products.

The Danish Tax Minister, Thor Möger Pedersen, has indicated that It is clear that my awareness increased if a large bank is proposing a maneuver in which the tax due on the loan is placed in a tax haven country without accountability. If it is a widespread traffic in the financial sector, it is definitely something we will look at.

According to Johnny Schaadt Hansen, director of The Danish Tax Office Special Department of Economic Crime, there may be a counselor responsibility, which the bank may be punished for. It does not sound very good if a Danish bank is involved in such a concept. It will be included in our priorities, and one should not forget that in such a case can be a counselor responsibility, as one can be punished for, whether you are accountant, lawyer or banker, said Johnny Hansen Schaadt.

The articles also quotes Lars Krull, a senior consultant and expert in banks from Aalborg University, saying that if it is primarily tax that drives it, and not a real need for funding, you should be wary. Also, the specialized financial daily Finanswatch.dk openly regards this practice as a scam.

Finally, a few days ago we learned that three Swiss bankers are charged in a New York indictment with conspiring to hide more than $1.2 billion of taxpayer assets from the Internal Revenue Service, in what is a very similar tax dodging scheme (they were using offshore companies, straw-men and other mechanisms to defraud).

News from the Danish Media (in Danish)

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The Equity Release Scam not Important Enough for the Audiencia Nacional

January 13th, 2012

As we were almost expecting, the Audiencia Nacional has chosen to not deal with this case. Just as they chose to do with the “Urdangarin” case, King Juan Carlos’ son-in-law, they consider this matter not susceptible of being investigated by the higher AN but directly via the local Courts of First Instance. Below is a brief explanation of the position of the case and what we will be proposing next:

Dear Sir/Madam,

We are writing to you to advise that the Audiencia Nacional, the Madrid Courts specialized in major criminal cases, terrorism, money laundering and other high-profile cases, has rejected investigating the matter on jurisdictions grounds.

This decision comes as no surprise after learning, via the press, that only a few days ago they also rejected (on similar grounds) a petition to investigate the activities of the King Juan Carlos’ son-in-law, on corruption and tax evasion grounds, in spite of the very serious charges brought against him as well the geographically dispersed nature of his activities, throughout Spain (two key elements to attribute jurisdiction). The case is therefore now back to Court number 3 in Palma de Mallorca against the wishes of the, surprisingly, indicted person.

This relocation of jurisdiction in favour of district Courts of First Instance is thus a mere formality that has, in principle, the following immediate consequences:

  1. The choice of legal action (civil or criminal) will be determined by the specifics of the case, the situation of the mortgage and namely the existence is enough evidence to demonstrate criminality, in the form of deceitful publicity and swindle when selling the equity release products.
  1. Jurisdictional matters will now have to be re-addressed, depending on whether civil or criminal charges are instigated, the place of signing the contracts (both investment and mortgage loans) and where the offices of these banks are situated (some have closed their offices altogether).

Our firm is in favour of filing civil cases pursuing the declaration of “nullity and voidness” of equity release contracts on broader grounds, as is permitted in the civil jurisdiction where the legal standard of proof is reduced to “the balance of probabilities”, often referred to “more likely than not”. Our main arguments will be based on 2 Supreme Court rulings on an almost identical case, which found a Spanish bank guilty of mis-selling financial products to customers with no financial knowledge. A summary of the cases and how they relate to equity release can be found on the following links:

https://belegal.com/blog-by-antonio-flores/equity-release-contracts-full-of-cracks-i/

https://belegal.com/equity-release/equity-release-contracts-full-of-cracks-ii/

From our perspective however, the need for further clarification of the nature of the contracts necessarily will require an expert opinion, financial in this case. Also, we are very keen to obtain the opinion of the Spanish regulators in respect of the following, for which we will apply directly to them (as we had requested the rejecting Madrid Courts to obtain such reports and will now not be getting them):

 

  1. If the Tax Office considers that mortgaging one’s home and hiding the proceeds in Luxembourg is a valid way to avoid taxes.
  2. If the Bank of Spain gave clearance to this speculative product, aimed at retirees, pensioners and older people.
  3. If the Financial Regulator (CNMV) gave clearance to this investment vehicle, the promotional literature devised to sell it, the IFAs through which the products were sold and the content of the contracts, from a consumer protection legislation perspective.
  4. Where the investment vehicle was a unit-linked insurance policy, if the Insurance regulator (DGS) approved the items on point c).

We will write to you shortly with a legal representation proposition as soon as we decide the venues for bringing an action and whether we can join together lawsuits where the defendant is one same bank, regardless of the address of the mortgaged property. Needless to say, from a legal fee point of view this proposition take into account your financial situation and will give weight to the no-win no-fee element of the legal fee, in detriment of the retainer, that will be much reduced and that can be paid by installments.
B. regards

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Swiss Choices: International Financial Planning at its Best

November 27th, 2011

The promotional literature by Swiss Choices Equity Release leaves no room for doubt when signing up the Equity Release obnoxious scheme. As they indicate, “do not make the mistake of leaving any action until the last minute…because you don’t know when this will be.

Developed by Graydon & Associates Costa Blanca S.L. in connection with Swiss Life (Liechtenstein) AG and BFI Consulting AG (whatever those initials stand for), according to the duo, “it was fine-tuned to provide current and future liquidity whilst ensuring the highest possible level of safety, privacy and asset protection.” . 

To cap it all, they declared that “this kind of long-term planning requires utmost solidity – the kind that only the time-tested and stringent insurance and banking regulations of Switzerland can offer”

This financial flyer needs to be read in depth because of the extraordinary record it holds: that of being able to insert one lie within every three words!

 

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Henry Woods and Rothschild: Declining Standards of Living

November 22nd, 2011

While the title of the letter is insulting beyond belief, it is the content of it which encompasses the various degrees of deceit the duo descended to.

Were these the declining standards of living Henry Woods was referring to, which have in fact been inflicted on their clients as a result of the ER contract?

  • Anguish
  • Stress
  • Fear
  • Depression
  • Heart Palpitations
  • Increased risk of heart disease
  • One amputee due to alleged vascular crisis caused by stress
  • One recorded death due to alcoholism following depression
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How to determine the risk, according to Nordea Bank

November 20th, 2011

For Nordea, equity release risk was to be assesed by reference to the state of the waters you were going to swim in. If you preferred rough waters, you were in for a bumpy ride but if you were rather more cautious with your life-time savings, then your preference naturally would be calm waters, as in the blurred photo.

Well, no sooner than the product was signed up, the calm waters soon turned into a shockingly brutal storm where losses have reportedly reached 50% of the sums invested.

Excellent quantification of risk!

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Nordea Bank Interprets Spanish Tax Legislation Opportunistically

November 19th, 2011

Page 27 of the brochure Guide to Wealth and Tax Planning in Spain gives us some clues of extreme deceit. Not only it openly vindicates the evasion of Spanish taxes by elaborating on specific tax concepts, but this essay also contains suspicious omissions that, if known, would have made a potential subscriber of the product pull out.  The most crucial omission is contained a Spanish tax provision quoted on page 27, top right, which reads: 

“ non-residents tax payers are only liable on the basis of assets located in Spain (or rights acquired by virtue of inheritance or donation), or where the life insurance policy has been established through a Spanish insurance company.”

This quote is inspired on article 7 of the Spanish Inheritance and Gift Tax Act, which says the above but also, the following: “or where the life insurance has been established by foreign insurance entities operating in Spain”.

Which clearly leads us to conclude that Nordea consciously omitted a crucial bit of information that, if inserted, would have made the whole proposal of Equity Release fall by the wayside and thus, the brochure would have not existed. If all of those who signed with Nordea had been given the benefit of objective and transparent tax information, rather than deliberately manipulated, they would have not been saddled with these obnoxious products. Unfortunately, they were lied to.

Article 282 of the Spanish Penal Code stipulates: “manufacturers or traders that, when advertising products and services, make false or untrue statements about the same, capable of causing serious damage to customers, will serve a minimum of 6 and a maximum of 12 months imprisonment.”

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Barclays Bank Equity Release Pitch: Hail, Rain or Shine

November 18th, 2011

At last, some informant has leaked information proving the involvement of Barclays Bank in the Equity Release fiasco. The information we had received so far from them stressed the facts that they had never used seudo-IFAs, nor had they sold the product based on an alleged IHT-mitigation effect. The attached seems to indicate something different though…

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Rothschild’s Equity Release Pitch Not Convincing Enough

November 16th, 2011

When the Equity Release providers chose to roam the Spanish Costas and hired imposter IFAs, they seriously hampered their ability to lend in a massive scale for their scope was, from the outset, limited to the tourist areas. Because having hundreds of millions to lend, perhaps billions, to unsuspecting pensioners who were looking at maitaining their wealth, I would have thought that a full on marketing campaign was de rigeur, via Spanish national television, media outlets etc.

Surely, the following pitch would have made tens of thousands of pensioners to latch on to the Tax-Evading-Equity-Release-Programme:

Advertiser:

Dear Spanish Pensioner, this message is for you and if you don’t listen carefully, you may be in trouble: Do you own a property?…Do you not have a mortgage on it?…Do you not realize that your property and family wealth is in danger if you don’t to something?…Because the Spanish Inland Revenue is here to rob you…Take out a mortgage loan on your property, no matter your age or size of your pension, have a guaranteed income AND dodge the Inland Revenue…Or do nothing in terms of IHT planning and make the tax man’s life easier, make them a member of family and allow them to run away with your hard-earned income.” (non-bold text extracted from publicity used by agents employed by Rothschild and Nordea Bank).

One can only imagine the hundreds of millions of Euros these banks, imposter IFAs, Lawyers, Notary Publics and incompetent tax-haven-fund-managers, could have reaped if this ad would have on say, Antena 3, Telecinco, Canal Sur, or perhaps the BBC…and it will stay in our imagination because had this scaremongering message been divulged on Spanish media outlets, live-broadcasted breaking-news showing scores of pinstriped-suited individuals being thrown into police vans would had been almost guaranteed.

Yet still they managed to run off to Luxembourg with a few good number of millions of expat money.

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How Rothschild Captured Equity Release Clients

November 13th, 2011

rothschild-equity-releaseUnfortunately for Rothschild, the repressive laws that curtail freedom of speech do not reach Spain and so, we are comfortably allowed to produce staggering evidence or wrongdoing, even if it means that a bank is exposed. But just how Rothschild managed to give a mortgage to several 90-year old is beyond the comprehension of most mortals, it is a mystery that belongs to the realm of the extraordinary, almost paranormal.

And yet, they achieved it: Peter Rose, professional scaremonger, compulsive liar and also Managing Director of Rothschild, was able to put together an article that, by inviting people to openly defraud the Spanish Tax Office, was convincing enough to get people to sign up to a product that would see them, ultimately, homeless.

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