Spain: Tax Havens Stymie Judge Garzón's Investigations

Inter Press Service
April 30,2002

Spanish judge Baltasar Garzón has run up against the airtight secrecy of authorities in several tax havens, which is frustrating his campaign of investigations into alleged money laundering, tax evasion and embezzlement of funds, and even possible blackmail payments to the illegal Basque organisation ETA.

Garzón has not received solid responses to his formal requests for information from Gibraltar, Cayman Islands, Monaco, Puerto Rico, Liechtenstein, the British isle of Jersey, and the northeastern U.S. state of Delaware, a legal source told IPS.

"The common practice of these tax havens is to respond with evasive answers, postpone the matter or omit key data," said the source.

Tax havens are territories with little or no taxation or currency controls that serve as the headquarters for corporations, especially banks and investment funds, and ensure client confidentiality. Foreign businesses and individuals are treated as residents and thus avoid paying taxes in their own countries.

Judge Garzón is investigating the opening of secret accounts and movement of funds in Delaware, Cayman Islands, Jersey and Puerto Rico by the Banco Bilbao Vizcaya Argentaria (BBVA), one of Spain's two largest banking entities and which has invested heavily in Latin America.

The combined deposits held some 200 million dollars, which were legalised and transferred to the BBVA headquarters in Spain in February 2001 at the behest of then co-president of the bank, Francisco González, who today is the entity's sole president.

The investigation has already prompted the resignation of most of the bank's board members, whose mandate dated back to the pre- merger Banco Bilbao, including former co-president Emilio Ybarra.

The scandal has extended to Treasury Secretary Estanislao Rodrí­guez Ponga, of the governing centre-right Popular Party (PP). The leftist opposition is clamouring for his resignation or ouster, pointing to the minister's past service as BBVA fiscal adviser.

Garzón has not heard back from the Caribbean's Cayman Islands, whose authorities were requested to provide information about potential money laundering by drug trafficking cartels, or from Europe's Monaco and Liechtenstein, about alleged secret accounts of the Telecinco TV network from when it was controlled by Silvio Berlusconi, now Italy's prime minister.

Those two investigations remain open.

The judge has run into the same obstacle with the British isle of Jersey, located in the English

Channel, in his quest for information about the transfer of allegedly illegal commissions paid by the organisers of the 1992 World Expo in Seville.

Jersey's Attorney General William Bailhache responded to Garzón's petition saying that the clients of BBV Privanza Bank, a branch of BBVA based on the island, "have a legitimate right to privacy in their affairs."

The Spanish judge reacted immediately, stating that this right "is essential, but cannot be of an absolute and unconditional nature."

But Bailhache argued that giving out information about the movement of money in Jersey would violate international conventions on human rights.

Garzón replied that the bank under investigation had distributed brochures to its potential clients specifically inviting them to use its services to escape taxes.

The Spanish magistrate plans to send a more detailed petition for information to Jersey this week. If he does not obtain the necessary data, Spain's Anti- Corruption Prosecutor will denounce Jersey before the International Financial Action Task Force (IFTF) on money laundering charges, legal sources told IPS.

The IFTF is a specialised group of the Organisation for Economic Cooperation and Development (OECD), whose 30 members include the industrialised countries.

One tax haven that greatly affects Spain is Gibraltar, a British enclave in Spanish territory. Madrid is calling for sovereignty over the area. The companies based in Gibraltar, home to 28,000 people, are exempt from taxes and the authorities allow account holders to maintain anonymity. These rules explain why there are more than six companies per inhabitant of the island and most, say experts, are registered there only for the purpose of opening bank accounts.

Luxembourg, meanwhile, in the heart of the European Union, has 200 banks and more than 1,800 investment funds, but fewer than 400,000 inhabitants.

In the Netherlands, to create a shareholding company it is enough to register the name and list an address in that country. No taxes need to be paid on the income reported by branch offices in other countries.

The U.S. magazine Fortune reported that 40 percent of the 500 largest companies in the United States are based in the Netherlands, as are 245 Japanese and 2,485 European transnational firms.

Garzón made a trip to another tax haven in March, the U.S. associate state of Puerto Rico, to interview witnesses. But he had no luck there either, despite the fact that one former BBVA employee provided testimony against the bank executives. The judge is expected to push harder for information in the next few days.

Meanwhile, the end of 25 years of silence by Juan Antonio de Ybarra e Ybarra, son of Javier de Ybarra and cousin of Emilio, the former BBVA co-president, put Garzón on another trail of clues.

Juan Antonio de Ybarra e Ybarra mentioned that many people are suspicious of the fact that some bank executives - alluding to his own cousin - move freely through the Basque city of Bilbao without the need for bodyguards. In Bilbao, as in the rest of Basque Country, politicians, bank executives and journalists are nearly always accompanied by armed guards due to threats from ETA, a separatist group that has already assassinated many of their colleagues in the region.

When the BBVA board met in Bilbao, Emilio Ybarra did not have bodyguards, while co-president Francisco González did. That prompted suspicions, which Juan Antonio de Ybarra e Ybarra alluded to, that his cousin had handed over money to ETA, possibly coming from accounts in the tax havens.

Garzón opened another investigation into the illegal financing of ETA, an organisation that uses blackmail of business executives and other mechanisms to collect funds. As a result of that enquiry, he ordered the arrest Monday of 12 people and is conducting a probe to determine whether there are ties to the BBVA case.

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