The Spanish-Saudi Investment Fund that was created in 2007 during the government of former Spanish prime minister José Luis Rodríguez Zapatero, with the support of the then-king of Spain, Juan Carlos I, was led by two companies chosen by Saudi Arabia, Spanish officials who helped launch the initiative have told EL PAÍS. This fund hired Corinna Larsen, who was at one time in a relationship with Juan Carlos I, and set up its headquarters in Guernsey, a tax haven in the Channel Islands.
In 2007, Larsen asked a trust called Peregrine in New Zealand to bequeath the former monarch with “30% of the income originating from the Spanish-Saudi Investment Fund,” in the case of her death. The details of the structure of this arrangement form part of the Pandora Papers, a collaborative investigation by several international media outlets coordinated by the International Consortium of Investigative Journalists (ICIJ), and in which EL PAÍS and La Sexta television network have participated. This global investigation has been analyzing the secret files of 14 offshore service providers in opaque jurisdictions and exposing the firms that have enabled politicians, business leaders and celebrities in more than 90 countries to avoid paying taxes.
The lawyer for Larsen, who still uses her ex-husband’s surname, zu Sayn-Wittgenstein, claims the documents related to the trust are false. Larsen has not responded to questions from the ICIJ about her contractural relationship with the aforementioned fund.
A financial instrument such as this trust, or a trust fund, is a particularly opaque contract by which a testator leaves their entire estate of parts thereof entrusted to the good faith of their legal representative (the trustee) so that, in determinate cases and timeframes, it is transferred to another person (the beneficiary) or invested according to the instructions laid out by the testator. Trust funds are commonly used instruments offered by Swiss banks and asset managers to people in possession of significant wealth who are looking for tax avoidance, security and confidentiality.
The initiative to create the Spanish-Saudi Investment Fund came from the Spanish Foreign Affairs Ministry, which was led at the time by Miguel Ángel Moratinos, and from Juan Carlos I himself. But the management of the project was carried out by two foreign companies: British asset manager Cheyne Capital and Swiss-based Arox Infrastructure.
Cheyne Capital supposedly hired Larsen for the project and presented her as an associate at meetings in Madrid, according to sources who were involved with the fund. The firm, which is headquartered in London, did not respond to questions sent by this newspaper. “They told us that [Larsen] was working for them and that she would speak with investors. We knew nothing about her work nor who she was talking to,” says a source familiar with the launch of the fund.
“No one knew that she was hired. She appeared like another possible investor and said she would bring in money from other funds. We didn’t know either about her relationship with the king,” says a former minister in the Zapatero government, who was involved with setting up the initiative.
Spain and Saudi Arabia lent their full support for the launch of the fund. The ambassadors of both countries facilitated different meetings between the directors of Cheyne Capital, US investment bank Morgan Stanley and Corinna Larsen herself, with Spanish and Saudi authorities, according to one of the participants of the gatherings. According to Spanish news site El Diario, in June 2007, the Saudi press covered Larsen’s visit, in company of then-Spanish ambassador Manuel Alabar, to meet with Saudi Arabia’s Prince Alwaleed bin Talal.
On June 19, 2007, just days after her journey to Riyadh, Larsen attended the official presentation of the Spanish-Saudi Investment Fund in the Royal Palace of El Pardo. The event was also attended by then-industry minister Joan Clos, former Saudi finance minister Ibrahim bin-Abdul Aziz Al-Assaf and the president of the Spanish Business Confederation (CEOE) Gerardo Díaz Ferran, as well as other leading figures and representatives of the political and business world. “They introduced me to her at the event and she said to me, ‘This project is very important for Spain,’” a senior official says of his brief meeting with Larsen.
That same day, the late Saudi monarch Abdullah bin Abdulaziz visited Madrid for the first time and was styled a knight of the Order of the Golden Fleece by Juan Carlos I, the insignia of a 15th-century chivalric order and the highest decoration awarded by the Spanish Royal Household. During his speech at the event in El Pardo, Spain’s emeritus king commended the Spanish-Saudi Investment Fund.
British fund Cheyne Capital hired the US investment bank Morgan Stanley so that its executives in Madrid, London and Riyadh could make the presentations and capture companies that would supply the liquidity for the creation of the fund, according to a source from the banking sector. The promise was to participate in a huge prospective infrastructure plan in Saudi Arabia, the cost of which would run into several trillion dollars.
“In the first phase, the objective was to raise $500 million, 250 from Spanish companies and another 250 from Saudi capital,” explains a finance executive who took part in the launch. “There were conversations with a number of banks so that they would finance the fund’s future investments. If you obtain 500 of capital you could get another 4,000 of debt.”
A prospectus of the fund was published, and Morgan Stanley made a number of presentations. Some 14 Spanish companies, among them OHL, Sacyr, Caja Madrid (Bankia) and La Mutua, among others, committed to supplying around €200 million but the promised Saudi capital never exceeded €100 million. “The Saudi part did not work, and the Spanish companies said, it’s either all of us or none of us,” explains one of the participants. “The [global financial] crisis in 2008 and 2009 saw the end of the project, and in the end, no one ended up putting in what had been committed.”
The Fondo de Infraestructuras Hispano Saudí (or, Spanish Saudi Infrastructure Fund) was registered in Saint Peter Port, the capital of Guernsey, which is one of the Channel Islands. The archipelago, located off the coast of France, are known as “Crown Dependencies,” meaning that while not part of the United Kingdom, the latter country is responsible for them. They are self-governing, but are not sovereign states, and their economies are based on financial services given that they are considered tax havens. “In that era, the normal thing was that all of the issuers in capital markets would do it there in order to take advantage of the low tax rates,” explains one of the sources consulted by EL PAÍS.
Stuart Fiertz and Jonathan Lourie, the founders of Cheyne Capital and former executives at Morgan Stanley, were at the helm of this project. They traveled to Spain several times and took part in a number of meetings with Spanish executives, the sources consulted explain. On some occasions, they did so in the company of Larsen and presented her as their associate.
Fiertz was one of the directors of the Energy and Infrastructure G.P. Limited fund, which was created in Guernsey on April 10, 2007 and closed on August 23, 2012. To do this, the British investment fund used the company Cheyne Equity Partners, which was headquartered in Tórtola, another tax haven in the British Virgin Islands, and which was listed as the owner of 8,000 shares. Another 8,000 shares were registered in the name of Boreas Capital Limited.
The other company that was driving the project, Arox Infrastructure AG, was represented at meetings in Madrid by Ludovico Manfredi and Eberhard von Koerber, according to witnesses consulted. What’s more, both figure on the organizational structure of the aforementioned fund created in Guernsey, as this newspaper has been able to confirm via the island’s company registry. Both Cheyne Capital and Arox wanted to invest in the projects that the fund would implement.
Who decided that two foreign companies such as Cheyne Capital and Arox Infrastructures should manage the Spanish-Saudi fund? “We thought about putting it out for a transparent, competitive public bid, but the Saudis said it had to be these two companies,” explains a high-ranking official from the Trade Ministry who was involved in the launch. “No one from the Spanish administration took part in that.”
“The Saudi representative stated that to carry out a project of this magnitude a financial institution with a global reach was needed and they chose Morgan Stanley,” the same source explains. “The Spanish administration was not involved in the management of the contracts, managers and so on, because the Saudis were in control of that. We didn’t know anything about it because we didn’t put anything in, not a single euro. With Larsen we did not have any meetings because we didn’t provide the projects.”
In 2010, the executives from Cheyne and Arox called a meeting in Madrid with the Spanish companies who had committed to the project in order to inform them about the closure of the fund. At the same meeting, the costs were announced, which included several million euros spent on trips, meetings, attorneys and dealings that would be apportioned between all the parties involved. “I believe that it was closed in 2010, I’m not sure,” explains a source close to the project. “The Spanish companies paid something. The costs were not too onerous.” Other sources close to the companies involved state, however, that the costs were as high as €16 million.
Some of the Spanish firms that took part in the project admit their initial commitment, but none of those consulted has supplied to this newspaper the figure that was paid when the fund was eventually closed.
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Odyssey Marine Exploration: Spanish court shelves case against US treasure hunters that looted ‘Mercedes’ frigate | USA
The history of the Spanish frigate Nuestra Señora de las Mercedes includes two grievances and one victory. The first of the former was when the British Navy sunk it and its 275 crew members on October 5, 1804, off Portugal’s Algarve coast. The second offense came in May 2007, when the US treasure-hunting company Odyssey Marine Exploration scooped up its cargo of 500,000 silver and gold coins from the shipwreck at the bottom of the sea.
Triumph came when the US justice system confirmed that the treasure belonged to Spain, in a ruling released in February 2012. But there was one more affront to come: a Spanish court has just definitively shelved a case into alleged crimes committed by the US treasure hunters as they were removing the coins. After a tortuous 14-year investigation, a courtroom in Cádiz has been left with no option but to let the probe die, albeit admitting its “bafflement” and “anger” over what it considers “unusual proceedings.”
At the same time as the legal process began in Florida to determine who was the rightful owner of the rescued treasure, Odyssey or Spain, a court in La Línea de la Concepción, in the southwestern Spanish province of Cádiz, began investigating whether the then-CEO of Odyssey Marine Exploration, Greg Stemm, and his team had committed any criminal offenses when they removed the haul from the shipwreck. Among the potential crimes were damaging an archeological site and smuggling.
The fact that the 500,000 pieces of silver and gold were returned to Spain in February 2012 – nearly 17 tons of material, which are now held in the ARQUA underwater archeology museum in Cartagena – is proof that the legal battle in the United States ended well for Spain. But the latest decision in the Spanish case, to which EL PAÍS has had access, leaves no doubt that the investigation into potential crimes has definitively been shipwrecked.
The three judges who were responsible for the case found that the shelving, which cannot be appealed, is based principally on the fact that the potential offenses have now exceeded the statute of limitations in Spain for trial. And the slow process of the probe, according to the judges’ writ, was due to the failure of the US justice system to respond to the letters rogatory sent in 2013, and that were needed if Stemm and the rest of the suspects were to be questioned by investigators.
“In terms of the lawsuit over the coins, the United States was on Spain’s side,” explains Ángel Núñez, a public prosecutor who specializes in cultural heritage and who was in charge of the case until 2009. “But it is true that when it comes to targeting one of their own nationals, they are not so willing to collaborate. And given that these were US citizens who are not at the disposal of the Spanish courts…”
The Spanish court probe into Odyssey had already entered into a tailspin before this latest ruling. In December 2016, another judge in La Línea dismissed the case. The private prosecution, which was brought by the company Nerea Arqueología Subacuática, appealed the decision but it was rejected. In a new attempt to not let the legal process die, archeologist Javier Noriega, one of the heads of this small company based in Málaga, took the case to the High Court of Cádiz province, in La Línea, the one that has definitively shelved the proceedings.
In their ruling, the judges add that they share “with the appellant his surprise, confusion and even anger for the, shall we call it, unusual proceedings with this case, at least since the year 2013.” The magistrates do not go so far as to specify what prompted them to feel this way.
Archeologist Javier Noriega believes that he knows all too well what they are referring to. He and his colleagues decided to take up the case – represented by the attorney José María Lancho – as a “professional and moral obligation.” They have since seen how “all of these years can be summed up by the end: exceeding the statute of limitations.” “They avoided entering into the substance of what happened to Spain’s cultural heritage,” the expert complains.
These unusual proceedings in the investigation which the judges mention and that Noriega suffered first-hand were reported on in the Spanish press. In March 2012, a former legal representative for Odyssey, with no authority, entered the courtroom when the judge was absent and persuaded court workers to photocopy the entire findings of the legal investigation so far, as was reported by the Spanish daily Abc at the time. According to Abc, such an action would have allowed Odyssey to prepare a defense against the findings of Civil Guard investigators and decide whether or not to actually take part in the trial.
The actions of the representative were very serious, taking into account that the probe was counting on a protected witness: a diver who had been threatened for having denounced Odyssey, given that he had knowledge of some of its activities in Spanish waters.
Now Noriega, 46, is gloomy about the end of a process that has occupied a significant part of his career. “As people who love our profession, it’s frustrating,” he explains. “It ends up being a defeat for all of us, for culture and for society. And if as well as that, the person responsible has gone unpunished, because of the statute of limitations, that’s very sad.”
Despite the legal setback, the archeologist argues that the court probe contains “evidence of all kinds, archeological, from witnesses, technical, juridical, and a ton of resounding questions that deal with what supposedly happened with an overwhelming truthfulness.”
The expert believes that an opportunity has been missed by Europe to convey “a clear message to the thieves who have spent years destroying the history of those shipwrecks from the modern era all over the world.”
Odyssey Marine Exploration never had any interest in the Spanish frigate beyond the cargo of silver and gold that it was carrying. That was made clear by the destruction caused by the company in the archeological area where the remains of the 275 people killed in the attack in 1804 lay. “When an archeological site is plundered, it is destroyed forever,” states Noriega.
After the site was looted, ARQUA led a scientific excavation that was carried out in three campaigns – from 2015 to 2017 – in which the remains of the shipwreck were documented and the items that the treasure hunters left behind were removed. These included cannon, cutlery and other everyday objects from life on board. The expedition also achieved the challenge of descending 1,130 meters underwater, the maximum depth achieved until that point during a subaquatic arqueological mission by a European country.
While the damage done to a historical site such as the Mercedes shipwreck will not result in a trial or convictions, Núñez believes that the consequences of the process “were positive, from a legal and global point of view.” Noriega goes even further: “Spain and its coasts are, today, possibly the best protected and safest in the world with regard to the protection of cultural heritage against looting.”
Since the Odyssey case, the classification of offenses against historical heritage in Spain has improved, new archeological maps have been created, there is better coordination between administrations, and there is greater social awareness about this kind of offense. It was precisely these weaknesses that the treasure-hunting company Odyssey made use of to make off with the coins. In fact, the activity has presumably lost its appeal not just in Spain but also elsewhere, given that the American company has since abandoned its treasure-hunting activities and is now focusing on underground mining.
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