Sunday, July 10, 2016

The Forgetfulness Of Clubs' Finances

Clubs are suddenly very much in fashion - news fashion, that is. The police and the tax agency have made them so. One of them is Amnesia, the Ibiza club that regularly features among awards for the best club in the world and which has been with us since the start of the 1970s. Amnesia, more than any other club, gave Ibiza its club reputation. It now looks as if it might acquire a different reputation.

Over recent days, the club and other property belonging to its owner, Martin Ferrer, have been raided by the Guardia Civil. The operation was ordered through a combination of an investigating judge in Ibiza, the tax agency and the Guardia Civil's central operations unit. The judge has since issued an order to "block" a total of sixteen properties belonging to Ferrer, meaning that they cannot be sold or their assets transferred. The scope of the operation is such that it involves property as far away as Leon on the mainland, where Ferrer has a house in Crémenes and various others.

The raid on Amnesia, which was over two days, extended to the opening of bank safe deposits. At least two million euros have been found. Ferrer was arrested but has been released, much to the perplexity of the prosecution service which had called for his precautionary detention and that of others. Nevertheless, the Guardia's criminal police and the tax agency believe they have the documentation they need and so it will not be altered or somehow disappear. Tax fraud and money laundering are the main charges that prosecutors are levelling.

The nature of the operation is such that Guardia detectives were moved in from Mallorca. Virtually no officers in Ibiza have been involved. At the room they have occupied at the Ibiza headquarters, the first thing that was done was to change the lock. A preliminary estimation by the tax agency of the level of alleged fraud is nearly five million euros. This figure relates to only two years - 2012 and 2013 - and this particular investigation was sparked by an anonymous tip-off directed principally against the former chief financial officer of Amnesia and related companies, Josep Aymar, with Ferrer also implicated.

The case has been several months in the unfolding. The prosecution service, on receipt of a report from the tax agency, lodged it was the court back in October. There had been a period of investigation prior to this, with the anonymous information and the facts it offered having been scrutinised.

The operation against Amnesia is not an isolated one. In fact it falls under a massive nationwide action. Dubbed "Operation Chopin", a total of 87 clubs were raided across Spain when officers from the Guardia, the National Police and the Mossos in Catalonia moved in early on Saturday morning at times when the clubs were closing: in the case of Amnesia, it typically closes at 7am. Among these clubs were other well-known ones in Ibiza - Space and Privilege - as well as BCM in Magalluf. Chopin is thus a major operation against potential tax fraud that embraces much of the elite of Balearic and Spanish nightlife.

The scale is enormous, the coordination of the action impressive. There were four clubs in the Balearics that were raided, but elsewhere there were as many as twenty (in Valencia), sixteen in both Catalonia and Galicia and ten in Andalusia. Together these clubs represent some twenty per cent of the entire turnover of Spain's nightlife sector. But what actually is the turnover? That's something for investigators to identify. Approximately 75% of revenue is cash.

As to Ferrer, it is not the first time that he has been the focus of an investigation. There was one in 2011 related to VAT returns five years previously. His involvement with Aymar is said to have been financially disadvantageous to him in that there were poor investment decisions, such as the Amnesia Barcelona project. An allegation is that the debt and interest that needed to be paid for that resulted in the diversion of funds in order to service the repayments; this represented, therefore, a loss for the tax agency, which is a polite way of saying that a fraud was committed.

Where does this all lead to? It's impossible to say. This is an investigation into a sector in which cash dominates. Establishing alleged trails of money laundering therefore becomes central. Unravelling them will not happen overnight; say between 12 midnight and 7am, when a club would be open.

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