The investigation points to the enrichment of Cristóbal Montoro and the use of front men.

Barcelona / MadridFormer Finance Minister Cristóbal Montoro, a member of the core of the PP government during Mariano Rajoy's presidency, is in the eye of the storm for having trafficked laws from within the ministry. According to the case summary to which ARA has had access, investigators suspect he may have enriched himself. How? Several companies in strategic sectors—from gas companies to construction, including electricity and tobacco—apparently obtained the regulatory changes they sought, including tax benefits, after hiring the services of Equipo Económico (EE), a consulting firm founded in 2006 by Montoro himself. But the plot doesn't end there: at the same time, EE was linked to several companies that investigators consider front companies, some of them with ties to tax havens, to make it difficult to trace illicit funds. Investigators believe that the former PP minister and several former high-ranking Treasury officials from his time could be hiding money at the end of the chain.

This is evident from one of the reports by the prosecutor in the case, dated December 5, 2019, when she asked the judge to extend the secrecy of the summary, now lifted: "The same corporate network created and the information we have on the positions held by one of the administrative staff of the Economic Team made it clear that there were front men and shell companies to divert the profits from their illicit origin and hide their investment."

The prosecutor and investigators suspect that the former Minister of Finance is one of the beneficiaries of the plot, since despite having access to the government, he could have continued to be part of EE because the notarial documents of his disassociation from the entity would have been "fictitious." This case was initiated by the Mossos d'Esquadra (Catalan police) in 2017 in Tarragona—which is why the investigating judge is from there—by chance: within the framework of another case, they intercepted emails from the technical director of Messer Ibérica de Gasas S.A., Rubén Folgado, in which he described the actions carried out by the company with the objective of obtaining a legislative change that would provide them with tax benefits by reducing the electricity tax. Among them was the hiring of Equipo Económico, founded by Montoro: "The most direct route, as always, is to pay this economic team that has direct contact with Minister Cristóbal Montoro," said one of the emails.

In total, the plot involves 28 people and six companies, to which the investigating judge accuses seven crimes: bribery, fraud against the public administration, malfeasance, influence peddling, prohibited negotiations, corruption in business, and document falsification. The Prosecutor's Office and the Mossos d'Esquadra also believe there may be money laundering crimes involved.

Throughout 2019, the Mossos d'Esquadra (Catalan police) investigated not only the companies that had hired Equipo Económico to have a "direct link" to Cristóbal Montoro's Ministry of Finance and achieve the legislative changes they wanted, in exchange for paying for standard reports, but they also followed the trail of the money that went to them. Thus, they identified several companies that work solely for Equipo Económico and that are linked to partners of that company and to the former minister himself.

A report from the prosecutor in the same year states: "The investigation carried out by the Mossos d'Esquadra reveals that the company Equipo Económico (EE) has been used by its partners, and allegedly also by other people who would covertly participate in the distribution of illegal profits... to introduce legislative reforms into our legal system that would favor businessmen willing to pay." And the investigators add in another point of the case: "This system of tax engineering allowed them to obtain tax benefits (due to their lower taxes) in addition to making it difficult to identify the final recipients of the funds."

Shell companies

The Mossos d'Esquadra have clearly identified the network of shell companies that the owners of Equipo Económico used to divert money they collected from companies in exchange for influencing the Ministry of Finance. The turnover of these companies (Econodos SL, Tutman Fiscalía SL, Consultoría y Diagnóstico SL, and Plataforma de Soluciones Jurídicas SL) is detailed, ranging from €3 million to €800,000 between 2008 and 2017. Rico, who was Secretary of State for Budgets under José María Aznar and, therefore, Montoro's right-hand man in the ministry, was also the sole director of the company Econodos, which received €3,511,925.42 in payments from Equipo Económico between 2009 and 2015.

The Mossos d'Esquadra claim that, ultimately, the scheme had two ways of sharing the profits. The first was by paying unusually high salaries to his partners, and the second through shell companies. Martínez Rico received, for example, an astronomical sum of €11,053,029 in payrolls.

Starting in 2015, after the first reports of Montoro's influence peddling emerged, Equipo Económico transferred its operations to the company Global Afteli SL. The Mossos d'Esquadra also point out that part of the financial activity of these companies could incorporate transactions carried out abroad.

The link with tax havens

Many of these shell companies, including EE, sent money abroad to tax havens, and it is at this point that the investigation is now halted pending receipt of information from these countries. "Thus, considering it likely that the money could have been located outside of Spain, the outflow of funds from both EE/Global Afteli and Limacar to various European countries with which they would have maintained intra-community transactions has been revealed. Furthermore, it has been highlighted, on the one hand, the inflow of foreign currency to the US, the United States, and the United Kingdom, and on the other, the outflow of foreign currency from Limacar and Tutman Fiscalía to Ireland and Luxembourg," states the Tax Agency.

In Montoro's specific case, suspicions arise over the manner in which he allegedly broke away from the firm he founded in 2006 as Montoro & Asociados, which later became Equipo Económico. Specifically, the Mossos d'Esquadra (Catalan police) point out that he sold his shares for a value lower than the AEAT (Spanish Tax Agency) criteria (also his brother, Ricardo Montoro, and Luis de Guindos, former Minister of Economy under Mariano Rajoy, both also partners in Equipo Económico). Therefore, they believe he actually maintained a connection. And since they have found nothing irregular in Montoro's formal accounts and properties, the investigation now focuses on tracing the route of the money that entered Equipo Económico and was later diverted abroad. The objective is to find the front man who was supposedly hiding the former PP minister's money.

Legislative reforms

The companies paid EE, which was directly linked to Montoro, to obtain favorable legislative measures. The PP's absolute power and which, according to investigators, "was more in the interest of EE than the general interest." Industrial and Medicinal Gas Manufacturers (AFGIM) There comes a time when they say that the effective way "is to pay the economic team that has direct contact with Minister Montoro." Meetings follow, and they finally agree to pay in total (each company, not the association) 27 page Mossos d'Economés. After a meeting with Montoro himself, everything leads to the Treasury's approval of this tax benefit. of Economic Activities at the request of gas companies. First, they contacted a company to lobby and influence the Ministry of Finance to accept this modification and incorporate it into the budget law. From Montoro's law firm, the reform was successful, and EE billed them €360,000 for their services. He tried to apply a "progressive" tax in the electricity sector, which penalized these companies;

The Mossos d'Esquadra investigation begins with the gas sector and continues with renewables, but also focuses on the relationship EE had with specific companies, such as Red Eléctrica, in which SEPI, the state's public investment arm, holds a 20% stake; Abengoa (where they highlight its close relationship with political powers of all stripes); Madrid Network, linked to the Community of Madrid; and Ferrovial. Catalan police say that Red Eléctrica, which they recall is the company that monopolizes all electricity transmission networks in Spain, contracted EE services worth €1.3 million between 2010 and 2015. Regarding Ferrovial, they gather information from an anonymous complaint filed in the case by Beteta, Secretary of State for Public Administrations during the Rajoy government, who suggested that he hire Montoro's office to promote his intentions to reform the regulatory framework, which ended up billing him €300,000.

On the other hand, the Catalan police also point to a branch in the Community of Madrid, through Madrid Network, a private association promoting innovative projects that managed public funds. How so? Following an agreement made by Cristina Garmendia, minister under José Luis Rodríguez Zapatero (PSOE), who transferred money to the Community of Madrid, which in turn signed an agreement with Madrid Network to finance the projects it considered. The Economic Team had a turnover of 2 million euros. Antoni Beteta also chaired this organization and was Minister of Economy in the Community of Madrid. The Mossos d'Esquadra, at the same time, point out that this organization made loans to companies linked to former minister Garmendia.

Finally, the police also cite the relationship between EE and Abengoa, with whom Montoro's firm invoiced more than €3 million. In any case, they note that the relationship goes beyond the contractual, and the key figure here is Ricardo Martínez Rico, a partner at EE, hired by the firm "to provide a direct connection with the Minister of Finance." Rico is also the brother of Felipe Martínez Rico, Montoro's chief of staff when he was minister.

Philip Morris and the gaming companies

Tobacco companies also allegedly turned to EE and Montoro to obtain the legislation they wanted, and Philip Morris, specifically, appears to have paid the most money, with €1.3 million. The investigation reveals that there were meetings between the tobacco company and Treasury officials regarding tobacco taxation, and also that Ricardo Montoro Romero, the former minister's brother, allegedly received income from Philip Morris in 2016 for courses and conferences.

Gaming companies had also approached EE, and specifically Codere S.A., before the gaming law came into force. Spanish companies were lobbying to put obstacles in the way of foreign-owned companies, and after Codere became an EE client, the Treasury imposed taxes on foreign gaming companies' profits obtained in the four years prior to the law's approval if they wanted to obtain a license in Spain.