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Spain - Corruption

Corruption remains a major issue in Spain: in 2016, the country scored its worst ranking in Transparency International's annual Corruption Perceptions Index following a series of scandals hitting various political parties.

Spanish Prime Minister Mariano Rajoy was called in April 2017 to testify in proceedings relating to corrupt practices by a number of companies, which were suspected of bribing lawmakers in Rajoy's conservative People's Party (PP) in exchange for contracts. The event marked the first time in modern history that a Spanish premier has been asked to take the stand. The 62-year-old leader is not accused of any wrongdoing himself in the case, but his post as PP party chief since 2004 could mean that he might hold valuable information. The daily "El Pais" newspaper, however, has reported that the public prosecutor considered testimony from Rajoy to be irrelevant to the case.

The trial arose out of the so-called "Gurtel" scandal centered on businessman Francisco Correa, who along with three others is suspected of fraud and the embezzlement of large sums of public funds between 1999 and 2005. In total, 37 defendants face justice in the controversial case, in which it is alleged that Correa and his network would receive a commission of 2 to 3 percent on the value of public tenders. Correa is alleged to have shared those profits with the politicians that facilitated the awarding of those contracts.

A Spanish court said 25 May 2018 it had found Prime Minister Mariano Rajoy's Popular Party (PP) guilty of benefiting from a vast kickbacks scheme that saw PP politicians take bribes in exchange for contracts. The Madrid-based National Court, which deals with major criminal cases, also sentenced businessman Francisco Correa, the brains of the graft network, to 51 years in prison and several former PP members to up to 38 years.

The man allegedly in charge of this slush fund was Luis Barcenas, the PP's treasurer between 2008 and 2009. He was sentenced to 33 years and four months in prison and to a 44-million-euro fine for money laundering, tax fraud and other offences. Barcenas, suspected of having hidden money in Switzerland, was the pillar of the corruption scheme along with Correa.

On 01 June 2018 the Spanish parliament voted in favor of a no-confidence motion against Prime Minister Mariano Rajoy over a funding scandal. The no-confidence vote came as Rajoy's conservative People's Party (PP) was enmired in a funding scandal that last week saw 29 people linked to the party, including elected officials, receive heavy sentences while the party itself was fined for operating hidden accounts.

In Spain a variety of historic, socio-economic and criminogenic factors contribute to the increasing scope and complexity of organized crime. As Europe’s main entry point for cocaine and for cannabis resin (hashish), Spain continues to provide a fertile ground for drug trafficking with increasing seizures of cocaine and cannabis resin. Smuggling of migrants (comprising largely immigrants coming from the African continent) is another large playing field for organised crime and poses a serious humanitarian challenge. Organised criminal groups also profit from property crime, including by burglarising industrial estates, jewellery shops and dwellings.

Organised crime exercises serious corruption pressures on law enforcement, the local level administration and politicians. Recent cases of police corruption have involved extortion from prostitutes, bars and local businesses, participation in drug trafficking networks, and relationships of certain officers with local “red light district” clubs. Nevertheless, corrupt arrangements in the police are not likely to be long-lasting as internal affairs units investigate cases and can be rather effective in bringing charges against corrupt officials.

Spain’s coastline has long attracted criminals and money-launderers, which have exerted corrupt influence on local governance. This type of pressure has challenged the impartiality of the justice system, linking judicial corruption with political corruption. Judicial corruption is singled out as a serious problem in Spain, whereas the courts are corrupted in order to delay or speed up proceedings, to conceal evidence or judicial records. Judicial impartiality is sometimes achieved in exchange for bribes but most often through political pressures. Politicians place key magistrates in judicial governing bodies and in case of investigations magistrates are able to pressure lower level judges so that their political patrons and related businessmen may be acquitted.

Political parties grant their affiliates access to power and protection (including protection from criminal prosecution) in exchange for loyalty and electoral support. Politics has therefore turned into a market where parties compete like businesses, inspired by personal benefits and supported by corruption. This political system, made up of a network of personal relations and particular interests, is at the core of the so called Spanish “ungovernance”.

During the economic prosperity, political parties made extensive use of bank loans to cover their expenses. The Court of Audit reported in 2012 that the total debt of political parties (national and regional) to financial institutions amounted to EUR 227 million in 2007. Over the same period, the composition of boards of directors of savings banks (cajas de ahorros) became increasingly influenced by political parties. At the same time, controls over the loans granted to parties were not comprehensive, given the limited capacity of the Court of Audit at the time to perform such checks. This created vulnerabilities in the integrity of the system for financing political parties and electoral campaigns. As a result, some loans were granted at very favorable conditions, and at times forgiven altogether.

According to the 2013 Special Eurobarometer on Corruption 63% of respondents (highest percentage in the EU) feel personally affected by corruption in their daily lives (EU average: 26%), while 95% say that corruption is a widespread problem in the country (EU average: 76%) and 91% state that corruption exists in local and regional institutions (EU average: 77%). Regular national surveys carried out by the Spanish Centre for Sociological Research (CIS) currently also show negative trends.

The 2013 Special Eurobarometer on Corruption shows that Spain scores better than the EU average on petty corruption: only 2% of Spanish respondents were asked or expected to pay a bribe in the past year (EU average: 4%). Over 52% of the Spanish respondents to a 2013 Flash Eurobarometer survey on businesses think that the only way to succeed in business is to have political connections (EU average: 47%).23 97% of Spanish businesses (second highest percentage in the EU) said that corruption is widespread in their country (EU average: 75%), while 88% (second highest percentage in the EU) consider that bribery and abuse of power is widespread among politicians, party representatives or senior officials at regional or local level (EU average: 70%). some 93% of Spanish respondents (second highest percentage in the EU) to the same survey say that favoritism and corruption hamper business competition in their country (EU average: 73%).

Numerous past and ongoing criminal proceedings into allegations of corruption concern regional and local elected officials, including involvement of 'clientele' networks. A database built on open sources includes approximately 600 municipalities and 5 144 alleged corruption cases reported in the media between 1996 and 2009. The cases often involve charges or allegations of illegal party funding, illicit personal enrichment, diversion of national or EU funds, favoritism and conflicts of interest. Some of the most well-known investigations at regional and local levels concern alleged misuse of public funds by former high-ranking regional officials to award earlyretirement packages and abuse of labor force downsizing plans or alleged corrupt practices with regard to vehicle inspection system public contracts, or awards of public contracts in the healthcare sector.

Parties must now notify the Court of Audit of all donations above EUR 50 000 or involving real estate, as well as of all agreements with banks relating to loans. These loan agreements also have to be disclosed to the Bank of Spain. Moreover, a cancellation of loans is considered as a donation. Cancellations of loans to political parties exceeding EUR 100 000 per year are now prohibited. In December 2012, amendments to the criminal code were adopted to also include provisions on criminal liability of political parties and new forms of criminal sanctions for concealment and falsification of public accounts.

Giving or accepting a bribe is a criminal act. Under Section 1255 of the Spanish civil code, corporations and individuals are prohibited from deducting bribes from domestic tax computations.

Spain has a wide variety of laws, regulations, and penalties dealing with corruption. The legal regime has both civil and criminal sanctions for corruption, bribery, financial malfeasance, etc. The Spanish legal regime is hampered, however, by the fact that only natural persons (i.e., individuals), as opposed to legal persons (i.e., companies), can be held criminally liable for the actions of a company. Furthermore, civil and administrative proceedings cannot begin until there is a finding of criminal liability against a natural person. Although the Ministry of Justice has initiated an amendment process to provide for sanctions of legal persons, it has not yet become law.

On November 29, 2006, Parliament passed a tough law against tax evasion that is designed, in part, to combat corruption. The government also issued two regulations imposing new requirements on banks and financial institutions to fight money laundering. In April 2010 Spain’s Parliament passed a new law, Law 10/2010, aimed at protecting the integrity of the financial and other economic sectors through the establishment of obligations to prevent money laundering and terrorist financing. With this law, Spain has successfully transposed the third EU money laundering Directive (Directive 2005&60/CE) of the European Parliament and the Council of October 26, 2005. Banks and other financial institutions, investment services firms, collective investment institutions, management companies of private equity and venture capital firms are all obliged to comply with the law. Some portions of the new law entered into force immediately, but others are awaiting implementing regulations, which were expected to be approved in the course of 2011.

Spain is a signatory of the OECD Convention on Combating Bribery, and Spanish officials attach importance to combating corruption. The government is working to amend domestic law to make the Convention a more useful investigative and prosecutorial tool.

The General State Prosecutor is authorized to investigate and prosecute corruption cases involving funds in excess of roughly USD 500,000. The Office of the Anti-Corruption Prosecutor, a subordinate unit of the General State Prosecutor, has 15-20 prosecutors in Madrid, Barcelona, and Valencia who are tasked with investigating and prosecuting domestic and international bribery allegations. There is also the "Audiencia Nacional," a corps of magistrates whose attributes include broad discretion to investigate and prosecute alleged instances of Spanish businesspeople bribing foreign officials.

Spain enforces anti-corruption laws on a generally uniform basis. Public officials are probably subjected to more scrutiny than private individuals, but several wealthy and well-connected business executives have been successfully prosecuted for corruption. There is no obvious bias for or against foreign investors. U.S. firms have not identified corruption as an obstacle to investment in Spain. Although no formal corruption complaints have been lodged, U.S. companies have indicated that they have been disqualified at times from public tenders based on reasons that these companies’ legal counsels did not consider justifiable.

Spain’s rank in Transparency International’s annual Corruption Perceptions Index improved by two places in 2010 after three years of decline. However, its overall score has remained stable in recent years.

Conversations with representatives of the Spanish legal community indicate that the Convention is increasingly being taken into account in the drafting of contracts. Spanish companies, both domestic and multinational, are insisting that clauses protecting them against requests for bribes be inserted into business contracts. Tax evasion, particularly by those who work in cash-based sectors, has reportedly been heavy.

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