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Last updated on April 17, 2014 at 7:39 EDT

Five more held in Spanish stamps fraud case

May 13, 2006

MADRID (Reuters) – Spain’s High Court on Saturday ordered
that five more people accused of fraud be held in jail as an
investigation into whether they lied about the value of
investments in postage stamps continued.

The men are directors of Forum Filatelico, the second of
two privately owned Madrid-based companies at the center of
what could be the biggest fraud scandal in Spanish history,
possibly running into billions of euros according to court
documents.

Both companies deny any wrongdoing.

Some 350,000 people are thought to have put their savings
into the companies, which used the cash in the global
collectibles market to buy rare or antique postage stamps.

The money was used to “disappoint the good faith of
investors via a two-fold fiction: (by telling them) that the
stamps acquired as an investment had a value of far more than
was really the case, and that the interest paid to them did not
come from (the stamps) but from different contributions (by
other investors),” Judge Fernando Grande-Marlaska said in court
documents.

Like four men arrested on Friday from Afinsa, another
collectibles investment company, Marlaska ordered the five
should be held in prison because of a risk they would try to
flee or destroy evidence.

The judge accused them of fraud, money laundering and
criminal insolvency, court documents showed.

JUDICIAL ADMINISTRATOR

Now a judicial administrator will be named to gather
financial evidence to present for trial, legal sources said.

Newspaper El Pais reported that lawyers defending Afinsa
directors argue that the problem is due to a different
interpretation of the judicial nature of contracts between
Afinsa and its clients.

The case is further complicated by the fact that the firms
were not supervised by either the Bank of Spain or the national
securities watchdog CNMV, they said.

It is unclear to which supervisor, if any, such an
investment company is answerable, except to tax authorities
Hacienda.

The public prosecutor said that between 1998 and 2002,
Afinsa bought stamps for 58 million euros (40 million pounds)
and sold them to its investors for 723 million euros — a
mark-up of 1,150 percent.

It said that at the end of 2004, Afinsa’s commitments to
clients stood at 1.75 billion euros while media have reported
its current commitments could be much higher.

Forum Filatelico for its part had a gap in its accounts of
2.4 billion euros, court documents said.

The case has caused ripples outside Spain, particularly in
the United States where Afinsa is the main shareholder in
Escala, a Nasdaq-quoted company which specializes in buying and
selling collectible items like stamps, coins and art.

Shares in Escala plunged more than 80 percent this week.


Source: reuters