Money Laundering & Forest Liquidation LOS ANGELES TIMES April 4, 2005 http://www.latimes.com/business/la-ft-spain4apr04,1,6762879.story?coll=la-headlines-business&ctrack=1&cset=true GLOBAL REPORT Building a Case in Spain An international probe of money laundering wends through the construction industry in the Costa del Sol. By Leslie Crawford Financial Times MADRID - In the Spanish boom town of Malaga, it is the building cranes, rather than the Mediterranean, that stretch out as far as the eye can see. The capital of the Costa del Sol has always had a Wild West feel, but now Malaga is entangled in a vast money-laundering investigation that could spell the end of the construction orgy that has been its economic lifeblood. Operation White Whale, the culmination of an 18-month investigation involving police in seven countries, has netted 41 suspects and 251 properties valued at 250 million euros (about $320 million), including luxury villas, holiday flats and shopping malls. Bank deposits totaling 30 million euros have been frozen, and the contents of several safety deposit boxes in bank vaults have been taken away for inspection. Spanish police believe that they have cracked the biggest money-laundering ring in Europe, with ramifications in the United States and Canada. Candido Conde-Pumpido, the attorney general, described the investigation as "the tip of the iceberg." "We are witnessing the silent invasion of mafias on our coast," he said, "and the big fish have yet to be caught." Last month police following the money trails of three drug cartels raided the offices of Fernando del Valle, the head of a Marbella law firm. Police allege that he set up hundreds of shell companies for foreign criminals to invest their illicit proceeds in Spanish property. Police estimate that more than 600 million euros might have been laundered through the Del Valle firm's offices. They suspect that many more law firms along the coast are involved in money laundering. Documents seized at the Del Valle firm appear to indicate that large sums of money were diverted from Yukos, the Russian oil group, to a Dutch company and then reinvested in a Spanish unit. In a statement, Yukos denied that it had business interests in Spain. The company has written to the attorney general requesting more information. Operation White Whale would mark the first time police have established a direct link between organized crime and Spain's booming construction and property industries. Half of all new construction starts in Spain take place on the Mediterranean coast. In a boon for international criminals, established practice enables notaries to excuse themselves for a few minutes when property contracts are signed, allowing the buyer to hand over "dinero B," a substantial amount of undeclared cash. Unlike bankers, public notaries are not required to "know their clients" or establish the provenance of money exchanged in property transactions. Three notaries have been arrested in connection with the investigation. There are no reliable estimates of to what extent organized crime may have infiltrated Spain's construction industry, but Per Stangeland, head of criminology at the University of Malaga, says the presence of criminal networks in construction and property is undeniable. "It is a driving force, perhaps the most important driving force, behind the construction industry," he said. "How else is there to explain that [Malaga], with one of the highest unemployment rates and lowest incomes in Spain, can sustain a 1,600% growth in the construction of private housing in five years?" The civil guard, a branch of the armed forces, estimates that 550 criminal groups operate in Spain, about half of them foreign. Last year, police made 323 arrests in connection with organized crime. "Criminals are businessmen these days," said a chief inspector in a unit that fights organized crime. "They want good travel connections, an efficient banking sector, nice weather and anonymity. They get all that in Malaga." Politicians on the Costa del Sol are known to accept payment or personal favors in return for the sale of public land or the approval of construction projects. Jesus Gil y Gil, the former mayor of Marbella, was being investigated on 15 counts of corruption and links to Italian and Russian mafia bosses when he died last year. Although Spaniards have long turned a blind eye to official corruption, links to organized crime have become too serious to ignore. Jose Antonio Alonso, the interior minister, said recently that organized crime was "as big a threat to Spanish security as Islamist terrorism." That is why so many people are watching Operation White Whale. "In the Marbella raids, police were acting with the clear support of judges and public prosecutors," Stangeland said. "This is a big policy shift." But convictions against money laundering are rare in Spain. "The key now," he said, "is a successful prosecution." Copyright 2005 Los Angeles Times --