The Hispano-Saudi Investment Fund created in 2007 under the government of former Spanish Prime Minister José Luis Rodríguez Zapatero, with the support of the then King of Spain, Juan Carlos I, was managed by two companies chosen by Saudi Arabia, Spanish officials who helped launch the initiative told EL PAÍS. This fund hired Corinna Larsen, who was for a time in a relationship with Juan Carlos I, and set up its headquarters in Guernsey, the tax haven of the Channel Islands.
In 2007, Larsen asked a trust called Peregrine in New Zealand to bequeath to the former monarch “30% of the income from the Hispano-Saudi Investment Fund”, in the event of his death. Details of the structure of this arrangement are part of the Pandora Papers, a collaborative investigation of several international media outlets coordinated by the International Consortium of Investigative Journalists (ICIJ), and in which EL PAÍS and the La Sexta television network participated. This global investigation analyzed the secret files of 14 offshore service providers in blackout jurisdictions and uncovered companies that have helped politicians, business leaders and celebrities in more than 90 countries avoid paying taxes.
Larsen’s attorney, who still uses her ex-husband’s last name, zu Sayn-Wittgenstein, claims the documents related to the trust are false. Larsen did not respond to questions from the ICIJ about its contractual relationship with the aforementioned fund.
A financial instrument such as this trust, or fiduciary fund, is a particularly opaque contract by which a testator leaves all of his estate or parts of it entrusted to the good faith of his legal representative (the trustee) so that, in specific cases and time limits, it is transferred to another person (the beneficiary) or invested according to the testator’s instructions. Trust funds are commonly used instruments offered by Swiss banks and asset managers to people with significant wealth who seek tax avoidance, security and confidentiality.
The initiative to create the Hispano-Saudi Investment Fund came from the Spanish Ministry of Foreign Affairs, headed at the time by Miguel Ángel Moratinos, and from Juan Carlos I himself. But the project was managed by two foreign companies: the British asset manager Cheyne Capital and the Swiss Arox Infrastructure.
Cheyne Capital reportedly hired Larsen for the project and introduced her as a partner in meetings in Madrid, according to sources involved with the fund. The firm, headquartered in London, did not respond to questions sent by this newspaper. “They told us that [Larsen] was working for them and that she would speak with investors. We didn’t know anything about her work or who she was talking to, ”said a source close to the fund’s launch.
“No one knew she had been hired. She appeared as another potential investor and said she would bring in money from other funds. We didn’t know his relationship with the king either, ”explains a former minister of the Zapatero government, who helped set up the initiative.
Spain and Saudi Arabia have fully supported the launch of the fund. The ambassadors of the two countries facilitated various meetings between the directors of Cheyne Capital, the American investment bank Morgan Stanley and Corinna Larsen herself, with the Spanish and Saudi authorities, according to one of the participants in the rallies. According to the Spanish news site El Diario, in June 2007, the Saudi press covered the visit of Larsen, together with the Spanish ambassador at the time, Manuel Alabar, to meet the prince of Saudi Arabia Alwaleed bin Talal. .
On June 19, 2007, just days after his trip to Riyadh, Larsen attended the official presentation of the Hispano-Saudi Investment Fund at the Royal Palace of El Pardo. The event was also attended by then Minister of Industry Joan Clos, former Saudi Minister of Finance Ibrahim bin-Abdul Aziz Al-Assaf and President of the Spanish Business Confederation (CEOE) Gerardo Díaz Ferran, as well as other personalities and representatives of the political and commercial world. “They introduced me to her at the event and she said, ‘This project is very important for Spain,’” a senior official said of her brief meeting with Larsen.
On the same day, the late Saudi monarch Abdullah bin Abdulaziz visited Madrid for the first time and was named a Knight of the Order of the Golden Fleece by Juan Carlos I, the badge of a knightly order of the 15th century and the highest decoration awarded by the Spanish Royal House. During his speech at the event in El Pardo, the King Emeritus of Spain congratulated the Hispano-Saudi Investment Fund.
UK fund Cheyne Capital has hired US investment bank Morgan Stanley so that its executives in Madrid, London and Riyadh can make the presentations and tap the companies that would provide the liquidity needed to set up the fund, according to a banking industry source. . The promise was to participate in a massive infrastructure project in Saudi Arabia, which would cost several trillions of dollars.
“In a first phase, the objective was to raise 500 million dollars, 250 from Spanish companies and 250 others from Saudi capital”, explains a financial manager who participated in the launch. “There have been conversations with several banks to finance the fund’s future investments. If you get 500 in principal, you could get 4,000 in additional debt.
A prospectus for the fund was published and Morgan Stanley made a number of presentations. Some 14 Spanish companies, including OHL, Sacyr, Caja Madrid (Bankia) and La Mutua, among others, have pledged to provide around 200 million euros but the Saudi capital pledged never exceeded 100 million euros. “The Saudi part didn’t work, and the Spanish companies said, it’s either all of us or none of us,” said one of the participants. “The [global financial] the crisis of 2008 and 2009 saw the end of the project, and finally, nobody ended up putting what had been committed.
The Fondo de Infraestructuras Hispano Saudí (or Spanish Saudi Infrastructure Fund) was registered in Saint Peter Port, the capital of Guernsey, which is one of the Channel Islands. The archipelago, located off the coast of France, is known as the ‘Crown Dependencies’, which means that although it is not part of the United Kingdom, the latter country is responsible for it. They are autonomous, but are not sovereign states, and their economies rely on financial services as they are considered tax havens. “At that time, it was normal for all the issuers in the capital markets to do it there to take advantage of the low tax rates,” explains one of the sources consulted by EL PAÍS.
Stuart Fiertz and Jonathan Lourie, the founders of Cheyne Capital and former executives of Morgan Stanley, were at the helm of this project. They have visited Spain several times and have participated in numerous meetings with Spanish executives, the sources consulted explain. On some occasions, they did it with Larsen and introduced her as their partner.
Fiertz was one of the directors of the Energy and Infrastructure GP Limited fund, created in Guernsey on April 10, 2007 and closed on August 23, 2012. To do this, the British investment fund used the company Cheyne Equity Partners, which was whose the head office is in Tórtola, another tax haven in the British Virgin Islands, which was listed as the owner of 8,000 shares. 8,000 other shares were registered in the name of Boreas Capital Limited.
The other pilot company of the project, Arox Infrastructure AG, was represented at the meetings in Madrid by Ludovico Manfredi and Eberhard von Koerber, according to witnesses consulted. What is more, both are on the organizational structure of the aforementioned fund established in Guernsey, as this newspaper has been able to confirm via the island’s company register. Cheyne Capital and Arox both wanted to invest in the projects the fund would implement.
Who decided that two foreign companies like Cheyne Capital and Arox Infrastructures should manage the Hispano-Saudi fund? “We thought of a transparent and competitive public offer, but the Saudis said it must be these two companies,” said a senior official from the Ministry of Commerce who participated in the launch. “No one from the Spanish administration took part in it.”
“The Saudi representative said that to carry out a project of this magnitude, a global financial institution was needed and they chose Morgan Stanley,” said the same source. “The Spanish administration was not involved in the management of contracts, managers, etc., because the Saudis controlled this. We didn’t know because we hadn’t put anything in, not a euro. With Larsen, we had no meeting because we did not provide the projects.
In 2010, the executives of Cheyne and Arox called a meeting in Madrid with the Spanish companies that had signed up to the project to inform them of the fund’s closure. At the same meeting, the costs were announced, which included several million euros spent on travel, meetings, lawyers and relations that would be distributed among all parties involved. “I believe it was closed in 2010, I’m not sure,” said a source close to the project. “Spanish companies have paid something. The costs were not too high. Other sources close to the companies involved, however, indicate that the costs amounted to 16 million euros.
Some of the Spanish companies that took part in the project admit their initial commitment, but none of those consulted provided this newspaper with the figure that was paid when the fund was closed.