Secret payments scandal weighs on Spanish PM Rajoy

Spain's acting prime minister Mariano Rajoy highlighted the deficit reduction registered over the last four years to avoid being the first country fined in the history of the EU's fiscal rules.

Prime Minister Mariano Rajoy and Spain's ruling People's Party denied today (31 January) that the party passed payments from business donors secretly to the premier and other party leaders after a newspaper published what it said were unofficial party accounts.

El País published images of excerpts of almost two decades of handwritten accounts that it said were maintained by People's Party treasurers. El País said the accounts showed 11 years of payments to Rajoy of €25,200.

The accounts – which the newspaper said amounted to a parallel unofficial bookkeeping system – indicate donations from companies, mostly builders, and regular payments of thousands of euros to a number of party leaders.

The report is the latest twist in a scandal over alleged secret cash payments to PP leaders that has hit Rajoy's popularity amid a deep recession, high unemployment and a fiscal crisis that could push Spain into an international bailout.

"The People's Party only has one set of accounts and it is clean, transparent and submitted to the official accounting authority," PP Secretary General Maria Dolores de Cospedal told a news conference, denying allegations of corruption in El País.

"We have absolutely nothing to hide."

Cospedal was one of many top party officials, along with former Economy Minister and IMF chief Rodrigo Rato, named by El País as receiving secret payments. Rato did not immediately respond to a request for comment.

An earlier statement by the PP said the party's payments to its leaders and staff were always legal and followed tax rules. The party also denied that there were systematic payments to people other than their official paychecks.

A spokeswoman from Rajoy's office told Reuters the prime minister stood by comments he has made recently that he has not engaged in improper conduct.

High Court Judge Pablo Ruz, who is investigating a four-year-old corruption case involving the PP, has asked prosecutors to look into the new allegations and could open another line of investigation, court sources told Reuters.

The party has ordered an external audit of its accounts.

A recent poll by Metroscopia showed that 96% of Spaniards believe corruption is widespread in politics in Spain, after dozens of cases have emerged in recent years, most notably an ongoing judicial investigation into alleged embezzlement of public funds by King Juan Carlos' son-in-law.

"This does not help to calm down the difficult moments that we are going through, economically, politically and the climate on the street. This is a time for maximum transparency," Jose Antonio Monago, the president of the region of Extremadura, told reporters at a news conference unrelated to the party scandal.

The alleged payments may not necessarily be illegal if the party leaders declared the income in tax statements.

Until recently, Spanish political parties were allowed to receive anonymous donations. However, it would have been illegal not to book those donations in the book's official, regulated accounts, a People's Party source told Reuters.

Building boom

A People's Party source, who asked not to be named, said the allegations raise serious ethical questions about party operations, especially because many of them occurred during Spain's building boom, in which politicians granted large numbers of development contracts.

"It looks like bribes, the nature of the document is very incriminating, if it's true," the source said.

Among the companies named in the El País story is builder and infrastructure and energy company FCC. FCC declined to comment. A source close to the company told Reuters that FCC would carry out an internal investigation regarding possible donations.

El Pais also said the president of another builder, OHL, Juan Miguel Villar Mir, was one of the donors. OHL declined to comment.

The accounts published in El País were allegedly from two former PP treasurers. One of them is Luis Barcenas, who stepped down as party treasurer in 2009 when judges began to investigate his possible involvement in alleged illegal payments and kickbacks to party officials from builders and other businesses that won government contracts.

The ongoing judicial investigation of Barcenas has revealed recently that he had a Swiss bank account which at one point held as much as € 22 million. His lawyer has said previously that the money is from legitimate businesses and that Barcenas has now declared taxes on the income.

Press officials from Spain's High Court confirmed that Barcenas' lawyer has provided to the court a document showing that in 2012 his company applied for a tax amnesty on funds in the Swiss bank account.

Barcenas' lawyer was not immediately available for comment.

The Party of European Socialists (PES) has called for the revelations to be immediately addressed by the Spanish Conservative Party the Partido Popular (PP).

Speaking from Sofia, PES President, Sergei Stanishev called the information published by El País “extremely serious”.

“A shadow system of payments funded by construction interests is very concerning. That it implicates the PP, the party in Government, is harmful to the international image of Spain. The PP should act immediately, and with responsibility. They should clarify and explain to the public, the true nature of their involvement in this shadow scheme. Every moment that they delay further erodes citizens’ trust in the political system,” Stanishev stated.

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