Spain's Slush Fund Scandal

Tyler Durden's picture

Submitted by Pater Tenebrarum via Acting Man blog,

According to a recent report in the FT, the former treasurer of Spain's ruling Popular Party, Luis Bárcenas, has claimed in an interview that the party has been in breach of Spain's campaign finance laws for a minimum of 20 years. Presumably he was moved to talk because he was the one who got caught and is expected to fall on his sword. Now that he is facing a lengthy prison sentence, he no longer has a reason to clam up. Incidentally, no-one in Spain was surprised to learn what he had to say.

According to the FT:

“The former treasurer of Spain’s ruling Popular party (PP) has broken his silence over a slush fund scandal that has rocked the country for the past six months, claiming in an interview that the party had broken campaign finance laws for at least 20 years.


Luis Bárcenas, the man at the heart of the scandal, was arrested and detained late last month in connection with an inquiry into the €48m fortune he is said to have amassed in Swiss bank accounts. The investigating judge ruled that the former party treasurer will have to remain in prison until his trial, and fixed his bail at €28m.


His decision to give an interview after months of blanket denials, and to threaten further revelations, marks a potentially dramatic turn in the high-profile scandal. It suggests that Mr Bárcenas is disappointed with the lack of support he has received from PP leaders since the affair broke, and that he may be ready to implicate other senior party leaders.


According to the front page report in the Sunday edition of El Mundo newspaper, Mr Bárcenas claims to have documents and hard discs that chronicle the systematic violation of party finance laws. Their publication, he adds, would “bring down the government”. The interview – which appeared carefully worded and contained only a handful of direct quotes from the former treasurer – was conducted by the editor of El Mundo several days before Mr Bárcenas went to jail.


Though he confirmed many of the allegations that have been swirling in the Spanish media in recent months, Mr Bárcenas made clear that he was not yet willing to release all the damaging information he possessed. “In the current circumstances, the last thing that Spain needs is this government to fall,” he was quoted as saying.


However, the interview is likely to deal a heavy blow to the center-right PP all the same, and not just because it contains the threat of further revelations. Mr Bárcenas described in detail how donors used to arrive at party headquarters with bags and suitcases full of cash, some of which would be channeled into the official party bank account, while some would be used to cover election expenses outside the official campaign fund. Another portion of the money would go into a safe, and contribute to a party slush fund.”

(emphasis added)

The reason why Barcenas is not making everything public just yet is probably that he hopes that the material could yet provide him with a ticket to freedom. Essentially, he is telling the Rajoy government: 'Think of something to help me, or else'. At this stage we believe the 'or else' option has become nigh unavoidable, short of Mr. Barcenas suffering an unfortunate accident. Too much has already been revealed, and he is by now in too deeply already.



What we are seeing here is actually a strong parallel to Greece. The EU has been complaining about the Greek government's inability to collect taxes, without considering that Greek tax payers may have very good reason to pay as little as possible to the corrupt apparatus installed by the ruling class. As a Greek shipowner told a journalist when asked why he thought it was fine that rich shipowners are tax-exempt in Greece: “Would you want to pay money to Al Capone?”  Pause. “Me neither.”

The same attitude is pervasive in Spain. In fact, we would argue that both Greeks and Spaniards are among the few people in the industrialized world who have correctly identified the ruling class for what it really is: a form of organized crime. It obtains its income not by serving its fellow men, i.e., not by the economic means of production and exchange, but by political means, i.e., the expropriation of producers by coercion and the threat of violence. It is a monopolist of security and justice in the territory it rules, and hence nigh unassailable. The occasional cases where members of the ruling class are made to a pay a price (such as Mr. Barcena's case, or the recent scandal in France, where none other that the country's 'tax czar' was caught evading taxes) are really exceptions to the rule. Either there is a scandal so big that it is feared that the population may reject exploitation by the ruling class altogether unless a few heads roll, or it is a case where someone was so stupid in getting caught that it is decided to make an example of him in order to limit the damage and warn others to be more careful, or it is a rare case of internal strife among the members of the ruling elite that breaks into the open. Other than that, they have usually nothing to fear (just observe what happens to politicians who say that they are 'accepting full responsibility' for something that has happened on their watch. How often do they actually end up paying a tangible price?). 

In most European countries the corruption is more subtle and not as pervasive as in Spain and in Greece, and as a consequence the class of wealth producers, while grumbling, is for the most part quietly accepting the exploitative arrangement. One must not forget, citizens are subject to incessant statist propaganda, beginning already in school (it is no coincidence that governments have obtained near monopolist control over education). This mainly consists of hammering home that the 'State is needed', because without it, there would be utter chaos. As Hans-Hermann Hoppe writes in “The Economics and Ethics of Private Property” in the context of comparing Austrian and Marxist class analysis about the Orwellian features of this propaganda exercise:

“[...] the state is indeed [...] the great center of ideological propaganda and mystification: Exploitation is really freedom; taxes are really voluntary contributions; non-contractual relations are really “conceptually” contractual ones; no one is ruled by anyone but we all rule ourselves; without the state neither law nor security would exist; and the poor would perish, etc. All of this is part of the ideological superstructure designed to legitimize an underlying basis of economic exploitation.”

(emphasis added)

Usually the cost of resistance is extremely high for an individual acting on his own, and as a result it is mainly low key. Spain and Greece are slightly different in that the corruption of the ruling bureaucratic-political apparatus is so glaringly obvious that resistance is almost regarded as a duty.




Former PP treasurer Luis Barcenas, greeting his former colleagues: I have tales to tell

(Photo credit: Dani Duch)



Widespread Fraud

In a recent missive in the wake of Moody's most recent rather sobering credit rating report on Spanish banks, Exane's bank analyst Santiago López Díaz (a.k.a. 'Santi'), summarizes the situation as follows:

Another of the paramount problems facing Spain is widespread fraud (not to mention widespread political corruption). Some of the Spanish cheerleaders argue that, in reality, the unemployment is not 27% because of the huge size of the black economy. We don’t disagree with that statement. Is the unemployment rate in Andalucía really 37%, as officially reported? However, none of the cheerleaders mentions that if we assume the real unemployment rate is much lower, we should also assume a much higher cost of capital for a country in which fraud is common and only a very few pay taxes.


When we analyze the personal income tax statistics recently released by the Spanish IRS, it is clear that Spain has a problem with a very difficult solution. Fewer than 6,000 people in Spain make more than EUR600k per year (???…nope, we are not kidding); just 73,000 (0.4% of all taxpayers) make more than EUR150k. And 40% of all tax payers declare a monthly income below EUR1,000 per month. 62% of all personal income taxes are paid by 6m people (in a country with 47m people).”

(emphasis added)

Although Santi doesn't mention it, the reason why tax evasion is such a widespread popular sport in places like Spain and Greece is precisely what we have pointed out above: people regard the class that obtains its income by political means as a criminal gang. They are evidently entirely correct with this assessment.

Of course one cannot issue a blanket condemnation of the character of people employed by Spain's government – undoubtedly there are a great many honest people active in the administrative apparatus – but as the campaign finance scandal shows, there is enormous corruption at the very top. It is a good bet that it extends downward from there.

In Greece it has e.g. been noted that any people working at a ministry who turn out not to be corrupt are standing out like sore thumbs. As a rule they are mobbed by their colleagues if they refuse to adapt. It seems likely that things are not quite as bad in Spain.

On the other hand, the data Santi relates above are highlighting a major problem with regard to dealing with the governments cumulative public debt as well as its unfunded liabilities (including the cost of future bailouts of the still floundering banks): a tiny minority of tax payers is ultimately expected to pay for all or most of it. They are unlikely to be very happy with their sacrificial lamb status. There is therefore a good chance that they will eventually 'go Galt'.

The sheer size of the so-called 'informal' or 'shadow' economy in Spain – without which there would probably be a famine by now considering the official unemployment rate – actually provides proof that people are perfectly capable of living peaceful and productive lives without the State. After all, the only interaction between people employed in the shadow economy and the State consists of stratagems by the former to avoid and evade the attention of the latter.



As the sovereign debt and banking crisis in Europe continues to evolve, we may yet get to see a number of very interesting developments in terms of the social and political arrangements in Europe. One is that a few regions are liable to attempt to secede from the territories they currently belong to. Catalonia in Spain is actually a prime candidate for eventual secession and judging from the strong support secession has in the population,  one should not underestimate the probability that it will actually happen one day.

As we have argued in 'Secession, An Alternative View', a decentralization of political power, this is to say, the very opposite of what the EU is trying to achieve, would actually be a very favorable development for productive citizens and individuals. By contrast, the EU's goal of ever more political centralization and 'harmonization' only helps the ruling classes to exploit the producers of wealth more effectively by taking away their ability to 'vote with their feet'.

Finally, as the bankruptcy of the Western welfare/warfare states becomes more glaringly evident, even stronger growth of the informal economy seems likely to ensue. Eventually the State may not only become unable to live up to its financial promises, but may become unable to enforce its various monopolies and edicts as well, i.e., it may cease to be a viable entity. Just as the Marxists once predicted, it could then simply 'wither away' – but in its wake it would not leave a socialist Utopia, but actually a free society. In that sense, this latest scandal is actually a boon in disguise, in that it undermines the legitimacy of the State further.


IBEX, weekly

Spain's 10 year government bond yield. The fiscal position of Spain's government remains unsustainable. We believe risk premiums are set to rise again – click to enlarge.



10yr., yield, Spain

The IBEX Index in Madrid: a major secular bear market mirroring the economic downturn – click to enlarge.

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world_debt_slave's picture

perfect, example, a pol is a pol, no matter what nationality, crooks, all of them.

Seer's picture

And those non-pols who are buying them off are not crooks?

POWER corrupts.

CH1's picture

And those non-pols who are buying them off are not crooks?

Both parties to the payoffs are equally crooks.

Seer's picture

EXACTLY! (I can always count on you seeing the realities!)

I get so tired of folks beating on the coin as though it only has one side.  By doing so it takes the focus off the coin itself, which allows the other side of the coin to get away churning up more shit, until it becomes way too obvious, in which case the coin is flipped over... Heads we lose; Tails we lose...

xtop23's picture

The conclusion for this posting could have been simply stated as;  

All politicians are corrupt ........ duh?

It amazes me that people still buy into the bs that government is anything but an apparatus of indentured servitude.

It's like ..... hello? Of COURSE they're stealing your money ..... this is somehow shocking to you?


Seer's picture

While the Spanish are "violating" "campaign finance" laws ("the code is more what you'd call "guidelines" than actual rules."), the US is openly violating CONSTITUTIONAL laws...  Just trying to put this in perspective.  Does anyone really believe that politicians are being put in office by the regular masses?  If it ain't the CIA/NSA manipulating the outcome it's big business doing it.

Seize Mars's picture


...and that's the Snowden bomb.

NSA election rigging.

One eyed man's picture

Luis Bárcenas will be declared to be a terrorist spy, his documents and hard disks will be confiscated, and he will spend the rest of his life in a place where the sun doesn't shine.

Problem solved!

Burticus's picture

"Black" market = (government-) free market

Seer's picture

Ruled by the mobs.  I feel so much better...

This is going to really be painful until it all settles down to a more localized level.

defender1be's picture

The state will not leave a free society behind, it will leave a completely destroyed society behind.

Becouse the last thing that the failing state's will do to try to survive is war.

Zer0head's picture
Saudi princess arrested in human trafficking case


Princess Alayban was arrested in Orange County, California after a Kenyan woman carrying a suitcase flagged down a bus Tuesday and told a passenger she believed she was a human trafficking victim. The passenger helped her contact police

olto's picture

This is really old news from 2009---I'm disappointed, Tyler---there has to be some news!

Ropingdown's picture

Indeed, this is very old news.  The new news is a scandal erupting in the socialist PPOE party in the south, Andalusía.  It is alleged that a regional government fund meant to help major employers pay laid-off employees severance, was used corruptly.  I'm not sure,  though, that this scandal, featured on El País in English, is not just an exagerated attempt by the PP to drag the other major party down.

1835jackson's picture


samsara's picture

A big thank you Tyler for taking the tip.  Great article.

Temporalist's picture
Luxembourg PM Juncker to resign over spy scandal

Jean-Claude Juncker announced he would resign following a secret service scandal.

Son of Loki's picture

"Austerity is for the Little people," in Espanol is what?

WTFUD's picture

A slimey bunch of criminals dogs & bitches one and all.

Judge Crater's picture

In New York City, one City Council member wanted police to arrest anyone buying on the street counterfeit Gucci watches or designer handbags.  The local news reported that counterfeit goods cost NYC $1 billion a year (?).  The councilmember, who represents a district that includes Chinatown, had her resolution laughed out of the hearing committee.  Meanwhile, Mayor Bloomberg's pal Bruce Ratner got some $250 million in investment income for his Atlantic Yards project in Brooklyn from 498 mostly Asian investors.  Each investor who invested $500,000 in Ratner's got a resident green card immediately.  Each $500,000 investment must generate 10 jobs.  The total payroll for the Atlantic Yards at its peak was 300 employees or so, leaving a shortfall of some 4,600 jobs.  So, everyone was in on this green card conspiracy, from Mayor Bloomberg to Comptroller Liu (NYC lent Ratner money) to ICE to the local media.

dunce's picture

The Greek ship owner insulted Al Capone by comparing him to Greek politicians. Capone provided a product that the public wanted at a competitive price. The murders were mostly his competitors that were cheating him out of his share of the profits. Though he went to jail for tax evasion, he paid many politicians, judges and police directly in bribes. The bribery collection system in Chicago is still operating the same way.

limit_less's picture

The highlight - "What we are seeing here is actually a strong parallel to Greece. The EU has been complaining about the Greek government's inability to collect taxes, without considering that Greek tax payers may have very good reason to pay as little as possible to the corrupt apparatus installed by the ruling class. As a Greek shipowner told a journalist when asked why he thought it was fine that rich shipowners are tax-exempt in Greece: “Would you want to pay money to Al Capone?”  Pause. “Me neither.”"

smacker's picture

We should not allow ourselves to be too distracted by individual incidents of corruption as we see in Spain or Greece.

The reason is that political corruption is systemic in ALL governments. Corruption is what politics and government is mostly about, although the political elites will always deny this. When populations realise the truth and cease being in denial, wrongly believing that their elected government is a force for good, the process of bringing them to heel can begin.

Sure, in some countries - Spain, Greece and most of the so-called banana republics in Latin America have a history of corruption. And in Brazil it's as endemic today as it ever was. The reason these countries get hi-lighted is because their corruption is often very blatant: they simply dip their hands in the till and steal the money and sometimes they get caught. But in many western governments, the corruption is often far more sophisticated and institutionalised and many people don't know about it or don't see it as's just the way the system works.

One example of this is the UK where the committee in charge of setting MP salaries and what expenses are allowable is made up of - guess who - yes, the MPs themselves, headed up by the unelected HoC Speaker who's traditional role in life is to support MPs. This was the case for a very long time and only became known when it was revealed that many MPs were making fraudulent expense claims which were being signed off by the Speaker's staff. An oversight committe has now been instituted. ho-ho. I see that these same corrupt MPs are now trying to vote themselves a fat pay increase, despite having presided over the collapse of the UK economy and generally made a shambles of everything they touch.

Corruption in government is so widespread and so deep that it's impossible to reform it. Each country has to tear down their current systems and rebuild from foundations up.

honestann's picture

Tear down?  Yes.
Rebuild?  NO WAY.

Fact:  So-called "government" IS evil, by its very nature.  Period.

Let people defend themselves.  Perfect?  Of course not.  But any so-called government is always one thing, and only one thing:


This is only a benefit to predators, not to honest, ethical, benevolent producers.

ZH11's picture

"Finally, as the bankruptcy of the Western welfare/warfare states becomes more glaringly evident, even stronger growth of the informal economy seems likely to ensue."

No analysis required as to why they're bankrupt though eh?

There's only one entity responsibility for the bankrupting of these states and it's not the people - scum elites are to be dealt with through the inevitable historical response.