Congress has called for an urgent report on the stamp trading companies Afinsa and Fórum Filatelica. The request comes after deputies have been sent hundreds of letters from people who have been affected by the collapse of the two companies and who have as a consequence in many cases lost their life savings.
It comes as the National Court judge, Baltasar Garzón, has charged a lawyer, Domingo Cuadra, and the businessmen José Manuel Carlos Llorca for an alleged connection between the fraud in the Fórum Filatélico company and the Ballena Blanca Marbella money laundering case.
9th October 2006
Investors who have been affected by the collapse of the Afinsa stamp trading
company now have the period of a month from about 18th September to show to
the administrators the details of their investments and losses. This follows
the publication of the period in the official state bulletin. Those who need
further information are invited to call a National Court hotline on 91 523
33 43. Meanwhile the recently created Federation of Associations of those
affected by the collapse has called a protest in Madrid for October 21.
News and Views for July/August 2006
Stamping out sham salesmen
Afinsa & Forum Filatelico
Financial investigator Tony Hetherington reports on how the world of collectibles can be a lucrative area for fraudsters.
Whenever stock markets look shaky, banks are hit by scandal, or life companies fail to offer any profits on their with-profits policies, Joe Public and his wife search for an alternative investment scheme that offers safety and a decent return. Diamonds have always been popular. Antiques, classic cars and fine wines have also been offered as investments and each in their day has attracted a fortune from people who know absolutely nothing about antiques, classic cars or fine wines but trusted the salesman!
All of which brings me to rare postage stamps and Afinsa, the world's 'Number Three' collectibles company (after Sotheby's and Christie's) which is at the heart of an alleged £3.4 billion fraud with an amazing 350,000 victims.
Afinsa, and a separate company called Forum Filatelico, offered investors guaranteed returns of up to 10 per cent by putting their money into rare stamps. This was no hole-in-the-corner operation. Afinsa was the major shareholder in Escala Group, a Nasdaq-listed business with branches in London, Asia and the US, and it had been operating, mainly in Spain, for about 25 years.
But in recent months warning signs started to appear. Spain's CNMV investment watchdog issued a statement saying that since tangible items fall outside investor protection laws, the public should beware of unrealistic promises. And the first asset it listed as an example was stamps.
Then questions started to be asked about the real value of the stamps held in storage by Afinsa. Had the firm over-inflated valuations to keep up with their guaranteed returns, even though philatelists around the world knew that stamps had not risen in value by anything like 10 per cent?
By April, we had become aware that Lloyds of London was about to refuse to renew the policy insuring Afinsa's over-valued stamps against theft, fire or similar risks.
And then on May 9 the balloon really went up. Armed Spanish police raided both Afinsa and Forum Filatelico, arresting nine directors on suspicion of operating a 'Ponzi scam' - a fraud in which investors' profits are found by dipping into money subscribed by people just joining the scheme, rather than by any genuine - business dealings.
When the Madrid mansion of Afinsa boss Francisco Guijarro was searched, police tore down part of a wall that showed signs of recent work. Inside they found a parcel containing £6.8 million in euros. Guijarro and the eight others arrested have now appeared in court, where they filed not guilty pleas to charges of fraud, money laundering, embezzlement and tax evasion. Meanwhile, 350,000 investors living in Spain, Portugal and elsewhere have been left wondering whether they will ever see a penny of their savings again.
Of course, it is easy to be wise after the event. But a useful rule to live by is not to invest in anything that trades in an unregulated market.
Make sure that if everything turns sour, there is a watchdog body that will listen to your complaint.
And unless you are, yourself, an expert who would instantly recognise overpriced stamps, antiques, classic cars or fine wines, steer clear of tangible assets offered with mouth-watering returns that could evaporate like the froth on a cup of capuccino.
Investors are invited to contact Tony Hetherington via the editor at firstname.lastname@example.org Tony Hetherington cannot enter into any personal correspondence, but all letters will be read and, where appropriate, subjects may be followed up for inclusion in this column.