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Monday, 17 February 2014

PGC versus Procom D.U., Pt III: Why did SNS Property Finance create opaque financial constructs through its subsidiary PDU Zaragossa in Spain? And why did building ground in Valencia, which SNS PF financed, lose 80% of its value in just one year?!

The successors of SNS Property Finance might face a criminal lawsuit from CEO of Parcelatoria Gonzalo Chacón, Jaafar Jalabi.

PGC is a Spanish construction and operation company, which has been involved in a bitter legal fight with Procom Desarrollos Urbanos (PDU) and its legal owner, the Dutch real estate and property bank SNS Property Finance.

Here is the third and final part…

I give you the details of the deal, concerning the shopping center in Zaragossa: the owner is PDU Zaragossa, a subsidiary of Procom Desarrollos Urbanos [Procom or PDU is a full subsidiary of SNS Property Finance – EL]. This was the shopping centre, which had been sold to the Bank of Ireland after it had been established. The owners of the subsidiary PDU Zaragossa were for 50% PDU and for the other 50% CECOSA / Eroski.

This project is a big shopping centre, in which the anchor (i.e. the main shop at the front end of the shopping centre) was Eroski Hipermercado (i.e. hypermarket). I put an embargo on the shopping centre, when Procom didn't want to pay me the €6.5 million (see the previous articles - EL).

While I put the embargo on it, I noticed that Eroski was suddenly abandoning the space that they were occupying (in spite of their 50% ownership). I had my lawyers act and I asked why Eroski abandoned the shopping mall. I said to them: "When Eroski is abandoning the shopping centre, the value of it will go down tremendously. It is always killing for the value of a shopping centre, when the anchor suddenly disappears from it”.

PDU Zaragossa had borrowed €125 million from a bank in Spain, called EBN. Bank EBN is a conglomerate of 5 'cajas' [i.e. Spanish savings and loans banks with a strong attachment to local governments and / or labour unions – EL]. I put pressure on CECOSA through my lawyers and told them that they brought the value of an embargoed object down, by abandoning the project.

They said: "Let us tell you the real story. In name we own 50% of the shares in PDU Zaragossa. In reality however, we received some money in 2009 and in exchange the group of SNS Property Finance asked us to sign a piece of paper. This “contract” obliged us to vote exactly that what the people of SNS PF – who owned Procom at the time – wanted us to vote. The real economic interest was for whoever SNS PF wanted! CECOSA / Eroski had to do whatever the people of SNS PF told them to do. On the record, they were still 50% owner, however.

Jaafar Jalabi, CEO of Parcelatoria Gonzalo Chacón
Picture copyright of Ernst Labruyère
Click to enlarge
The board of PDU Zaragossa had 3 boardmembers from PDU and 3 from CECOSA. The latter, however, voted whatever SNS PF told them to vote, due to the signed contract, provided it was legal.

One day, they didn't tell me why, the 3 + 3 board member structure was eliminated from the corporate records at the mercantile registry in Spain. The board member structure changed to one board member only: that was PDU, in the role of sole administrator.
So we contacted SECOSA again and asked them:"How can you agree that PDU is the sole administrator for the shopping centre?” CECOSA told me:"Things started to become very suspicious and we didn't want to take responsibility anymore. We are still the owners on paper, but not in reality. We are not involved in the board of directors anymore".

PDU Zaragossa had a debt of €125 million at the EBN bank. Until 2011, the cash flows that the company generated, were sufficient to pay the interest for this loan. After Eroski Hipermercado left, however, the shopping centre went seriously “down the drain”. This downfall caused that that the generated cash flows were not sufficient anymore to cover these interest payments.

And now SNS PF is responsible for paying the €125 million debt back to EBN, while at the same time the shopping centre in Zaragossa is dying. In the good days PDU and CECOSA signed an agreement with the Bank of Ireland to sell them the project for €400 million (see the previous article). The Bank of Ireland couldn’t continue, due to the real estate crisis in Ireland, so PDU went to court and collected €110 million in damages until now.

Today, they [PDU and SNS PF – EL] have to pay €125 million to EBN bank. I took an evaluator to evaluate the current marked-to-market value of this shopping centre in Zaragossa. Anybody, who wants to buy it now, can do so for very little money.

Still, potential buyers need to totally refurbish it and they have to find new tenants, which is a ten year process. Especially, as very close to this shopping centre in Zaragossa, a new one opened with El Corte Inglés and other fancy shops. It will be very hard to attract new tenants to the old shopping mall, but it still holds €125 million in debt.

Who really owns this 50% of CECOSA today, we don't know. We suspect it is SNS PF, but it is done in an opaque and convoluted way. And it is definitely not the way that it is described in the book by SNS ‘whistleblower’ Hetty van de Laar. PDU still owns 50% and the other 50% is somewhere else. These events all happened in the days of Groenhof.

And now we return to Valencia: the shopping centre in Valencia was part of a bigger project. PDU bought land for residential homes. They started to buy it during the period from 2007 until 2009. The price of this land was somewhere between €27 and €30 million. Unlike the previous project, this €27 million project was financed 100% by SNS PF. I have the records of this.

You must know that PDU normally establishes subsidiaries to do different projects. Each of these subsidiaries has a certain amount of equity capital and this capital is partially or totally financed by SNS Property Finance.

Subsequently, each subsidiary borrows working capital from local banks, in order to further develop the intended project. This has been the case in virtually every project, with only one exception. This exception was the land which was destined for residential purposes in Valencia, next to the intended shopping centre with the Snowdome.
This specific residential land, which costed about € 27 to € 30 million and was bought by PDU, was 100% financed by SNS Property Finance in The Netherlands.

Just a year after completion of the purchase – financed by SNSPF – the real estate crisis hit Spain and PDU had to take provisions on its properties: it wrote down the value of this residential land to about € 5 million. This was a loss of nearly € 25 million in just one year(!).

In my 35 years of experience in real estate, I have never seen such a loss in value, and of course, it was all lost by SNS Property Finance. Please note that it was SNSPF that lended money to PDU in order to buy the land, which implies that the money came directly from The Netherlands. I have all the records of this. Why do I have these records? Because it is stuff that I embargoed as well.

To me it is not normal that SNS PF borrows €27 million to buy land and the moment that a minor problem hits the real estate market, the value is down 80%. I don't have proof of any misdemeanors, but it doesn't sound logic to me. Such building ground doesn't go down 80% in one year. Somebody overpaid and pocketed some money in exchange. I have the records of this.

And now... to answer your questions:

Ernst: Do you think that Propertize is aware of the fact that they caused you harm?

The new people within Propertize know that they caused me harm, but they don't want to pay me my damages until they are legally forced to. I accept this logic, but committing crimes is not acceptable.

The attitude that the legal predecessors of Propertize have followed at the Spanish court, means that they committed crimes and that these crimes are paid for by the Dutch state. In my eyes, this is really not acceptable. SNSPF and now Propertize are taking the attitude that PDU is a local company, independent from SNSPF. This is definitely not true; we have documents that show this.

Ernst: When did you became aware of the fact that Bouwfonds PF took too much risk?!

In 2005, I noticed that Bouwfonds were acting like cowboys. Since those days I didn't want to cooperate with them anymore. They were still Bouwfonds and owned by ABN Amro, at the time.

I tried to bring El Corte Inglés (ECI) in on my contract with them. Believe me, there is not a single company in Spain that does not want to have ECI in their shopping mall…, except for Bouwfonds. I didn't understand it. It is in the court records, that I wanted ECI and they didn't want that to happen. It tells you something, doesn't it?!

Ernst: Did you get to know any of the Dutch persons, involved in your legal battles, personally?

No! I never met Buck G. in person. Or any other of the Dutch people at all, as a matter of fact. Only through the documentation, I saw his name. He had only one point on the agenda: filing a criminal law case against Jaafar Jalabi! Without even asking anything to me. SNS Property Finance didn't want to pay for an obligation, which it had against me, for a project that they abandoned and which they couldn’t finance anymore.

Please remember that José Arenas Ural and I were archenemies. The accusation of SNS PF against Arenas and myself was that, once we noticed in February 2007 that the project in Valencia was not going to happen, we plotted to change the agreement between PDU and PGC.

After February 2007 and until 2009 PDU, financed by SNS PF, spent €50 million on the project. This was silly. They wanted to sell it to Unibail Rodamco. They said that the project was not progressing and that would have been the fault of the landowner:
  • They raised a lawsuit against the landowner, which failed;
  • They raised a lawsuit against me, to not pay the €6.46 million, which failed.

Who's developing the shopping centre in Valencia today? Unibail Rodamco! UR made an agreement with the landowner, after PDU was kicked out, and they are developing the shopping centre right now.

Ernst: Do you think that SNS PF started lawsuits at random against anybody?

PDU started lawsuits just like this! But the only lawsuit that they won - justifiably - was against the Bank of Ireland, as they had a signed contract with the BoI to sell the shopping centre in Zaragossa for €400 million.

However, if you will find somebody that is willing to pay €40 million for the same shopping centre today, I will cut off my right arm!

I tried to make a deal for the Zaragossa shopping centre (as I embargoed it) with El Corte Inglés, but they refused. They said that the legal mess was just too big and they didn't want to get involved in it. SNS PF tremendously messed up the management of the shopping centre in Zaragossa.

Let me explain you this about SNSPF and PDU: the last published balance sheet of PDU (2012) shows assets to the tune of €38 million. These are investments in group companies. The real, marked-to-market value of these investments is close to €0, as everything died under the guidance of PDU / SNS PF. As the equity capital on the balance sheet was €10 million, the debt had to be €28 million in value. These were mainly obligations to third parties, to third banks.

Where did the losses go into? Into subordinated loans of SNS PF, to the tune of €145 million. Who paid these liabilities?

Please not that this is an audited balance sheet. Who paid the €21 million in liabilities to the other banks? SNS PF! What is the value of these assets on the balance sheet of PDU? Zero! These are debts of companies in liquiditation, which have no value. SNS lost €145 million + €21 million in write-offs on the residential real estate project.

[Jaafar Jalabi later sent me the following statement through mail, in which he further tries to elucidate the issue of PDU’s balance sheet - EL]

To clarify the issue of the losses of SNSPF in PDU, I include the following analysis:

The balance sheet of PDU for the year 2012 shows that SNSPF has lended in excess of € 145 million to PDU: all of these loans will never be paid back, since PDU has no real assets anymore.

Moreover, PDU, as of closing of 2012, had borrowed more than € 21 million from local Spanish banks; the balance sheet states that SNSPF purchased these loans (i.e. SNS PF became responsible to pay them, while the assets backing these loans are worth 0).

This means that the total loss is 145 + 21= € 166 million. In addition there is a loan that needs to be paid by SNSPF for the Zaragosa shopping centre for an amount of approximately € 125 million. What is the value of the Zaragosa shopping centre today? Very very little.

When you have a company, whose books indicate that you have €38 million in assets, with a marked-to-market value of €0 and you have subordinated loans of approximately €166 million to this company, who is the owner then?! This is not sophisticated analysis. This is just simple calculation.

Ernst: Do you blame SNS Reaal for the things that happened to you?

Under Spanish law, SNS Bank is fully responsible for the acts of PDU and SNS PF. The executive management cannot hide behind the fact that they didn't know what was going on at PDU in Spain and within SNS PF. This specialty of the Spanish law is the result
of a lawsuit, which was fought until the Spanish supreme court. This lawsuit originated from a false criminal accusation against people, who couldn't pay back money that they borrowed from Banesto.

Summarizing: The executive managers of large companies, like banks and insurance companies, are always ultimately responsible for the actions that their subordinates are taking on behalf of their companies! This is now an official law in Spain!

This means that these executives have to introduce systems, which give them sufficient information about what their subordinates are doing. Based on this concept, SNS PF is responsible for the illegal things that happened to me. SNS PF, until February 2013, was working under the guarantee of SNS Bank and it was owned for 100% by SNS Bank. And SNS Bank itself was fully owned by SNS Reaal.

So when I wrote letters to the new leaders of SNS Reaal, I was expecting some reaction. I didn't get any reaction, however. I was really surprised about that.

You must realize that the full guarantee of SNS Reaal towards SNS Bank – and thus to SNS PF – only ended on the 31st of December 2013(!).

The guarantee was definitely effective until February 1st 2013, when the bank was nationalized. On top of that, the literature, which was published recently, stated that the guarantee has only been canceled on the 31st of December 2013.

If SNS PF did something wrong, it has done so under the guarantee of SNS Bank. The beauty of Spanish criminal law is that a crime cannot only be committed by people, but also by organizations. Can you take an organization to jail? No! But you can take the people behind the organization to jail.

The new people who enter into the organization, are responsible for the crimes that have been committed by the company before their arrival, under Spanish law.

Especially when they have been notified about these crimes and they didn't do something to stop them, they are responsible for these crimes. It can very well be that the executives of SNS Bank are assuming the ostrich position, but that won't help them against the consequences of this Spanish law.

Now, I am preparing legal actions against SNS PF and SNS Bank, but I'm hoping that the Dutch finance minister steps in and tells his employees: "You have committed a crime".

Then these employees will probably respond that it have been Buck G. and company, who did so. Then Dijsselbloem should respond that SNS Bank continued the crime by not stopping the lawsuits against Jaafar Jalabi and PGC.

Dijsselbloem has to step in and tell them to stop with it, as the Dutch state is footing the bill for the crimes that have been committed by SNS Property Finance. These are not my words, but the words of the judge for the civil case, who stated that funds have been fraudulently conveyed from the legal system in Spain.

I am going to write to NLFI and I'm going to consult media, in order to put the focus of the Dutch people upon the fact that the cleanup of SNS Reaal has not been finished yet.
Later, I will bring more documentation to you.

Myself, I never committed any crime during these years. It were all legal deals I made. I was out of the deal with PDU, because I was not allowed to bring El Corte Inglés in. ECI does not do shady deals. The minute I heard that ECI was not allowed in the deal, I was suspicious about the whole deal.

I have a whole team working on this case, as it this is extremely important for me and my company. 

This was the whole interview with Jaafar Jalabi of PGC. At the moment that I receive new and interesting information, I will write a follow up on this topic.


  1. This way of dealing with the past problems is typicaly for the "new" attitude of SNS, Propertize and their officers. They do not care whether it is proper and legal or not. They just try to force non payments etc,. relying on the fact that they are big and strong, belonging to the Dutch state. I bet they are being paid for "how much" they can get out of the dealings with real estate. As a Dutch citizen living in Spain I have personally witnessed this attitude. And the way they mistreated management with the shopping mall is exactly the same they did with their 130 million Euro project called Mosa Trajectum, in which I was involved. They were advised and offered different choices but ignored them and today are again ignoring them. But unlike mr Jaafer Jalabi, I do not have the funds to go to court against them and they know that. I hope that the responsible people including the minister of finance, when visiting Spain for a holiday get arrested and go to serve their jail time. That would be called finance minister. Your justice minister and state secretary have big mouths about justice, but in name of the Dutch state this criminal behaviour continuous.

  2. Thank you for your wonderful comments, Pieter. Let's stay in touch on this question and let's hope that justice is served in the end