The recent renovation works of the Los Fariones hotel not only incurred in urban planning breaches, but also generated an economic hole in the company's accounts, reaching an alleged cost overrun of more than 16 million euros, without it being clear that this expense was real. "With this action, the accused intended to eliminate the trace of previous crimes," says the minority partner of the company, García Bravo e Hijos SL, in his statement of charges against Juan Francisco Rosa and four other members of his family.
Both the prosecution and the Prosecutor's Office emphasize that this "apparent macro-building action" was executed "without a financial, economic plan and much less without submitting it to the approval of the General Meeting of shareholders", of which García Bravo e Hijos SL was a part, which considers that "payments not justified to this day" were made.
In addition, the same Rosa companies to which Hotel Los Fariones had been lending money or guaranteeing in credits for years, such as BTL Lanzarote, ended up appearing as alleged creditors at the hands of these works.
According to the Prosecutor's Office, "an apparent millionaire debt" was generated with these companies, "now lenders of the entity", which supposedly financed "the remaining amount of the final cost of the works", after the budget was doubled.
“Artificial, ad hoc debts, lacking control and justification”
When the renovation began, Hotel Los Fariones SA was in a “critical financial situation”, according to the prosecution, due to the money that the administrators had been diverting for years to other companies in the Rosa group.
Thus, Los Fariones SA could not dispose of its own funds to undertake the work and could not resort to ordinary bank loans either, so it initially had to resort to "vulture funds". The prosecution puts at 2.6 million euros only what it had to pay extra in interest on that loan, also having to constitute a new mortgage on the hotel. Afterwards, came the alleged contributions from other companies of Juan Francisco Rosa to cover the cost overruns.
“The real objective of this unnecessary, unjustified and lacking valid corporate agreement that would support it, is none other than to continue with the asset stripping of Hotel Los Fariones SA, as well as the imposition of hypothetical artificial debts, ad hoc, lacking all type of control, supervision and justification”, he adds in his statement of charges.
In addition, he emphasizes that “it is striking” that BTL ended up being a creditor of Los Fariones SA, when that company accessed a loan in 2008 by encumbering the hotel itself for it. “Without this burden, Hotel Los Fariones SA could have accessed adequate financing and avoid dependence on the Rosa group”, underlines the private prosecution, which considers that these renovation works are “a fundamental milestone to know the modus operandi of the accused”.
In this regard, he points out that “seeing the criminal plot as a whole”, one can see “a planned criminal sheet” that intended to “expel the minority partner”.
“Once the solvency of the company is destroyed, either by the continuous asset stripping or by the breakdown of financial capacity, the company is at the mercy of the companies of the so-called Grupo Rosa”, he concludes. And it is that the administrators, all members of the Rosa family, also resorted to various allegedly illegal capital increases, with which they reduced the participation of García Bravo e Hijos SL.
Received a subsidy of more than 5 million for the works
The auditor himself referred in a report to the “grotesque deviation of the work”, according to the private prosecution in his statement. Initially, according to the project report, the budget was 16,959,606.57 euros. However, the company was modifying that figure in the information it provided to different organizations, such as banking entities and public bodies, to which it requested subsidies for the work.
For example, in 2016 it availed itself of regional incentives, stating that the investment was 27,359,236 euros (nearly 11 million more than initially budgeted), “which determined the granting of a non-refundable subsidy of 5,198,254.84 euros”. In addition, in the documents to request a mortgage loan, it raised the cost of the work to 33,066,955 euros.
Later, already during the investigation of this case, an expert report from a party, prepared by the entity PWC, further increased the alleged cost of the works, putting it at 41,737,842 euros. In that report, it also maintained that BTL Lanzarote SL would have made “cash disbursements” of 23,359,593 euros and assumed “maintenance and management costs” of 1,065,584 euros.
“This conclusion is based on the 'extra-accounting' data provided by the entity Hotel Los Fariones, S.A. which, however, are absolutely unknown, even to the auditor himself, so there is no justification for their reality”, points out the private prosecution.
To this he adds the damage caused by the closure of the hotel itself, which was agreed “unilaterally, removing it from the pertinent control and authorization of the General Meeting of shareholders and without any viability plan, in a new clear detriment to the minority partner”.
“The works began to be executed, with the closure of the hotel, in the month of November 2016 and its completion was scheduled for mid-2018, but the delay in the execution motivated by the total absence of a prior financial file, as well as the absence of contracts for material execution with third parties, determined that the reopening of the Hotel Los Fariones was delayed until the month of September 2020”, adds the private prosecution, which insists that “the execution of the works involved payments not justified to this day”, with which it considers that it was trying to disguise the previous emptying that the administrators had made of the accounts.
