Fraud and economic crime: defence and private prosecution

The cases we take on

We work in business crime on both sides: as private prosecutor (acusación particular) for the person who has lost money, and as defence for the person under investigation. These are cases with long investigations, a great deal of documentation and, almost always, a forensic accountant behind them:

• Fraud of some complexity involving property: sales of what could not be sold, charges concealed, double conveyances, payments on account for developments that are never built, intermediate companies that receive the money and disperse it.
• Breach of trust and misappropriation in companies and communities of owners: directors who go beyond their powers, funds that are not returned, undeclared related-party transactions.
• Company disputes with a criminal dimension, running alongside the commercial route.
• Criminal insolvency and the stripping of assets ahead of enforcement.
• Forgery of documents used as a means to all of the above.

We do not publish the names of cases or of clients: professional privilege admits of no shades of grey. In case results you can see decisions in this field described without identifying anyone, among them a final acquittal and a reduction of sentence on appeal to the Second Division of the Tribunal Supremo (the Supreme Court).

Fraud and its aggravated forms

Estafa — fraud — is committed by those who, with a view to gain, use deception sufficient to induce error in another, leading them to make a disposition of property to their own or another’s detriment; the basic penalty is six months to three years in prison, and in fixing it the court has regard to the amount defrauded, the loss caused, the relationship between the parties and the means used (art. 248 of the Código Penal, the Criminal Code).

What makes the difference is the aggravated forms in art. 250.1 CP, which raise the penalty to one to six years in prison and a fine where, among other situations, the fraud:

• Relates to essential goods, housing or other property of recognised social utility.
• Is especially serious by reason of the scale of the loss and the position it leaves the victim or their family in.
• Involves a value above €50,000, or affects a large number of people.
• Is committed by abusing the personal relationship between victim and fraudster, or by the fraudster trading on their business or professional standing.
• Is fraud on the court (estafa procesal): manipulating evidence in proceedings so as to mislead the court into a decision that harms another.

And there is a second tier: if one of those circumstances is combined with the fraud relating to housing or an essential good, or if the amount defrauded exceeds €250,000, the penalty becomes four to eight years in prison and a fine of twelve to twenty-four months (art. 250.2 CP, as currently in force). Whether a case lands on one tier or the other depends on how it is built from the very first document: the amount, the subject matter and the relationship between the parties are not decoration, they are the offence itself.

Fraud involving property: article 251

Alongside ordinary fraud, the Criminal Code creates three specific offences carrying one to four years in prison, which come up again and again in property matters (art. 251 CP):

• Falsely claiming a power of disposal over movable or immovable property that one does not have — either never having had it or having already exercised it — and selling, charging or letting it to another, to that person’s detriment or to the detriment of a third party.
• Disposing of property while concealing charges over it, or, having sold it as unencumbered, charging or disposing of it again before the final transfer to the buyer.
• Entering into a sham contract to another’s detriment.

Breach of trust and misappropriation

These are the two offences that come up where the money was legitimately in the hands of the person who then misuses it.

Administración desleal, breach of trust in the administration of another’s property: those who, having powers to administer another’s assets — conferred by law, entrusted by a public authority or assumed under a legal transaction — breach those powers by exceeding them and thereby cause loss to the assets administered (art. 252 CP). It is the offence of the company director, the attorney and anyone who manages other people’s assets.

Apropiación indebida, misappropriation: those who appropriate for themselves or for a third party money, instruments, securities or any movable property received on deposit, on commission or for safekeeping, or entrusted under any title obliging them to hand it over or return it, or who deny having received it (art. 253 CP).

Both refer back to the penalties of art. 248 or, where the aggravating circumstances are present, to those of art. 250. In other words, the same jump between tiers as in fraud, with the same practical consequence.

What almost nobody raises in time: recovering the money

A conviction with no assets behind it is a piece of paper. In these cases money moves fast and, by the time judgment comes, there has been nothing left for years. Which is why, in any private prosecution, the work starts on two fronts at once:

• The civil liability file and interim orders against property: applying from the outset for the freezing of property, accounts and shareholdings, and for a caution at the Registro de la Propiedad (the land registry). Asking late is the same as not asking.
• Tracing assets: the land registry, the Registro Mercantil (the companies registry), the Catastro (the property cadastre), the beneficial ownership of the companies involved, and transfers made after the events, which may be liable to be set aside.

Limitation periods and the length of the investigation

Offences become time-barred after five years as a general rule; after ten where the maximum penalty is imprisonment of more than five years and not more than ten; and after fifteen where it is more than ten and less than fifteen (art. 131.1 CP). Where offences are concurrent or connected, the period for the most serious one applies (art. 131.4). Put another way: the tier of the offence does not only change the sentence, it changes how many years there are in which to prosecute it.

Once proceedings are under way, the judicial investigation has a maximum period of twelve months from its opening, extendable by reasoned orders for periods of six months or less, stating the particular steps outstanding and their relevance (art. 324 LECrim, the Criminal Procedure Act). Steps ordered before expiry are valid even if the results arrive afterwards; steps ordered without an extension in force are not (art. 324.2 and 3). In an economic investigation, with letters of request and expert reports involved, watching that calendar is part of the job, not a procedural detail.

The other side: defending

Defending in business crime almost always consists of the same thing: returning the case to its proper ground. Showing that there was a real intention to perform, that the failure to pay came from a supervening and documented cause, that the director acted within their powers and with the backing of the company’s organs, or that the figure underpinning the aggravated form is not the one the prosecution says it is. And, where appropriate, working on making good the loss, which is the most effective route to mitigation and, frequently, to closing the case by a negotiated plea on reasonable terms.

Frequently asked questions

Where we work

Our office is in Villanueva de la Cañada, with cases in Brunete, Villanueva del Pardillo, Valdemorillo, Quijorna, Majadahonda, Las Rozas, Boadilla del Monte, Pozuelo de Alarcón and the rest of western Madrid, before the investigating courts of the relevant judicial district and the criminal divisions of the Audiencia Provincial de Madrid (the provincial appeal court), and on appeal to the Second Division of the Tribunal Supremo. This page forms part of our criminal law practice; see also company and commercial law and breach of contract.