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10.06.2006 - THE GREAT PHILATELIC FRAUD (part 1)
In the April 24, 2006 issue of Barron’s, published every Monday by Dow Jones, the publisher of The Wall Street Journal, and Far Eastern Economic Review, Neil A Martin wrote an investigative report on

In the April 24, 2006 issue of Barron’s, published every Monday by Dow Jones, the publisher of The Wall Street Journal, and Far Eastern Economic Review, Neil A Martin wrote an investigative report on stamp investment activities of Afinsa Bienes Tangibles entitled ‘Stamp of Disapproval’. The report stated that its stamps were likely overvalued and that proceeds from sales to new investors were being used to pay returns to other investors. Barron´s also reported that Lloyd´s of London, Afinsa´s insurer to the tune of $1.5 billion, might pull their backing over the allegations of improper practices. This article was a follow-up of their earlier articles; the last article was published on December 5, 2005 ‘More Questions About Afinsa’.

Afinsa based in Madrid, Spain, is the world´s No. 3 collectibles firm behind Sotheby´s and Christie´s. The privately held Afinsa is also the majority owner of the Escala Group, formerly known as Greg Manning Auctions, in the US with 67% stake. Escala is a Nasdaq-listed auction house and stamp and coin company. Other philatelic companies in the group are Corinphila, Greg Manning Auctions, H R Harmer, Heinrich Köhler, IVY & Manning Philatelic Auctions, John Bull Stamp Auction Ltd., and Nutmeg Stamp Sales.

Afinsa was founded in 1980 by a Portuguese resident in Spain, Albertino de Figuereido, who conceived the idea after a Spanish philatelist friend advised him to buy stamps with money inherited from his father in Portugal. That way he could bring his substantial inheritance across the border to Spain without paying tax. He loaded his old Ford with stamps and drove to Madrid, where his friend bought them for twice what he´d paid. Figueiredo was decorated by the President of Portugal Jorge Sampaio in 1999, and is considered to be one of the most famous Portuguese citizens in Spain. He is president of the Portuguese Spanish Chamber of Commerce and a close friend to Portugal’s former Minister for Foreign Affairs, António Martins da Cruz. Afinsa, in which Figuereido still enjoys a majority shareholding recorded profits of 51 million euros in 2004. The company recently announced ambitious plans to expand throughout Europe, North America and Asia.

Its main rival at home, Forum Filatelico also founded in 1980, is a pioneer in promoting stamps as investment and has clocked up spectacular results in recent years. In 2004 the company made nearly 90 million euros. Forum has 150 branches, 250,000 clients, 300 employees and 1,600 agents.

On May 9, 2006 the National Police in Spain arrested nine persons in countrywide raids on the offices and residences of the directors of Afinsa and Forum Filatelico in a joint investigation launched by the National Court, tax authorities, and financial crime prosecutors on charges of “fraud, criminal insolvency, money laundering, tax evasion and embezzlement”.

Operation Atrio involved some 300 agents and began investigations into the group at the end of last year when the finance ministry asked the attorney-general’s office to investigate after tax inspectors had detected “possible criminal offences” during routine audits. The police officers sealed the headquarters of the companies and the vaults where stamps were stored.

Five out of the nine person’s arrested belong to Afinsa and include Chairman Juan Antonio Cano, Managing Director Vicente Matin Pena, the 75-year-old Portuguese founder and Honorary Chairman Albertino de Figueiredo, his son Carlos de Figueiredo, and Afinsa’s main supplier until 2003 Francisco Guijarro. Police raided Guijarro´s sprawling villa in Madrid´s luxury suburb of La Moraleja and found a recently closed-up Ali Baba´s cave stuffed with bags containing 10 million euros in 500-euro notes. They also found sheets of forged stamps, paintings by renowned contemporary artists, and luxury cars, including a Lamborghini. Police estimate the seizure to be the largest they had ever carried out in Spain.

The remaining four arrested persons from Forum Filatélico were Chairman Francisco Briones and board members, Miguel Angel Hijon, Francisco Lopez Gilarte and Agustin Fernandez Rodriguez. High Court judge Santiago Pedraz ordered for all five employees of Afinsa to be remanded in jail on May 12, 2006 explaining that he was doing so in light of the "high risk" that they would flee the country or destroy vital evidence. High Court judge Fernando Grande Merlaska has ordered for all four executives of the Forum Filatélico, to be remanded in jail on May 13, 2006.

National Court judge, Grande-Marlaska granted bail to the general manager of the Fórum Filatélico, Antonio Merino Zamorano on May 19, 2006 at €100,000. On May 22, 2006 the Anti-Corruption Prosecutor, Alejandro Luzón, granted €100,000 bail for the Accounts Director of the Afinsa stamp trading company, Emilion Ballester.

About 343,000 persons mostly from Spain and neighboring Portugal had invested more than € 6.5 billion in the stamp investment portfolios that guaranteed annual returns of up to 10 per cent. The companies promised to buy back stamps at the end of the investment period at the original sale price in addition to regular income paid monthly. The investors were offered the option of taking their stamp portfolios home but most investors left them in the company´s vaults.

part two follows