Rumours about Rumasa

Harry Eyres

Barcelona

The date 23 February is an ominous one in recent Spanish history. On 23 February 1981, Colonel Tejero of the Guar- dia Civil and the Captain-General of Valen- cia, Jaime Milans del Bosch, staged their Ruritanian coup — which might not have been nearly so funny but for the firm ap- Peal by King Juan Carlos broadcast the same night to the army to remain loyal to the government. Then on the second an- niversary of that event, 23 February 1983, came the dramatic announcement, inter- ruPting a late-night television programme, 4, a spokesman of the Socialist government Of Felipe Gonzalez that Spain's largest Private holding company, Rumasa, had been 'expropriated' by the state. Continu- ing this anniversarial tradition, the founder and ex-chairman of Rumasa, Jose Maria Ruiz Mateos, has now let it be known, speaking from a 'secret hide-out' in Lon- don, that if the government reprivatises any of the Rumasa companies, as it has proritis- ed to do, he will give an international press conference this Thursday, 23 February 1L984, at which he will show evidence that the King accepted a bribe of £5 million in return for a promise to swing the balance in

Our of Rumasa in its long-running fight against the state authorities. Most non People take this latest communica- , front Ruiz Mateos as a sign that the

become small-time sherry merchant has "eotne more than a little unbalanced in his hisY the l ncletta against those who deprived him of enormous business empire, symbolised logo of a bee in a hexagonal cell, which at the time of the takeover comprised 20 banks and over 600 companies with a ftotal of around 50,000 employees. Certainly e allegations involving the Crown smack a desPeration, especially as they represent p„ second attempt by Ruiz Mateos to im- the supreme constitutional authority hhis own downfall. It was only last month, olowing the rejection by the Constitu- 11al Court of an appeal against the take- over of Rumasa, that Ruiz Mateos released show of a document purporting to ',ELow the transfer of $3 million into a New aYork bank account in the name of Don c f e Y, claimed by Ruiz Mateos to be the as of a Portuguese friend of the King call- ., Bernardo D'Orey Piheiro. But Don 'vieVeY turned out to be the name of a vice- President of the Bank of New York, and the atalsitY of this piece of 'evidence' is generally tg,reed. After this dud ace, it seems unlikely

at Ruiz Mateos can have any further cards uP his sleeve.

h Even if he is completely discredited, ,,_miever, we will not have heard the last of le Rumasa case'. This is not surprising,

given on the one hand the peculiar nature of the empire of Ruiz Mateos and the difficul- ty, by no means accidental, of obtaining reliable information about its workings; and. on the other hand, the extent and im- portance of the interests involved, which run the gamut of the highest institutions of the land. In all its ramifications, the affair presents perhaps the severest test which the new Spanish democracy has had to face since it came into being in the elections of 1977, always excepting the 1981 coup. Rumasa as it stands, or stood, was the creation of one man, Jose Maria Ruiz Mateos, scion of a line of humble sherry dealers from Rota in the province of Ron- da. His father, Don Zoilo, moved to Jerez and became a respected member of the community, though his business remained on a very small scale. An idea of its size can be gained from the fact that when Don Zoilo died in 1961 and the sherry company, later to be completely transformed, passed to his third son Jose Maria, it had a capital of 300,000 pesetas (£1,500 at today's ex- change). Jose Maria had greater ambitions than his father, and immediately set about the phenomenal process of expansion which was to turn that initial amount into 17,000 million pesetas (£80 million) by 1976, ad- mittedly perhaps a nominal sum given the curious accounting system employed by Ruiz Mateos, but still only a fraction of ithe group's turnover at that time.

Although Rumasa was to spread into banking, property, construction and com- merce, it is fair to say that Ruiz Mateos never lost touch with his origins in the world of sherry. It was in fact a contract he managed to secure with Harvey's of Bristol, in 1958, to supply all the sherry and, eventually, to make up the blends required for Bristol Cream, which set him on his way. This con- tract only lasted a few of the 99 years it was due to run, because when Harvey's was taken over by Showerings in the early Six- ties, the Babycham people revoked it on the grounds of failure to meet with agreed stan- dards of quality. Ruiz Mateos appealed, but lost his case. Heavens knows what he had been putting into 'the Best Sherry in the World'. Still, by buying large quantities of sherry and paying only after six or nine months, while receiving payment from Harvey's within 90 days, he had been able to build up enough capital to finance apparently more successful ventures.

The early Sixties were a time of expansion generally in the West; particularly in Spain, where they saw the opening up of the economy after two decades of virtual isola- tion and the first four-year development plan (1964-7) of the technocrat Lopez Rada. Ruiz Mateos took full advantage of the opportunities for expansion in the areas of tourism and construction. But the real key was banking. No doubt remembering that when he had needed finance for his first venture, building a warehouse to store barrels of future Bristol Cream, no Spanish bank had backed him and he had been forc- ed to go to Tangier for his money, Ruiz Mateos, from 1963 onwards, set about buy- ing as many banks as he could lay his hands on. He ended up with 20, though his greatest regret may still be that he was never able to get hold of one of the siete grandes, the seven biggest Spanish banks, who guard their power very jealously, and whose role in the Rumasa, affair, like many other aspects of the case, is not yet fully clear.

In fact, Ruiz Mateos's involvement in banking led to his downfall. It became in- creasingly clear to the financial authorities that the reason he wanted banks, and was prepared to pay over the odds for them, was in order to attract money, which he succeeded in doing by offering interest rates, again over the odds, to finance his own businesses. From 1975, the anomalous nature of Rumasa, a group of companies controlling various banks rather than the more usual set-up of a bank controlling various companies, became an object of concern to the Bank of Spain, which foresaw the dangers of a high concentration of the risks of the banks in the companies of the same group. After repeated requests from the reputedly tough new Deputy Governor of the Bank of Spain, Mariano Rubio, Ruiz Mateos agreed in July 1980 to have an independent audit (not, incidental- ly, mandatory under Spanish law) of the Rumasa banks carried out by Arthur Andersen.

The auditors quickly realised that in order to come any conclusion on the credit- worthiness of the banks, they would also have to investigate the accounts of the Rumasa companies in which perhaps 70 per cent of their risks were concentrated. Ruiz Mateos procrastinated for more than two years without allowing the auditors access to the material they required, and it was his 'refusal to cooperate with the authorities', in the words of the Finance Minister, Miguel Boyer, which led to the govern- ment's summary intervention on 23 February 1983.

In a sense, the expropriation has been more than justified by the picture of the real state of Rumasa which has emerged over the last 12 months: the figures quoted at the time by Boyer, a loss in 1981 of $72 million rather than the claimed profit of $49 million, and an unpaid tax bill of $150 million, now seem likely to be under- estimates. But the question will still be ask- ed: couldn't the government have acted in a less drastic way? The problem the govern- ment now faces is that no one wants to buy back the companies which, as Miguel Boyer stressed, were only temporarily ex- propriated. All the time the cost of keeping Rumasa going continues to rise; it has already reached the astronomical figure of £1,000 million. Whether, as the financial experts are beginning to say, this proves that the expropriation was a costly mistake, is very much open to question. The accus- ing finger might better be pointed at the successive governments which allowed Ruiz Mateos to build so high on feet of clay.

Two questions out of many possible ones may be asked: was it entirely a fluke, or could there have been an element of bravado in the decision to expropriate Rumasa on the second anniversary of Te- jero's coup? And did Miguel Boyer commit a faux pas in hinting at a press conference on 18 February that he might intervene in Rumasa, provoking a minor panic and giv- ing Ruiz Mateos the opportunity of launch- ing a campaign in the media to present himself as a potential martyr?

A leak to the press is also involved in what is perhaps the most disturbing as well as the most unexpected of the chain of events set in motion by the take-over of Rumasa. The verdict of the Constitutional Court, a body set up in 1980 to arbitrate special cases involving guarantees laid down in the Constitution, rejecting the appeal of unconstitutionality raised against the government take-over by the right-wing opposition party Alianza Popular, somehow made its way into the press two days before it was officially announced. Quick to spot an opening, Ruiz Mateos fil- ed an official complaint against the Con- stitutional Court through his lawyer Crispin

'Sorry, luv, it's these bloody crocuses sticking in my back.'

de Vicente claiming that his interests had been damaged by the leak of the verdict.

Much to everyone's surprise, on 31 January, the Supreme Court converted the complaint into a 'denunciation' against the 12 members of the Constitutional Court requiring them to answer various questions. In other words, the Supreme Court has taken the Constitutional Court to court, an action for which there is no precedent and whose consequences are difficult to predict.

Meanwhile, the presumptive orchestrator of such a campaign remains in London (England has no extradition treaty with Spain), though not at his old address, an agreeable five-storey house in the Weit End, pictured repeatedly in Spanish weekly magazines since he moved there last July. A devout Catholic, member of Opus Dei,

and, true to the precepts of that Institute, father of 13 children, he is now reported 011 the review La Actualidad Economics, closely linked with Opus Dei) as saying that he is prepared to make a pact with the devil in order to secure justice. 'I am totally 8t, I odds with Spain and with the Spanish RoYal Family,' he goes on. 'Today the only thing believe in is the army, because it is the only disciplined thing in Spain ... Somebody has got to push the button and launch themselves into the vacuum.' The weekbr news magazine Cambio 16 claims, quoting as its source the Spanish security services, that Ruiz Mateos has been in regular con' tact with an envoy of Milans del Bosch since last April. Let us hope they have 11°I been planning anything too spectacular for this year's anniversary.