In a 634-page report filed in court on January 23, the National Fraud Investigation Office (ONIF) details the alleged unlawful activities by the network of companies owned by Rato in Spain and abroad.

The report is the result of a nearly two-year investigation into the former minister’s activities, following his brief arrest in April 2015 while his home and office were raided by police in search of incriminating evidence.

Rato received an average of €36,136 per talk between 2007 and 2014

The analysis concludes that Rato had undeclared income of slightly over €14 million between 2004 and 2015. This represents tax fraud of close to €6.8 million over the period. On every one of those years except for 2005, the evaded amount was higher than the €120,000 threshold that represents a tax crime under Spanish legislation.

Between 2009 and 2015, the years for which the crimes have not yet prescribed, “the amounts were close to €5.4 million,” according to the report.

Investigators found several methods used by Rato to divert these funds, including failing to declare payments for speaking engagements and claiming expenses that were non-deductible.

Rato, who was once Spain’s deputy prime minister and economy minister, has told this newspaper that “the report originated from an accusation of asset stripping that was used for my arrest, even though it was proven false within two weeks.

“The report contains false or erroneous data that the Tax Agency had the ability to detect a long time ago, since it was in its files,” he added. “I am analyzing the report and I will issue a reply.”

According to the ONIF report, Rato used the Panama-based firms Red Rose Limited and Westcastle, the British company Vivaway and the Spanish concern Kradonara “to conceal income that escaped the tax authorities and whose effective beneficiary was Rato. The undeclared amounts are slightly over €7 million. The risk countries used were Luxembourg, Monaco, Switzerland, Britain and Gibraltar.”

The report says that Rato worked as an advisor for Spanish telecoms giant Telefónica in 2013, 2014 and 2015, making €730,000 in the process. Yet none of this income was declared; instead, Telefónica paid Kradonara, a firm controlled by Rato, and Kradonara in turn was invoiced by Arada, another Rato firm that does not pay taxes because of its accumulated losses.

The report contains false or erroneous data that the Tax Agency had the ability to detect a long time ago

Rodrigo Rato

Arada is considered by investigators to be a key element in Rato’s corporate network. The company has also received payments from tax havens and from Rato’s speaking engagements. “It has enough tax credit to ensure that owed taxes are reduced to €0,” notes the report.

Following his tenure as IMF chief between 2004 and 2007, Rato returned to Spain and delivered 39 speeches, which he charged through Arada. Between 2007 and 2014 he invoiced €1,409,334.38, representing an average of €36,136 per talk.

Fall from grace

Once a powerful figure within the PP, Rato has since fallen from grace and has become entangled in three criminal investigations. Besides the alleged tax irregularities committed by the former politician in his private business dealings, the courts are investigating kickbacks he allegedly accepted to favor specific firms while he headed Bankia, a Spanish lender that had to be nationalized in 2012.

Rato is also being investigated in connection with the “black” credit cards secretly issued by Bankia and its predecessor, Caja Madrid, to its top executives. The monthly credit on each card, which beneficiaries used for personal purposes, was not counted as part of their wages and the money went undeclared.