property.timesonline.co.uk/tol/life_and_style/property/overseas/article5437968.ece
What happened to the Brits who invested in Spanish land schemes?
Hundreds of Britons invested in a Spanish land scheme that promised big profits. But will they ever see their money again?
Anna Mikhailova
When Chris Redford saw an advertisement in a property magazine from a company called
Fortuna Estates that held out the prospect of lucrative investments in land in southern Spain, he was hooked.
**It was 2004, and property prices across the world were rising. Redford, who was working in Dubai, did not want the hassle of managing a house or flat of his own and saw land as the ideal alternative. And so, over the course of the four years that followed, he transferred £250,000 into Fortuna’s bank account in Cyprus and waited for the profits to roll in.
They never came. Redford, 63, a former sales director for an airline services company, is among as many as 2,000 people, almost all of them British or Irish, believed to have fallen victim to an alleged multi-million-pound fraud run by Fortuna – the latest in a series of property scams in Spain** (see panel, right).
The company’s offices have since been shut down and two of its directors arrested; 20 others are being questioned. Spanish police claimed in a statement to have “broken up an organisation that has swindled foreign investors out of more than €65m” (£64m at current exchange rates) by offering “developments and real estate projects that were never built”.
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* Pain in Spain
Founded in 2002 and initially registered in Spain, Fortuna tempted investors with the prospect of up to 800% returns on their money. Under its schemes, people would buy rural land in Andalusia from the company, the value of which, they were told, would multiply once planning permission had been obtained to build houses, hotels, leisure centres or other developments on it. The company did not give precise guarantees as to when this would happen, but most investors understood that it could be within four to five years.
Those who expressed interest were assigned a salesperson, who would make regular calls encouraging them to invest. “The organisation then maintained the fraud, staying in contact with the investors and keeping them informed of progress and delays in the execution, in many cases convincing them to invest more in new projects,” the police claimed.
“It all looked above board and the promises were good,” says Redford, who lives in Chelmsford, Essex, with his wife, Helen. After an initial payment of €69,000, he went on to put the remainder of his quarter of a million pounds into four separate developments run by Fortuna – Sierra Fortuna, Cazadores Reales, Miramontana and Miramontana Vista – all of them in Andalusia. The money was intended to see him through retirement. He is not sure how much, if any, of it he will see again and has now taken a part-time job to make ends meet.
“I am annoyed with myself even more than I am angry about the lost money,” he says. “Now I’m retired, I need it. My wife has just been made redundant and now she’ll have to go back to work as well.”
Redford has organised a group of British investors with the aim of starting a group action against Fortuna. “I have more than 70 people already, and I’m hoping to get hundreds,” he says. Most are believed to have lost between £10,000 and £30,000. “I have been told there is someone who lost £500,000,” he says, “but they have not come forward yet.
“The problem is, it’s not like keeping your money in a bank, where you can withdraw if you start to feel uncomfortable. It’s tied up in land, so it’s not as simple. I started having concerns a year ago, when someone who used to work for Fortuna warned me it was not above board, but there wasn’t much I could do.”
For other investors, the first indication that something was wrong came only in November, after the reports that Fortuna’s offices, in Mijas and Fuengirola, had been raided. Investors began to panic and flocked to online message boards to swap stories and try to establish what was going on.
Many had become aware of Fortuna’s problems only after they were contacted by European Mediation, a Rochdale-based company, which offered to recover their losses – provided they paid 10% of the amount they were owed as an upfront fee. It is not clear how many – if any – people have been able to retrieve their money using its services. European Mediation failed last week to respond to requests from The Sunday Times to comment.
Among those who have lost money is Martin Shorland, 52, from Cheltenham. Two years ago, he paid Fortuna – which subsequently changed its name to Fortuna Land (Investment) – €28,000 for 5,000 square metres of land, part of its Miramontana scheme, which he claims the company told him it expected to sell on to a developer for a large profit.
“I’ve bought lots of other investments and it all looked good,” Shorland says. “Alarm bells started ringing six months ago after I spoke to Ray Piper, the number-two man in Fortuna, who sounded nervous on the phone and told me not to expect as big a return. After that, my letters and calls stopped being returned. It was a big, big disappointment, and losing the money has been a knock-back. Luckily, I’m not as affected as some have been.” Last week, Shorland gave a statement outlining his case to Gloucestershire police, who have said they will pursue the matter through Interpol. Piper declined to comment when contacted by The Sunday Times.
Internet chat rooms abound with stories of woe. “I am so ashamed and upset that I trusted my pension money to the hand of these miserable and ignorant people,” one contributor wrote. Another said: “I checked this company out thoroughly, it seemed a viable operation … Like everyone else, I cannot afford to lose this money. It was hard earned.”
To those who invested in its developments, Fortuna appeared to be a legitimate organisation. Its two Spanish offices were fully staffed – rather than mere letterbox addresses – and employees were required to give their full names. Additional office space, with a receptionist, was rented in Switzerland. Callers were told this was the company’s Swiss broker.
“I visited both the offices in Spain and they had about 20 people each coming in doing normal working days,” Redford says. “It looked like a real office. Some of the victims are chartered accountants who did due diligence on Fortuna beforehand. It all looked real.”
The returns the company promised, however, were rather too good to be true – even by the standards of the Spanish property market, which was booming in the first part of the decade. The brochure for Bella Fortuna, the company’s first development, for example, claimed that land “released to private investors” in September 2002 at €6.80 per square metre had been “independently valued” at €37.59 per square metre a little more than two years later, after planning permission had been granted for a hotel complex. “Watch your investment in raw, undeveloped land turn into commercial projects with multi-million-euro potential,” it claimed. “No other company offers the unique opportunities that Fortuna offers.” The company said that it was “committed to offering its clients independent, objective advice when considering land investment”.
Spain has become a favourite base for so-called boiler-room frauds, in which unwitting investors, many of them Britons, are cold-called by scammers and sold shares, property, land or other assets. “They use Spain because the police do nothing about them as long as they’re not affecting their own citizens,” says a source familiar with such schemes.
In the case of Fortuna, potential clients responded to extensive press advertising, were approached at property exhibitions or were contacted after their names appeared on mailing lists. “It’s all connected – client lists are passed between scammers,” the source adds. “A client who buys stock over the phone, even if they’ve been tricked before, is more likely to fall for the scam than someone you cold-call.”
The raid on Fortuna was the culmination of an operation by Spanish police, codenamed Fuentespino, that lasted two years and was run by the special prosecutor against corruption and organised crime. Those questioned face charges of fraud, falsifying documents, money laundering and tax evasion. Bank accounts and properties in Malaga and Granada have been seized. Spanish police, citing secrecy laws, have declined to name the two suspects arrested, but they are believed to be Jerome Donovan, who also appears to have gone by the name of Jerome Andrée, and his wife, Daniele Emboulas.
Anyone now trying to access Fortuna’s website is redirected to the site of another company, Oanna Group, with which it says it has “implemented a strategic relationship”. Oanna’s site carries a simple message, apparently from its hosting company: “This service has been suspended. If this is your website, please contact the accounts department as soon as possible.”
A spokesman for the Financial Services Authority (FSA) said that the organisation could not comment on individual cases, but added: “Don’t buy shares from people who ring you out of the blue. If you’re in any doubt, check with the FSA to see if the firm is authorised. If it sounds too good to be true, it probably is.”
In November, the FSA called on global regulators and law-enforcement agencies to tackle boiler-room fraud, estimating that 30,000 people fall victim to such scams in Britain each year, at a cost of £300m.