\n<\/p>\n
A CVC executive who is one of Spain\u2019s most powerful yet discreet dealmakers has been dragged into the spotlight by a tax probe into a multibillion-euro healthcare deal.<\/p>\n
Javier de Jaime Guijarro, a CVC heavyweight with personal wealth of at least \u20ac500mn, is being investigated by a Spanish court over allegations of tax fraud that threaten to rock Spain\u2019s private equity sector.<\/p>\n
Public prosecutors claim de Jaime and CVC defrauded the Spanish state out of more than \u20ac350mn through his categorisation of investment profits as capital gains rather than income and the group\u2019s use of overseas holding companies, according to court documents seen by the Financial Times.<\/p>\n
The allegations centre on practices that are core to private equity around the world but are less well known in Spain, where buyout groups are regularly labelled \u201cvulture funds\u201d, including by the Socialist-led government.<\/p>\n
De Jaime, who joined CVC in 1997, is one of the group\u2019s most important dealmakers globally. When the company went public last year he owned more than \u20ac500mn of its shares, a personal stake exceeded only by CVC\u2019s three founders and chief executive Rob Lucas.<\/p>\n
De Jaime has been a driving force behind CVC\u2019s investments in Spain\u2019s top football division La Liga<\/span> \u00a9 Josep Lago\/AFP via Getty Images<\/span><\/p>\n The Spaniard, a managing partner who oversees buyout activity in his home country and Italy, is a power broker behind several high-profile brands. He was a driving force behind CVC\u2019s investments in Spain\u2019s top football division La Liga, power utility Naturgy, and Deoleo, the underperforming owner of olive oil brands including Bertolli and Carbonell.<\/p>\n De Jaime\u2019s tax woes started after CVC secured a mammoth windfall from its sale eight years ago of hospital chain Quir\u00f3nsalud in one of Spain\u2019s most successful private equity exits.<\/p>\n The health venture began in 1998 when CVC paid $85mn including debt to acquire a small Spanish healthcare chain called Recoletas. It later sold it then bought it back, renaming it as IDC Salud then merging it with private hospital group Quir\u00f3n and others.<\/p>\n When CVC sold Quir\u00f3nsalud to German hospitals group Fresenius Helios in 2017 it received \u20ac5.76bn and reported profits of almost \u20ac2.9bn, according to a person familiar with the matter. <\/p>\n If CVC followed the standard incentive structure in private equity, the firm and its executives would have shared 20 per cent of the \u20ac2.9bn, with the rest going to its fund investors. <\/p>\n De Jaime is likely to have pocketed tens of millions personally, according to a CVC incentive structure previously revealed by the FT.<\/p>\n When CVC sold Quir\u00f3nsalud to German hospitals group Fresenius Helios in 2017 it received \u20ac5.76bn<\/span> \u00a9 Eduardo Parra\/Europa Press via Getty Images<\/span><\/p>\n Spain\u2019s tax authority opened a probe into the transaction in 2021. Its findings were then passed to public prosecutors, who drew up allegations that underpinned a judge\u2019s decision to open an investigation at Spain\u2019s National High Court last month.<\/p>\n De Jaime is accused of committing four offences in his personal tax returns between 2015 and 2018, according to the judge\u2019s court order.\u00a0CVC is accused of 13 tax crimes. The investigating judge will decide whether the case will go to trial once the probe is complete.<\/p>\n \u201cThe exact nature and circumstances of such acts, and the persons involved, have not yet been fully determined,\u201d the judge wrote.<\/p>\n But as a head-on challenge to some of private equity\u2019s central practices, some say the CVC case could destabilise the sector in Spain.\u00a0<\/p>\n \u201cCertainly this is something viewed with concern by the private equity industry,\u201d said one leading Spanish buyouts lawyer. \u201cIf CVC is unsuccessful, it creates or draws a line as to how others and the market generally will plan to set up their [investments] going forward, which would put Spain at a disadvantage.\u201d<\/p>\n According to a person close to public prosecutors, a key strand of the case concerns \u201ccarried interest\u201d, a share of post-sale investment profits paid to buyout executives such as de Jaime.<\/p>\n The authorities acknowledge that de Jaime declared all of his carried interest and paid tax on it, according to the person familiar with the matter.<\/p>\n In many countries, recipients of carried interest benefit from a tax break that enables them to pay less by classifying it as a capital gain rather than employment income. <\/p>\n CVC has invested in Deoleo, the underperforming owner of olive oil brands including Bertolli<\/span> \u00a9 Darryl Brooks\/Alamy<\/span><\/p>\n De Jaime declared some of his carried interest as employment income and some as investment income, a decision the Spanish tax authority said was wrong, according to the person.<\/p>\n Private equity lawyers say the tax treatment of carried interest was a grey area in Spain at the time of CVC\u2019s exit. The top tax rate on capital gains in Spain is currently 30 per cent, whereas the top rate on employment income, which varies by region, can rise as high as 50 per cent.<\/p>\n One lawyer said that only in 2023 did reforms to the rules make clear that all carried interest should be treated as employment income. However, they added that only half of the gain is now taxed, meaning an effective tax rate on carried interest of about 25 per cent depending on the region.<\/p>\n The other key part of the CVC case centres on its use of holding companies outside Spain.<\/p>\n Quir\u00f3nsalud was held by a Dutch vehicle that was in turn owned by two Luxembourg entities. CVC declared tax in the Netherlands but paid none in Spain due to a double taxation treaty between the two countries, according to the person familiar with the case.<\/p>\n The Spanish tax authority has argued that the holding structure for the hospitals group should be ignored, which would mean the CVC fund based in Luxembourg was liable to pay income tax in Spain for receiving income from the sale of a Spanish company, albeit as a non-resident.<\/p>\n A tax adviser said there was not usually a significant tax advantage to be gained from using Dutch over Spanish holding entities. The adviser said the Spanish authorities were also pursuing other private equity firms over the structure of their transactions.<\/p>\n The use of Luxembourg holding entities was common, lawyers said, because lenders to private equity portfolio companies often required them as the country\u2019s laws ensured strong protection of their rights.<\/p>\n The CVC transaction contained another twist: above the Luxembourg entities were funds in the Cayman Islands, the person familiar with the case said, a reputed tax haven.<\/p>\n De Jaime and CVC declined to comment. However, the firm said last year in a prospectus ahead of its initial public offering that the fund in question \u201cvigorously\u201d disputed the case against it, and that the firm believed the likelihood the tax authority would \u201cultimately prevail is low\u201d.<\/p>\n If the judicial investigation leads to formal charges, the firm and de Jaime face the possibility of having to explain their practices in the uncomfortable surroundings of a courtroom.<\/p>\n","protected":false},"excerpt":{"rendered":" A CVC executive who is one of Spain\u2019s most powerful yet discreet dealmakers has been dragged into the spotlight by a tax probe into a multibillion-euro healthcare deal. Javier de Jaime Guijarro, a CVC heavyweight with personal wealth of at least \u20ac500mn, is being investigated by a Spanish court over allegations of tax fraud that<\/p>\n","protected":false},"author":1,"featured_media":30657,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[49],"tags":[4829,5337,5075,1877,4148,1034,1534,3195,101,899],"class_list":{"0":"post-30656","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-cvc","9":"tag-equity","10":"tag-fraud","11":"tag-private","12":"tag-probe","13":"tag-rock","14":"tag-sector","15":"tag-spains","16":"tag-tax","17":"tag-threatens"},"_links":{"self":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/30656","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=30656"}],"version-history":[{"count":0,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/posts\/30656\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=\/wp\/v2\/media\/30657"}],"wp:attachment":[{"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=30656"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=30656"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naijaglobalnews.org\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=30656"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}