Executives sanctioned in a personal capacity by the National Commission of Markets and Competition (CNMC) for participating in cartels are trying to knock down the fines in the National Court. These sanctions are something relatively new in Spain. They were introduced into the law in 2007, but the first ones did not arrive until 2016. Since then, the CNMC has fined 70 directors of some 40 companies in a dozen files for a total of some 2.3 million euros, at the rate of about 33,000 euros per head. There are already repeat offenders, and there is debate about whether the fines are dissuasive.
The latest case is that of one of the largest cartels dismantled by the CNMC, which was formed for three decades by the main companies of security systems, signaling and communications of the AVE network, medium distance and suburban in Spain. It was deactivated in September with the imposition of 127.8 million in sanctions on 8 companies. Among them, Cobra, former industrial subsidiary of ACS sold in December to the French group Vinci (30 million fine), together with Siemens (28.9 million, later halved for collaborating in the process), Nokia (24 million) or Thales (17 million).
In that file, ten managers were sanctioned. In an unprecedented decision until then, three received the maximum fine allowed by law: 60,000 euros: its president in Spain, Jesús Sánchez Bargos, and the director of sales and Business Development of the Civil Market division, Fernando Ortega. "The sanction has been appealed in its entirety because we reject the conclusions of the CNMC report," indicate sources from the French multinational, who do not specify if its president is one of those who has managed to provisionally suspend them.
In this procedure, the CNMC fined four Thales executives in a personal capacity, more than any other cartel company. The former head of Siemens Rail Automation in Spain when these events occurred, Jesús Guzmán Martín de los Santos, who has headed the ACS Railway business since 2018, also received the maximum possible sanction, according to his profile on LinkedIn.
At least two of those fined 60,000 euros have managed to get the Court, without going to the bottom of the matter, to suspend the execution of the sanctions. This is the case of Fernando Ortega, director of Thales, who argued that disbursing that sum "would cause him damages that would be impossible or very difficult to repair given the amount and the economic remuneration he receives", since it is equivalent to "approximately 27% of his remuneration gross annual money during the fiscal year of 2020, the last complete fiscal year", or 44.8% of its net income, "once the corresponding withholdings have been made", according to a March order.
A few weeks ago, the Court also suspended the sanction of 60,000 euros to another of those fined in that file, which argued that it is a "high amount for a natural person", of "a quarter of the annual income received", as accredited with the corresponding certificate of withholdings and income on account of the IRPF of 2020. Paying it immediately "would cause a considerable negative impact on his economic resources and those of his family".
Similar arguments have served to suspend the sanction of 41,000 euros imposed in that procedure on Íñigo Balda, manager of the Basque CAF. This company, sanctioned with 1.73 million, signed in 2020, with that file already opened, to a former CNMC counselorin the first movement of this type since the creation of this body in 2013.
Balda's defense stated that "no harm can be seen to the public interest due to the fact that the Administration stops paying the amount of the penalty at this time", which "represents more than 16% of its annual income", of about €256,000. Facing it would prevent him from paying the "high" expenses that Balda faces: "School education for the five children; expenses for a rental home and the payment of two mortgage loans" that he documented, according to the order.
The same has happened with Francisco Travieso, a former director of CAF fined 28,000 euros. A sum that, already retired, "represents 77% of his annual income," according to his defense.
They have also appealed against the executive sanctions of the consulting cartel dismantled in May 2021. Competition imposed 6.3 million in fines on 22 companies and more than a dozen of their managers for setting up a scheme to "manipulate the largest number of tenders in a sustained manner over time" for at least 10 years. Emails were exchanged in this way to rig deals: "We have to do them very well, come on, as if we were going to win..."
On a personal basis, thirteen managers were fined 427,000 euros and Competition proposed that the participants be disqualified from contracting with the Administration. Several have taken their case to court. This is the case of Leandro Ardanza, managing partner of the Bilbao consulting firm 97 SYF, SL, fined 69,667 euros. The manager, who did not respond to the call from this medium, has challenged the sanction of 55,000 euros that was imposed on him as a natural person. And he has achieved his precautionary suspension as the Audience accredited his "economic problems": "He is going through a difficult personal and financial situation that has forced him to apply for various loans, both mortgage and personal" and, without this precautionary measure, "there would be a significant economic loss," he stated, according to a December ruling.
Ana Andueza has had less luck, until 2018 a partner in the Basque Country of Deloitte, a firm that received the largest fine in the file, almost 4 million. Andueza has declined to comment, as her case is in court. She was fined another 55,000 euros. According to the CNMC resolution, she exchanged numerous emails with Ardanza to give each other "coverage" in different public tenders.
A few days ago, the National High Court refused to suspend the execution of the sanction against her and imposed the payment of the costs for not considering the "irreparable damage" that she alleged had been proven. An expert in corporate governance who has held executive positions at Deloitte or KPMG, she argued that the resolution "is null and void" since her presumption of innocence was violated and because "there is no proof of her participation or her guilt." And she understood that the fine was not proportional, arguments that "directly affect the substance of the matter" and are, "in this process in which we find ourselves, insufficient to suspend the resolution," according to the Court.
In the consultants' file, Íñigo San Emeterio, corporate director and head of Consulting at Idom (24,000 euros), and Marta Álvarez, head of the Consulting Department and the Competitiveness area of that firm (12,000 euros) were also personally fined. . Both are still in the Basque consultancy, sanctioned with 640,000 euros, the third largest fine in that procedure. They requested as a precautionary measure not only the suspension of the payment of the penalty, but to block the notification to the Contracting Consultative Board of the agreement to prevent them from contracting with the Administration in a personal capacity.
Their arguments were similar: that veto would cause serious damage to them and their company, "in terms of reputation and direct loss of customers, which can lead to the irremediable loss of income and activity for the company with the consequent loss of jobs ", including yours. They explained that public contracting represents 127 million annually for the group, 53% of the turnover of ICEA, the sanctioned consulting division, which is "the main company of the IDOM group and represents 80% of the Net Assets, 87% of turnover and 80% of its personnel".
And vetoing the company or its employees "would mean an amount equivalent to almost 200 times the fine imposed by the CNMC", with "the aggravating circumstance that it would prevent IDOM from generating additional income, practically leading to the closure of various areas of the company and the dismissal of a very relevant number of employees", according to two orders from February and March. Álvarez, who had already paid those 12,000 euros of fine, has been granted the precautionary measure. San Emeterio has been denied.
Other directors have knocked down the fines because the Court has annulled the file that generated them. This is what has happened with an alleged railway infrastructure cartel that the CNMC dismantled in 2016, imposing fines of 5.46 million on four companies and nine managers. But in December, the Contentious Chamber annulled the sanction of one of the offenders, JEZ Sistemas, and then has been estimating the resources of the directors of that and other companies.
The Court understood that the CNMC should have made a "greater effort" to explain why the information that was exchanged in the joint ventures created to obtain these Adif tenders "exceeded what was essential". And he did not take for good the super-regulator's argument about how the cartel altered prices or "restricted a market that the sanctioning resolution already recognized was limited to a handful of companies, the only ones that met the economic and technological conditions to face it." The CNMC is going to appeal to the Supreme Court, confirm sources from the agency.
That was the second file in which the CNMC activated the personal sanctions against managers. The first was the adult diaper cartel, with fines of 128.8 million. One of the people sanctioned was the general secretary of the Fenin employers' association, Margarita Alfonsel. She took her case to the Supreme Court and won it, as she said Five days. The same thing happened with the technical director of the association, María Aláez. The High Court determined that her position was subordinate to the general secretary and did not have autonomy in her functions.
Six years after, in May 2016, the CNMC imposed the first fines of this type, two managers are already repeat offenders. Both were fined the last time this mechanism was activated, in the railway cartel in September. The agency sanctioned Miguel Ángel Martínez with 50,000 euros, until 2019 general director of the subsidiary of Ferrocarriles de Cobra (today in the hands of Vinci), who was already fined 59,100 euros in the AVE cartel, dismantled in 2019, in a resolution that made ACS the leader in CNMC sanctions.
Germany's Siemens was also part of these illegal agreements. Its then manager Leopoldo Olea was fined 45,100 euros by the AVE cartel. And in last year, another 43,000 euros of sanction fell on him in a personal capacity. Olea is currently General Manager at Cobra Industrial Services, the former subsidiary of ACS.
As Pilar Canedo, director of the super-regulator and former president of the Basque Authority for the sector, highlighted on Wednesday at an event organized by the CNMC and the Galician Competition Commission (CGC), with this type of illegal conduct "the Administration pays more for the service it provides to citizens", who are the ones losing out. In the OECD "a growing number of countries" is considering including these behaviors in the field of criminal responsibility.
Are the current sanctions on natural persons dissuasive? There are doubts. The president of the CNMC, Cani Fernández, has advocated drastically raising the amount of it, like her predecessor, José María Marín Quemada. Both put on the table a figure: 400,000 euros of maximum sanction. In July 2020, the Ministry of Economic Affairs published a draft bill reform of the Law for the Defense of Competition to implement a European directive known as ECN+. Among other things, it contemplated extending that maximum threshold up to that amount, more than six times more than now.
Finally, the Executive transposed that European standard into a Royal Decree-Law approved in April 2021 that toughened the sanctions on companies for anti-competitive agreements. But the fines to directors were not touched.