The executive of a food manufacturing and delivery company in Tenerife, facing charges of Social Security fraud, has alleged that the allegations stem from poor advice he received at the time.
The Prosecutor’s Office and the Social Security Treasury are seeking a six-year prison sentence and a fine of €1.4 million. Although the debt is estimated at around €2.6 million, the exact amount may be determined during the sentence enforcement.
The alleged fraud involved the establishment of three companies, with the main company using the services of workers hired by the other two. These two auxiliary companies were created within one month of each other, had no assets, and, therefore, could not be held liable for any payments, according to the Prosecutor’s Office.
The defendant claimed that there was a verbal agreement with the Social Security authorities to postpone the payment of a €600,000 debt, but alleges that the state agency did not honour the agreement.
The defence attorney argued that the case should have been under the jurisdiction of a Criminal Court rather than a general Court, as the time limit had been exceeded without valid reasons for the delays.
The defence also claimed that the alleged crime had already surpassed the statute of limitations, assertions that were flatly rejected by the private prosecution and the Prosecutor’s Office. The Court stated that these claims would be examined during the sentence enforcement process.
The accused mentioned that since the inspection of his companies commenced, he has endured “the most challenging 12 years of my life, lost my family, money, and now survive on a pension.”
He disputed the claim that employees of the two auxiliary companies, identified as “front companies” by the Prosecutor’s Office, were working for the main entity. He insisted that each company’s roles were always kept distinctly separate.
Following his father’s passing in 2008, he assumed the role of the de facto and legal head of the entities established after 1991, a responsibility he shared with two other siblings.
By that time, the companies were already in dire financial straits, prompting him to seek a €500,000 loan secured by their assets. Additionally, he secured a personal loan of €150,000 from another business associate.
The other two companies were engaged in cleaning and distributing the meals prepared by the main facility. Thus, he asserted that their roles were distinct from each other.
Attempting to revive the struggling companies, he gathered the employees on September 5, 2012, informing them about the situation. Despite challenges, he managed to secure the jobs of 700 workers by establishing direct employment relationships with schools.
He maintained that they underwent constant audits and, though unsure about corporate tax payments, he confirmed that the accounts were regularly filed with the Commercial Registry.
The crisis has been attributed to the moment they overcame the challenging situation, leading to a loss of 40 percent of clients while maintaining the same staff structure. Simultaneously, stiff competition from other firms drove their prices down, rendering them non-competitive.
He reminisced about a time when they produced up to 14,000 meals daily and employed hundreds of workers.
The allegations describe other companies as “hollow and lacking substance,” merely providing labour to sustain the family business without owning any property or assets to take on the debts of the initial company.
As per the Prosecutor’s Office, the three companies amassed debts with Social Security by transferring employees between entities while operating primarily for the main company, thus dispersing tax responsibilities.
The debts remained unpaid, burdening the last two companies that lacked any assets, leaving them insolvent in practice. Despite employees being affiliated with the main company, the accused denied the accusations during the ongoing hearings, expected to continue for another five days.
