Spain’s Former King Has Fled, But His Cronyism Remains

Spain’s Former King Has Fled, But His Cronyism Remains

On Sunday night, Spain’s former king Juan Carlos fled the country in order to evade prosecution over mass-scale money laundering. Once hailed as a leader of the transition away from dictatorship, the monarch’s corrupt dealings show how Spain's powerful business interests continue to stand above democratic scrutiny.

King Juan Carlos of Spain receives Saudi King Abdullah for a gala dinner in Spain, 2007. (Carlos Alvarez / Getty Images)

Juan Carlos de Borbón is the only man whose name appears in Spain’s 1978 Constitution. Yet on Sunday night, the former king was forced to flee Spain as evidence builds up of his financial scandals. After crossing over to Portugal he boarded a private jet to the Dominican Republic, where he is now in exile.

Recent revelations into a series of massive illegal payments he received from Arab royal families and Spanish CEOs had left Juan Carlos increasingly vulnerable to prosecution, in both Spain and Switzerland. Particularly damaging was last week’s news that a €62 million London penthouse had been “gifted” to him by Oman’s royal family and then rapidly resold, in an act of apparent money laundering.

Since this occurred after his abdication in 2014, it would not be covered by the sweeping immunity Juan Carlos had enjoyed as king. But the scope of the allegations against him and his sudden escape have raised much wider questions about the legitimacy of the monarchy and the post-Franco order known to Spaniards as the ’78 regime.

Lavish Spending

Seen as one of the architects of Spain’s post-Franco democratic transition, as king from 1975 Juan Carlos enjoyed a degree of legal protection and insulation from media scrutiny rare among Western leaders. But his luck finally ran out in 2012, when he suffered a fall while elephant hunting in Botswana and had to be airlifted out of the country for emergency hip surgery.

For once, the Spanish intelligence services were unable to cover up Juan Carlos’s private goings-on, as facts slowly filtered into the press of the lavish trip he had taken with the German businesswoman Corinna Larsen, even as Spaniards suffered under harsh austerity measures.

Coinciding with a multimillion euro corruption investigation into his son-in-law and daughter, the images of the king posing with an elephant’s corpse — and details of his ten-year affair with Larsen — saw approval ratings for the monarchy plummet.

A swift abdication in 2014, with his son Felipe taking up the crown, was meant to see the royal household turn the page on Juan Carlos’s antics. Yet in 2018, Swiss prosecutors launched an investigation into a reported $100 million he had received from Saudi king Abdullah — as allegations raged that this was linked to the €6.7 billion contract Juan Carlos had helped secure for a Spanish consortium in 2008, linking Mecca to Medina by rail.

This March, the revelations began to spiral out of control. As Spain entered lockdown, King Felipe was forced to publically renounce his right to an inheritance from his father after the Telegraph revealed he was named as the main beneficiary of a €65 million offshore fund in the eventuality of Juan Carlos’s death.

It was also uncovered that a Catalan businessman and friend of the former king paid for half of Felipe and Queen Leticia’s €500,000 round-the-world honeymoon in 2004. This was followed with a leaked recording in early July of Larsen claiming that Juan Carlos would regularly return with up to €5 million in his luggage from trips to the Middle East — beaming like “a child” as he counted it with a machine in the Zarzuela palace.

As revelations continued to build, Juan Carlos decided he would rather not face justice — even under the constitutional framework that he had himself been instrumental in constructing. Rather, he secretly fled into exile, with the royal family only informing the press after he had left Spanish soil.

Deputy Prime Minister Pablo Iglesias was furious — claiming that “a democratic government cannot look the other way, much less justify or welcome behaviour that both undermines the dignity of … the Head of State and that defrauds our legal system.” Indeed, Iglesias together with other ministers from Unidas Podemos were kept in the dark about the ex-king’s plans, which were known to center-left prime minister Pedro Sánchez. Once again, it is clear that Iglesias’s party is still not trusted with matters of state that touch on the core tenants of the ‘78 regime.

The Myth of the Transition

Given the depths of his current disgrace, it‘s hard to recall just how much prestige Juan Carlos built up through his role in Spain’s tumultuous transition to democracy in the late 1970s. He came to power upon Franco’s death in 1975 as his chosen political successor — only to then initiate a reform process that broke with the dictatorship. The narrative of the young king who gave up his executive powers in order to usher in democracy and national reconciliation is at the heart of the 1978 constitutional regime’s legitimacy — its founding myth.

According to this official version, Juan Carlos together with center-right prime minister Adolfo Suárez, led a model transition, worthy of international emulation. This supposedly served to reconcile the “two Spains” divided by the legacy of the Civil War while seeing off the most hard-line elements from the Franco regime, most notably during an attempted military coup in 1981.

Cast as a national hero, for decades Juan Carlos was an immensely popular figure, even amongst Socialist (PSOE, Spanish Socialist Workers’ Party) voters. As journalist Alberto Lardiés notes in his book Bourbonic Democracy, it was common for Spaniards to claim that they were not monarchists by creed but “juancarlistas,” since it was “the king who had brought us democracy.”

In his work on Juan Carlos, liberal historian Paul Preston has also defended this narrative of “a people’s king.” As he put it in an interview with ABC newspaper: “I do not know if internally [Juan Carlos] was a convinced democrat or a convinced realist who had to be a democrat. But for me it does not matter because he took the option he took: to be the king of everyone.” For Preston “the life of Juan Carlos I was, until at least 1982, a life of sacrifice and of service to his people” and that later after such service “there must have been a feeling that ‘I deserve some reward.’”

Yet Preston’s desire to separate the Juan Carlos of the transition from that of the later scandals makes no sense when we examine the initial payments he received from Middle East royal families shortly after assuming the throne. This included a $100 million interest-free loan in 1977 from the Saudis, of which there is no record of any repayment.

This was followed in 1979 with an agreement over the importation of Saudi oil to Spain, with Juan Carlos earning a commission for each barrel of crude that was delivered (and from which he is believed to have earned a total of $5 million). Also significant was the $10 million in illegal funding he organized for Suárez’s 1977 election campaign, coming from the Shah of Iran. This was a clear act of interference in the country’s first democratic elections — indeed, in Juan Carlos’s written request to the Shah, he said the cash would save Spain from “Marxism.”

Above the Law

Framed in anti-leftist terms, this funding points to an alternative narrative around the transition — one more centred on the monarchy’s role in ensuring the continuity of class power. As former Podemos MP Manolo Monereo argues, the fundamental conflict during this period was not a battle between dictatorship and democracy but rather over what type of democracy would be instituted.

After Franco’s death, the anti-Francoist opposition, led by the Communist Party and the trade unions, was strong enough to block the initial attempts at preserving the old regime, as it launched a wave of mobilizations and strikes. Yet backed by the Francoite oligarchy, reformist elements within the regime and Henry Kissinger in Washington, Juan Carlos and Suárez were able to push forward with a type of democratization-from-above that would thwart any pretensions at social transformation.

According to Lardiés, the limited nature of this transition meant that political culture of Spain’s new democracy was infected from the beginning with the corruption and cronyism that had marked the Francoite regime. With no significant “expropriations, nationalizations or legal inquiries into the past,” the existing economic and political elites largely continued as before. With time, they incorporated much of the Socialist Party’s leadership into their networks of patronage, revolving doors, and outright corruption.

Under this new “’78 regime,” the king was never simply a constitutional monarch, but instead took up an active role in coordinating this power elite. Juan Carlos was one of the driving forces behind Spain’s “lobby of lobbies,” the Council for Economic Competitiveness, which brought together the CEOs of Spain’s fifteen largest companies.

In this spirit, the Palace of Zarzuela was the place where businessmen and media heads could come together to build contacts with leading figures from state institutions, such as the security and intelligence services. Most importantly, he harnessed his close friendship with the House of Saud and other petro-monarchies of the gulf to generated huge opportunities for the defense, energy, and construction sectors — with the king and his staff directly negotiating multibillion dollar contracts with these states. This included the single biggest industrial contrast obtained by a Spanish consortium — the €6.7 billion Mecca-Medina rail contract.

As commissions for such services, the king received not just cash payments but also luxury yachts, high-end sports cars, and properties in various European capitals. By all accounts, he was very direct with business leaders about his sense of entitlement to these commissions. For him, this was how business was conducted in Spain, part of the rules of the game — or as his lover and former business partner Corinna Larsen put it: “he does not distinguish between what is legal or illegal.”

In her leaked recording, she tells the story of Juan Carlos’s outburst over a delay in a payment from the oligarch Juan Miguel Villar Mir, whose company, Obrascon Huarte Lain (OHL), was one of the main beneficiaries of the Saudi high-speed rail contract. According to Larsen, the king confronted Villar Mir telling him: “Don’t fuck with me! It’s my commission — I secured the train. I talked to my friends, my brother [King Abdullah] and with the Saudis. You have to pay me … I met with those who closed the contract.”

“If he Is Innocent, the Nation Is guilty”

Juan Carlos’s illicit profiteering is extraordinary in scale. Since the 1970s, he has amassed a fortune that The New York Times estimates at $2.3 billion — and its origins mostly cannot be accounted for either through his official earnings or inheritance.

But the fact that Juan Carlos used his legal immunity and freedom from institutional oversight to run the Spanish monarchy as a massive graft and money-laundering operation was no accident. Instead, his actions should be seen as largely fitting with the best practice of Spain’s corrupt oligarchy — with the king leveraging his patronage and influence.

Yet the excesses of this ruling class have also been decisive in revealing the extent of Juan Carlos’s criminality. The key recordings of Larsen talking about her and the king’s business dealings were made without her knowledge by the corrupt police chief José Villarejo when he and the then CEO of telecoms giant Telefónica met her in London.

Now on trial for corporate and political spying, including over the theft of the phone of Pablo Iglesias’s assistant, Villarejo released the recordings in order to force a political intervention in his trial. His revelations were effectively a warning that he would bring the monarchy down with him, if he was sentenced to a long jail term.

The police chief was also probably connected with the 2016 leaking of WhatsApp messages of support from the current king and queen, Felipe and Leticia, to their close friend and “yoga buddy” Javier López Madrid after he was implicated in the Púnica corruption scandal, which engulfed the right-wing People’s Party in 2014.

In this respect, the political establishment’s current strategy of closing ranks around Felipe and ensuring the continuity of the monarchy will not be easy to pull off. Indeed, the last months have made it increasingly difficult to separate the reigning monarch from his father’s scandals. In particular, in the Villarejo recordings, Larsen talks about how the money Juan Carlos brought back from the Middle East was used to pay the expenses of his entire family — including King Felipe’s.

This claim needs to be investigated. But the political establishment is betting that inertia and the lack of an organized republican movement will see the existing parliamentary monarchy survive. In particular, the ruling Socialist Party has stood firmly with Felipe — with prime minister Pedro Sánchez claiming that the exit of his crisis-hit father has strengthened the monarchy’s position. Such sentiments are in sharp contrast to the position of its junior coalition partner Unidas Podemos, which released a statement affirming “it must be the people who decide” Spain’s constitutional form.

Polling from May for Publico shows 51 percent of Spaniards favor a republic and 58.2 percent would support a referendum on the issue; however, the institutional balance of power would not allow any such democratic exercise to take place. Yet this is also the country which self-identifies as further to the Left than any other in Europe. The ongoing revelations over the monarchy once again underline the glaring contradiction between the rabid cronyism of Spanish capitalism and the social majority’s commitment to democracy and social justice.