The Most Notorious Property Scam in the History of Spain

The Most Notorious Property Scam in the History of Spain

The Duque de Lerma sitting pretty atop his horse
The Duque de Lerma was so rich he could afford to have Rubens paint his portrait

Property speculation is a swindle as old as the notion of capitalism itself and, judging by the wave of evictions sweeping the city, not going out of style any time soon. But if you think the behaviour of the banks and investment funds these days is outrageous, then get a load of what went down 400 years ago when the monarchy itself was taken for a very expensive ride by a shameless rogue who wound up bankrupting the crown, while lining his own pockets at the same time. The bounder in question is one Francisco de Sandoval y Rojas, an impoverished, but well connected aristocrat who rose through the ranks to acquire the high falutin title of Duque de Lerma.

Unfit to rule

Philip III was a simple-minded bloke who, while fond of hunting and gambling, was easily bored by politics. What he needed was someone to deal with all the tedious paperwork involved in governance while he could gad about having a fine old time. Enter the Duque de Lerma who, between 1599 and 1618, effectively ruled the country as the king’s Valido. While Philip III was off enjoying himself, his disloyal vassal began setting in motion the greatest property scam Spain has ever known.

Moving the capital

Giving some spurious argument about Madrid becoming overrun with undesirables, the duke proposed the capital be relocated to Valladolid. Unbeknownst to the king, the duke had already been buying up land, property and palaces in that very city. The gullible monarch went along with the idea and in 1601, the entire court upped sticks and moved north. Suddenly property in Valladolid was at a premium, so guess who made a killing selling it to the crown? Yep, you’ve guessed it, the crafty duke pocketed a fortune from the move. And here comes the really outrageous part: greedy for more, he decided to repeat the scam five years later, by again suggesting the capital be moved, this time back to Madrid! As before, he sneakily bought up property in advance and sold it off to the crown for yet more cash.

The richest man in Spain

Already strapped for cash before this scam, the monarchy was forced to declare bankruptcy in 1607, while the insouciant Duque de Lerma, now the richest man in Spain, was in the process of having a splendid palace built for himself. To draw suspicion away, in the same year he made the popular, but ultimately economically disastrous decision to expel all the Moors from Spain, seizing their properties to give the crown a temporary cash injection.

Luckily Philip III’s wife, Queen Margaret of Austria, was not as gullible as her husband. Gathering some powerful allies, she began legal proceedings against the Duque de Lerma for defrauding the crown. This would have been an open and shut case, if it weren’t for the Catholic church. The expulsion of the Moors had bought the duke a lot of goodwill from the Pope, so when he found himself under investigation, he asked to be made a cardinal. The Pope granted this wish, thus winning the duke immunity from prosecution. To satisfy the disgruntled monarchs he gave up his right-hand-man, Rodrigo Calderón de Aranda.

A sacrificial lamb

Poor old Rodrigo was executed in 1621 in the newly completed Plaza Mayor and the disgraced duke retired to the kick ass palace he’d had constructed in Burgos with all his ill-gotten gains. Some form of justice did come later in 1625 when the next king’s valido seized all his properties in Burgos and Valladolid. Again the duke appealed to the pope, but this time he wasn’t backed up and lost a huge chunk of his fortune.

While it’s funny to think of the king being played in such an obvious way (at one point the king also had personal gambling debts to the Duque de Lerma), ultimately the victims of Philip III’s stupidity were the people on the street, who would have been forced to cough up more money in taxes to keep the crown financially afloat.

Rapacious greed still rules

When you look at the situation now in Madrid, again it’s the little people suffering. This time for the failure of government to regulate a rapacious banking industry. Over the last few years, rents have been rising steeply and forced evictions of tenants unable to pay for these sudden hikes have become all too common a sight on the city’s streets. This current wave of desahucios comes just a decade after thousands of families, unable to keep up with their mortgage payments, were kicked out of their houses when the housing bubble burst in 2008. People left not just homeless but, due to the unjust nature of Spanish property law, saddled with a lifetime’s debt to unscrupulous banks that now also owned huge portfolios of empty property. According to The Local, investment funds saw an opportunity here, buying up billions of euros in devalued real estate. The gamble paid off and now these faceless landlords are reaping the rewards, charging extortionate rents that many ordinary Madrileños just cannot afford.

Signs protesting eviction in Lavapiés read: “neighbours wake up, speculation at your door” and “greed is destroying the neighbourhood”

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