The Mallorcan businessman, Francisco Lavao, was the founder of the supermarket chain SYP, which was sold to Eroski for the equivalent in pesetas of 90 million euros in 1997. In 1999, he created another company - Grupo Avalo - whose interests were in construction and luxury services. In September 2010, his body was found on a cliff near Cap Blanc in Llucmajor. He had committed suicide. His businesses had collapsed because of the financial crisis.
In 2006, he bought a 35-metre yacht in Italy. Named Activa Club, the price was nine million euros. Around the same time, he had created a company in the north African city of Melilla. One of his sons was joint administrator. This company had no employees or any activity, but it was used to register the yacht in Melilla. By doing this, the yacht was outside EU customs territory. Payment of VAT was avoided, some 1.4 million euros.
The Prosecutor's Office maintains that the yacht was smuggled into Spain without paying the necessary taxes. There is a demand for 20 million euros in fines and compensation plus a five-year prison term for the son who was the joint administrator of the company. The Balearic government and the Tax Agency are both claiming some one million euros in uncollected taxes.
The yacht was never based in Melilla. It was in Palma, where Lavao and his son both lived. It was purely for personal recreational use. The prosecutor has established that the port of Melilla was used as a cover to avoid paying taxes.
The trial started in Palma a few days ago, but the court decided to send the case to Melilla at the request of the prosecutor. There has been a back and forth between Palma and Melilla. The Supreme Court will have to determine the jurisdiction.