Europe

Mercan Responds to Operation Babel Charges


Last week, Portugal’s Public Ministry (MP) unveiled a broad corruption probe, dubbed Operation Babel, involving an alleged network of public officials, businessmen, and companies accused of manipulating urban licensing processes for personal gain.

The investigation, which focuses on several high-profile real estate projects in Vila Nova de Gaia, near Porto, has resulted in 16 defendants facing dozens of charges, including corruption, malfeasance, influence peddling, abuse of power, money laundering, and undue receipt or offer of an advantage.

Central to the case is the alleged role of Patrocínio Azevedo, the former deputy mayor of Vila Nova de Gaia, who stands accused of 17 crimes, including passive corruption.

The Ministry contends that Azevedo commodified and instrumentalized his position to serve the interests of the other defendants and their associated companies in exchange for substantial financial compensation and luxury goods. Investigators believe Azevedo obtained economic advantages totaling nearly EUR 8 million by green-lighting the defendants’ real estate projects, often “to the detriment of the municipality’s interests.”

The indictment, accessed by Lusa news agency, highlights six projects under scrutiny: Hotel Azul, Hotel Riverview, Escarpa de General Torres, Garden Place/Hills, Riverside—Quinta de Santo António, and the ambitious Skyline project—the Cultural and Congress Center (CCC) of Vila Nova de Gaia.

The Public Ministry alleges that these developments were led by a web of related companies and individuals and received planning approvals through a series of illicit dealings and bribes.

Among the accused are prominent real estate developer Paulo Malafaia and Elad Dror, founder of the Fortera group, who allegedly played pivotal roles in the corruption scheme.

The MP claims that Malafaia, Dror, and lawyer João Lopes acted as intermediaries between the various entrepreneurs and Azevedo, funneling bribes and other inducements to secure favorable treatment for their projects.

Through their involvement in the scheme, Malafaia, Dror, and Lopes are each alleged to have obtained benefits exceeding EUR 7 million.

Other key figures implicated in the case include Luísa Aparício, the former head of Gaia’s Municipal Directorate of Urbanism and Environment, and Jordi Vilanova, head of Mercan Properties, Europe’s leading golden visa property developer.

The MP claims that Aparício and Vilanova each obtained an asset advantage of EUR 471,000 for their alleged roles in facilitating corrupt practices.

The web of corruption allegedly extends to ten companies, owned mainly by Elad Dror, which supposedly gained equity benefits of nearly EUR 9 million through his association with the illicit scheme.

These companies, including Ribaltcelabration, Mercan Property Panoramic, Mercan Property River, Semana Soberana, Attic, Fortera Proprieties, Basic Connetion, Warrior Shadow, Noble Faces, and NewBox, are linked to the various real estate projects under investigation.

In a move to recoup the alleged illicit gains, the MP is seeking a court order to compel the defendants to pay the State nearly 40 million euros, an amount corresponding to the economic advantages obtained through their alleged criminal activities.

As the investigation continues, two key defendants, Patrocínio Azevedo and Paulo Malafaia, remain in preventive detention.

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Elad Dror has voluntarily stepped down from his position as CEO of the Fortera group in an apparent bid to distance the company from the alleged scandal.

Mercan Properties issues statement

Mercan Properties, which has built more than 25 hotels in Portugal under the golden visa program, released a statement today in response to the indictment and Jordi Vilanova’s listing as a defendant, refuting any claims of wrongdoing related to Operation Babel.

You can read Mercan Properties’ official statement below:

Mercan Property River and Mercan Property Panoramic—two operational companies part of Mercan Properties Group in Portugal, developing one single hospitality—were named as defendants in the ongoing judicial process named “Operação Babel.”

“Operação Babel” is the result of an investigation regarding licensing processes in the Municipality of Vila Nova de Gaia, involving companies operating in the construction sector. The two Mercan operational companies were brought to the process in an incidental manner, and of the over 20 million amounts indicated in the indictment, less than 1% is attributed to the Mercan companies, and even that complete lacks legal grounding.

Being asked by an immigration publication to comment on this matter, we would like to start by providing some context on the process: this case has nothing to do with immigration nor the Golden Visa program in force in Portugal. This case has no impact on immigration-related application processes as it is a permitting/licensing matter, that in no shape or form relates to the immigration business, reflects on it, or affects it. In fact, Mercan is quite surprised that the immigration world is so interested in it, given it is so unrelated to their business.

Now, In Gaia, we encountered a situation where the cliff facing the hotel property posed a danger to the life and property of nearby residents. From the very beginning of our project, the two Mercan companies were unwavering in their commitment to finding a solution that would ensure the safety of the local inhabitants and the conditions necessary for the construction to proceed. This commitment was reflected in the thoroughness of the safety measures we undertook. Our proactive approach to reinforcing the cliffs’ containment wall underscores our commitment to the highest standards of safety and security for both the investment and the surrounding areas.

Therefore, it was with great surprise that Mercan Property River and Mercan Property Panoramic were notified as defendants in this case. The allegations suggest that we engaged in improper actions by funding the repairs and ensuring the safety of the surroundings, which is preposterous, as you may understand.

In any case, it is important to refer to the way the judicial system works in Portugal. If there is even the slight suspicions of wrongdoing,  even without any definitive proof, a person should be indicted to protect their constitutional rights. This, aligned with the presumption of innocence, would grant them all warranties of a just and fair processing. Of course, this principle does not consider potential distortions made by the media.

Consequently, it is not uncommon for indictments to be dismissed during the instruction phase, as the prosecutor’s office tends to be quite stringent. Naturally, Mercan will now begin appealing this decision, have an instruction judge analyze the claims, and have these charges dropped in full.

We would also like to point out that since we received these news, Mercan has been entirely transparent with project investors, our personnel, and relevant stakeholders, and we intend to continue to do so.

Now, proof that this is, indeed, part of being doing business in Portugal – although not the most pleasant one, is that the construction of the project continues unhindered with an expected opening on the spring of 2025 and with the full support of our partners. This is also a strong indicator that no wrongdoing occurred.

We appreciate this opportunity to provide some context on this matter, not only to clarify any doubts but also because several people in the industry have been using this situation to try and promote themselves, which, although predictable, still seems quite reprehensible. This is indeed a event that affects solely and, temporarily, one project, with no repercussions on the existing 30+ projects nor any future ones.

Finally, Mercan would like to state, once more, that we have complete confidence in its ethical conduct and personnel and are, as always, confident that the result of this process will show exactly that.”

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Ahmad Abbas AdministratorAuthorSubscriberParticipant
Director of Content Services , Investment Migration Insider

Ahmad Abbas is Director of Content Services at Investment Migration Insider and an 8-year veteran of the investment migration industry.

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