A court sentences the former owners of Codere to pay more than 650,000 euros for unfair administration A court sentences the former owners of Codere to pay more than 650,000 euros for unfair administration

José Antonio and Luis Javier Martínez Sampedro, former owners of the betting and casino company Codere, have engaged in a war against the company's new administrators and have already lost the first battle. The Mercantile Court number 11 of Madrid has sentenced them for unfair administration to return more than 650,000 euros to the company.

Codere filed a lawsuit against the Martínez Sampedro brothers in September 2020 after discovering alleged irregularities during the last years of family management. The sentence indicates that the investors installed one of their personal companies, Francomar Investment, in the official headquarters of Codere, without paying any type of compensation to the company between 2010 and 2013.

Subsequently, between 2014 and 2016, the Sampedros agreed to sublease 195 meters of the group's headquarters to their private company, in exchange for a consideration that did not cover actual expenses. In this way, the directors of the company paid the company they ran 6.51 euros per square meter for the space they rented to themselves, which meant about 1,270 euros per month. However, according to the court order, it cost Codere in the lease contract with Testa, the owner of the offices, between 15.5 and 17 euros per square meter.

Expert report

The administrators of Codere requested an expert report on the work of the previous administrators. This report reveals that the Martínez Sampedros charged personal expenses to a company credit card. Specifically, personal trips to Palma de Mallorca, Mexico, Miami, Bogotá, Caicos and the Turkish Islands, according to the magistrate's order. Likewise, they would have used the corporate card to pay for private meals in luxury restaurants, as well as to purchase two Loewe brand bags and even Wi-Fi bills from the businessmen's house in Palma de Mallorca.

“From the facts reported, it appears that the defendant administrators breached the duty of loyalty required in accordance with the provisions of article 227 of the LSC by signing a sublease relationship with Francomar Investments SL at first for free and then at a lower price to the market. Likewise, they put their own interests before, allocating personal expenses to the accounts of the company they managed, "says the court's brief.

The court ruling explains that "Luis Javier Martínez Sampedro and José Antonio Martínez Sampedro have breached their duties of loyalty as administrators", for which it condemns them to jointly and severally return 577,606 euros plus legal interest for the personal use of part of the headquarters of the group without paying the necessary consideration. The car also requests the payment of two other sums amounting to 11,419.27 and 65,089.53 euros for the expenses charged to the company card. Against this decision it is possible to appeal to the Provincial Court of Madrid.

Appeal against sentence

After learning of the court's decision, José Antonio and Luis Javier Martínez Sampedro issued a statement, echoed by the Europa Press agency, in which they announced that they will appeal the sentence.

The family has assured that it will file an appeal against the resolution, considering that it "suffers from both substantive and formal defects." As he specified, the sentence estimates a lawsuit that, in his opinion, is a "retaliation" of "the funds that illegally took control of Codere without launching the takeover bid established by Spanish law."

In the statement they underline that the social responsibility action that has been brought against them "lacks the necessary prior approval process by Codere's general meeting of shareholders", which would have given them the opportunity to "contribute the evidence" that "leave no support for each and every one of the accusations" attributed to them. “We understand that this sentence must be annulled on appeal,” they have indicated.

The Martínez Sampedros founded Codere together with the Franco family in 1980. In 2006 they repurchased the 42% that the current owners of Recreativos Franco had for 350 million euros thanks to a loan. The brothers came to have 80% of the company's capital. In October 2007, the group went public at 21 euros per share, with a capitalization of 1,155 million. After going public, they sold and reduced their stake to 60%.

Technical bankruptcy

In 2013, after the problems caused by the group's expansion throughout Latin America led the company to technical bankruptcy in 2013. Thanks to the fact that the holders of several bond issues agreed to exchange the debt for shares, Codere saved the bankruptcy mid-2014, but its founders lost much of their assets.

The group's debt, which was around 1,100 million euros, was in the hands of some investment funds that forced the Martínez Sampedro to hand over their shares, with which they came to control 85% of the capital, while the participation of the founders of the company, after a capital increase carried out in 2016, it was diluted to 2%.

In 2018, the funds that control the company decided to relieve the two directors due to the poor results that the company was reaping. Since then, the Martínez Sampedro brothers have been fighting hard in court against the new owners and administrators.