April 20, 2017 / 12:11 PM / a year ago

Spanish graft probe intensifies as police search OHL and Indra

MADRID (Reuters) - A Spanish High Court graft inquiry that has led to the arrests of people linked to the ruling People’s Party widened on Thursday as police searched the offices of construction group OHL and technology firm Indra.

The logo of Spanish constructor OHL is seen attached to a fence at a construction site in Madrid, Spain, March 29, 2017. REUTERS/Sergio Perez

Mariano Rajoy is not accused of any wrongdoing, but the investigation is an embarrassment for the Spanish Prime Minister who has sought to distance himself from a series of political scandals involving kickbacks.

Dozens of politicians and executives have taken the stand as a result and Rajoy, who holds the narrowest parliamentary majority in the history of Spanish democracy, has been called as a witness in a trial of members of his party suspected of operating a slush fund, a court spokeswoman said on Tuesday.

OHL and Indra confirmed the searches and an OHL spokesman said the company had not made any payments to politicians and was fully cooperating with police, while an Indra spokesman declined any further comment.

People look at a bus sponsored by Podemos (We can) party painted with pictures representing Spain's recent political scandals as it tours Madrid, Spain April 18, 2017. Picture taken April 18, 2017. REUTERS/Susana Vera

El Pais newspaper reported that the searches were linked to the financing of the PP’s Madrid branch during regional election campaigns in 2011. A PP spokeswoman declined to comment.

News of the searches hit shares in both companies, with OHL falling as much as 14 percent, before recovering to trade around 8 percent lower. Indra’s shares lost more than 4 percent.

A police spokesman did not name the companies, saying only that the inspections were part of the same operation which led on Wednesday to the arrest of former Madrid regional president Ignacio Gonzalez and 11 others.

The searches were carried out on order of the investigating magistrate in that case, Eloy Velasco, a police spokeswoman later said ,without giving any further information. A High Court spokesman declined to comment.

Gonzalez, a PP member who was president of the Madrid government between 2012 and 2015, and eleven others linked to his administration were arrested on as part of an open investigation into allegations including bribery and fraud.

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The former local leader has not commented on his arrest and Reuters was unable to reach him or his lawyer.

The PP said in a statement on Wednesday it rejects “any type of corruption ... and will take the necessary measures to stop any activity that infringes the law”.

Spain’s anti-establishment opposition party Podemos, which polls within a whisker of its main rivals the Socialists, seized on the searches to highlight links between the country’s politicians and businesses.

Podemos, which has been touring Madrid in a double-decker bus painted with pictures representing recent political scandals, said it was taking the bus to OHL’s headquarters.

Spain has slipped to 41 in Transparency International’s Corruption Perceptions index in 2016, implying a higher level of corruption in the Mediterranean country than Portugal and France, but a lower one than Italy and Greece.

Additional reporting by Rodrigo de Miguel and Sonya Dowsett; Writing by Isla Binnie; Editing by Sonya Dowsett and Alexander Smith

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