Various articles in the Spanish press over the weekend have brought attention to accounting regularities at Martinsa-Fadesa before it was forced to seek protection from its creditors back in July.

For example, and plot of land in Guanarteme (Las Palmas, The Canaries) belonging to Fadesa, valued at 1 million Euros, was revalue at 170 million Euros once Martinsa took over Fadesa to become Martinsa-Fadesa.

From one day to the next, and without apparent justification, another plot of land in Culleredo (Galicia) was revalued from 1.5 million Euros to 84 million Euros, helping to inflate the value of the assets on Martinsa-Fadesa’s books .

Then there is the example of the property in Puerto Real (Cadiz, Costa de la Luz, Andalucia), which went from 336,000 Euros to 65 million Euros, an increase of 19,000%.

These are just some examples of dubious accounting practises highlighted in a report by the court-appointed administrators handling Martinsa-Fadesa’s insolvency. These practices allowed Martinsa-Fadesa to book a profit in 2007, despite its increasingly precarious financial situation.

Martinsa-Fadesa was assisted in these spectacular revaluations by leading property appraisal companies like Tasamadrid (owned by Caja Madrid, one of Martinsa-Fadesa’s biggest creditors), and Ernst & Young, an accounting firm that approved the revaluations in its audit.

The administrators’ report values Martinsa-Fadesa’s assets at 7.34 billion Euros, 32% less than a previous valuation by CB Richard Ellis. Of course there is nothing to say that Martinsa-Fadesa’s assets aren’t worth a lot less than that when it comes to selling them to pay off the company’s debts.

The smaller Martinsa-Fadesa’s assets are, the harder it will be for foreign buyers who have made stage payments to the company to recover their money.

This is beginning to smell a bit like a Spanish Enron.