NETHERLANDS - The Dutch Association of Property Participants (VVP) has called for more transparency around property transactions, to prevent fraud such as that now being investigated at the company pension scheme of electronics giant Philips.

Its plea follows the arrest of 16 representatives of the Dutch property investment sector on suspicion of being involved in a scam, which is thought to have cost the Philips pension fund over €10m.

"It should be made mandatory for pension funds to sell property through a public tender. This way, all market players can participate, and property can be sold to the highest bidder," Dion Bartels of VVP commented.

Among those arrested are the present director of the €14.5bn scheme's property management branch PREIM, as well as his predecessor, the public prosecutor has confirmed.

These arrests have been made as part of one of the largest operations in recent history of the FIOD-ECD, the investigative branch of the tax authority. It involved searches at 54 locations in the Netherlands, Belgium and Switzerland, where property, bank accounts and valuable objects have been confiscated.

According to the prosecutor, the investigation focuses at fraudulent real estate transactions by (former) employees of three companies. Although it did not name the companies because it said they are not under suspicion, Dutch media problems have been found widely reported that they are Fortis Vastgoed and Rabobank subsidiary Bouwfonds.

"We think that the suspects have received substantial amounts for awarding and processing large building projects and large property transactions, possibly involving dozens of millions of euros," the prosecutor said in a statement.

The scam allegedly involved internal surveyors agreeing a relatively low value with external surveyors, before a property is sold to a business connection. It was later sold on for its market value, with the price difference being divided between the people who have made the deal.

Early last year, Philips Pension Fund sold a large package of ‘less profitable' residential properties and offices, after its asset management had been contracted out to Merrill Lynch Investment Managers, now BlackRock.

The company had already started an internal investigation into ‘irregularities in reporting' by its pension fund and PREIM last year, press agency ANP quoted a company spokesperson as saying.

The pension scheme reported overall returns on investments of 4.9% over 2006. Its direct real estate investments yielded 10.5%, which was 1.6% short of its benchmark. The scheme's coverage ratio was 134% at the end of last year.

In a short statement Fortis Vastgoed stressed none of its staff has been arrested, and that the investigation focuses on the period before it acquired the portfolio in question. "We might be a victim as well," spokesman Johan van der Schoot said.

Neither Philips nor Rabo Bouwfonds were available for comment at the time of publication