The investigation has deeply embarrassed the monarchy in a country hard hit by a financial crisis and sky-high unemployment. The scandal ranks among the worst public relations mishaps the royal household has experienced in the 37-year reign of King Juan Carlos.
Inaki Urdangarin, who has not been charged with a crime, made his way into a courthouse in Palma de Mallorca amid tense street scenes where a contingent of around 170 police kept noisy protesters away from the building. Urdangarin, married to the 75-year-old king's second daughter, Princess Cristina, has denied any wrongdoing.
Urdangarin, facing his second appearance in court, did not stop to say anything, but wished about 100 journalists accredited to cover the event a curt "good morning" as he walked in, accompanied by his lawyer Mario Pascual Vives.
The Duke of Palma, the title held by Urdangarin, had been called to answer questions at a courthouse on this Mediterranean island about whether he used his high-profile status to secure lucrative deals for a nonprofit foundation he ran and then fraudulently diverted money for personal gain.
But the conservative government of Prime Minister Mariano Rajoy has moved to try and shield the king from potential collateral damage inflicted by the Urdangarin case, emphasizing Juan Carlos' value to the nation.
Deputy Prime Minister Soraya Saenz de Santamaria defended the king's role three times during a news conference following Friday's Cabinet meeting, highlighting how the monarch had worked "for stability and democracy" in Spain.
Judge Jose Castro will question Urdangarin about three alleged offenses against the Treasury, including corporate tax fraud related to his foundation and matters linked to his personal income tax returns.
As stated in the writ of summons, the judge also intends to ask about alleged bank accounts in tax havens such as Andorra, Luxembourg and Switzerland. Carlos Garcia Revenga, Cristina's personal secretary, was also scheduled to answer questions Saturday.
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A week ago, Urdangarin's former partner, Diego Torres, faced detailed questioning by Castro and it is reported many potentially damaging documents were handed over to the judge. Urdangarin was summoned by Castro to the same court last February when the duke was quizzed over large contracts he secured from regional governments for his foundation.
He is suspected of then subcontracting the work to private companies he also oversaw, sometimes charging the public purse unrealistically inflated prices and syphoning some of the income to offshore tax havens.
Newspapers have reported that the revenues Urdangarin and associates are suspected of having handled may have exceeded
euro6 million ($8 million).
The duke's alleged misdeeds took place in 2004-2006. Urdangarin, the princess and their four children moved to Washington in 2009 as the investigation began to heat up. They returned to Spain in August.
The case exploded in the media late 2011 as Spain was buffeted by Europe's debt crisis, its economic growth grinding to a halt and already huge jobless numbers swelling.
Under Spanish law, the court will decide whether the prosecution has adequate evidence to file charges against the duke.
Press; By MANU MIELNIEZUK and HAROLD HECKLE]
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