The Cameroon international midfielder flew to London at the weekend only for the Hammers to cancel the agreement via e-mail on the morning of the medical, explaining they had agreed to loan Antonio Nocerin from AC Milan.
"Everything that has happened has surprised me. It was all done and we left it with them. I cannot understand how a club at that level can negotiate and work in a two-faced way like that," Osasuna's sporting director Petar Vasiljevic stated.
"It was a real shock how a club at this level was doing this. But every club know how things go and it was the same with this. We thought the subject was concluded and felt the talks had been completed.
"I want to explain what happened with Raoul Loe and how strange things became throughout the negotiations.
"The club received a firm offer from West Ham and we reached an agreement.
"It was then left in the player's hands to go ahead and pass the medical. He travelled to London with his agent where they waited and went to a hotel. Up until then everything went well.
"The following day when they had to undergo the tests they pulled out of the deal, blaming it on the fact that they signed someone else.
"I was then sent an e-mail confirming that West Ham had chosen to go with another player with different conditions and was a deal they had been working on for several weeks.
"It was a loan deal that they said was completed and gave their apologies."
Osasuna did not want to lose Loe but accepted West Ham United's offer for financial reasons, but Vasiljevic is pleased that the player is now set to stay.
"Raoul is a strong boy and knows that he had a chance to take a step forward in his career. But that was not possible and he had a bad Saturday night. Now he is back with the squad and it is all forgotten," he added.