Another method used in misappropriating public assets is the under-appraisal of companies, which allows for State-run businesses to be taken over for chicken feed. The modus operandi is quite simple. The targeted company is under-assessed (either through flawed management, which buries the company in debts, or by using the accounting value rather than the market value of assets as a starting point), sold to a “strategic” investor who then pays for it by selling some of its assets.
A champion of such deals is Ioan Niculae, owner of ASIROM, INTERAGRO, ASTRA ROMÂNĂ refinery, and a former stockholder in SNTR. Suspicions loom on each of these companies, and some of them are subject to ongoing lawsuits.
Niculae’s experience in foreign trade goes back to communist years
Interagro, a Romanian – British joint venture, was set up in 1994, with foreign trade-fertiliser exports in particular-as its main activity, as Niculae’s experience in foreign trade goes back to the communist years. According to the company home page, “in the same year, parent company SC Interaction SRL, also a Romanian-British company, was one of the five largest enterprises in terms of turnover and profits, according to data published by the Chamber of Commerce and Industry of Romania.” Later on Niculae started to invest in production, chemical industry, oil industry, in agriculture and insurance.
Through Interagro, Niculae also holds the Azochim Săvineşti and Sofert Bacău chemical works, as well as the chemical production unit in Turnu Măgurele. Niculae also has businesses in agriculture, oil and sports (he owned a football club, Petrolul, in Ploieşti). Interagro also holds 70% of the stock of ASTRA ROMÂNĂ SA refinery in Ploieşti, acquired from the State in 1997. Niculae is also the proud owner of an agriculture complex in his hometown Zimnicea, where Interagro has over 50,000 hectares of arable land and grain storage facilities whose capacity exceeds 600,000 tonnes. In Zimnicea Niculae runs an alcohol plant, Alcozim, as well as a porcine breeding farm, Suinprod, and in Roşiorii de Vede – a sunflower oil factory, Roşiori SA. Niculae’s wealth was put at USD 250-300 million by ½Capital½ magazine.
Ioan Niculae, the major shareholder in ASIROM, has been involved in a number of scandals over the past few years. Privatisation of the former State-owned insurance company ADAS, of the Romanian Tobacco Corporation (SNTR), of the Astra refinery are just some of the cases that made front-page news material.
The SNTR nebula
SNTR was initially privatised in May 2000, for USD 40 million, but it returned into the Agriculture Ministry portfolio after a Court order annulled the privatisation, further to a challenge filed by Leaf Tobacco group, assigned the second best score in the auction. SNTR was later on re-privatised in a questionable manner, i.e. as a means to write-off an Agriculture Ministry debt to Interagro, with payment in kind. The Ministry chose this solution over the natural alternative of including the ROL 210 billion debt in the 2002 budget. The Government decided to decrease the share face value from ROL 223,000 to ROL 131,876, which generated an over ROL 146 billion surplus in the buyer’s pockets. SNTR is the only company granted two State aid facilities in one year, under Government Ordinances no. 242/2001 and no. 180/2001, and later it also benefited, under Government Emergency Ordinance no. 186/2001, from a 40% cut down in excises. In the spring of 2003, SNTR was returned to the governmental portfolio, though with ROL 700 billion worth of fresh debts, courtesy of its former owner. Continuing the series of financial tricks, the value of two tracts of land, totalling several million USD, was added to the SNTR share capital. SNTR was acquired by the Tobacco UE/2003 consortium, made up of CTS (Italy) and Galaxy Energy International (the British Virgin Islands), whose ties with the former SNTR owner were extensively covered by the media. The major stake was taken over for a ridiculous EUR 1.6 million, way below the initially negotiated price.
The Tobacco Corporation affair has been looked into by the Prosecutor’s Office, but the file has not been finalised as yet. Many announcements have been made about Niculae being heard by anti-corruption prosecutors, but this has not actually happened so far. In 2001, Niculae paid USD 10 million as an initial deposit for the Romanian Tobacco Corporation. The deal sparked a huge scandal, and the bid was cancelled. Interagro brought the State to Court to recoup the money. Eventually he got a stake accounting for 56.4 per cent of the Corporation shares on a silver plate. After the equity was increased through incorporation of the land value, Interagro finds itself a minor stockholder. Just when it thought the dispute was over, Interagro was subject to new governmental checks. The new inquiries were hardly reasons for Interagro chiefs to rejoice. What happened after Ioan Niculae lost control on the Romanian Tobacco Corporation was equally controversial. APAPS privatised the company, in mid-2004, by selling a major stake accounting for 56.4 per cent of the shares. The buyer was a Virgin Island “offshore” and an Italian tobacco growers’ cooperative. They paid only ROL 50 billion for the company, although the cigarettes in the SNTR inventory alone were worth some ROL 600 billion. Adding to these were the company assets-land and buildings-put at another ROL 500 billion. To conceal the scheme, a clause was included in the contract, under which the buyers undertook to invest EUR 4 million later on. But today no one knows anything about the stage of the respective investments. Instead of checking this, the Government chose to split five year-old hairs.
Dirty oil businesses
The latest scam connected to Ioan Niculae’s businesses has as its key characters one Corneliu Păltânea, former head of the Prahova County Romanian Intelligence Service (SRI) and his ex-deputy Daniel Bucur. As investigators claim, starting 1993 Păltânea and Bucur appropriated petrol and diesel and supervises illegal fuel transports from Astra Ploieşti refinery, with Colonel Daniel Bucur even accompanying the oil tanks to avoid unexpected checks. In serious breach of professional conduct rules, the two officers allegedly blocked all notifications to SRI Prahova County concerning the illegal oil deals in Astra Ploieşti. The two were members of Ioan Niculae’s inner circle and took part in the theft of approx. 340 tonnes of fuel and other oil products. In exchange for the support granted to the crime group, Corneliu Păltânea and Daniel Bucur reportedly received money, products and other benefits totalling some ROL 15 billion (at year 2000 constant value). Former SRI boss Virgil Măgureanu was heard by anti-corruption prosecutors as a witness, after the two stated, in a move to dodge responsibility, that Măgureanu too was aware that no crime had been involved and that the petrol stored in the SRI yard was for the institution’s vehicles. Măgureanu would not make any statements.
Verestoy, USD millionaire from wood deals
Similar methods were employed by senior UDMR leader Attila Verestoy, a genuine local tycoon with wealth put at approximately EUR 40 million. Senator Verestoy was even dubbed “God’s chainsaw” or “Kerestoy”, on account of the wood deals he has made. Operations were mainly carried out through a company named “IVO,” in which Verestoy holds stock jointly with his brother-in-law Ferenczy Karoly (the company is quoted in a Ministry of Environment report on massive deforestation). The company received legal counsel from former Health Minister (1996-2000) Hajdu Gabor.
Since 1991 Senator Verestoy Attila has set up as many as seven companies, jointly with all sorts of important public figures from the left to the right end of the political spectrum. In all, the senior member of the Senate’s SRI Control Committee invested about USD 450,000 in cash and in kind. Since a lot of money needed taking care of, the Senator kept the helm of most of his companies, as chairman and administrator. Apparently politics didn’t take much of the UDMR leader’s time, nor did the overseeing of the intelligence service, which is why he was able to put his businesses on the right track. With the tactful and “fatherly” help of SRI.
In mid-1991, Verestoy Attila saw fit to become an entrepreneur, so jointly with his brother-in-law Ferenczy Karoly he went and set up “Ivo” SRL, based in Odorheiu Secuiesc. For quite a few years, the company was in the lumber and wood trade business, which brought it handsome profits, enabling it to bid for the largest spirits factory in Miercurea Ciuc in 1998. The UDMR Senator was no stranger to the alcohol trade; through other companies he had owned or managed, he gained experience in such operations and, of course, he realised how profitable it was to have your own production plant. Verestoy Attila initiated acquisition talks with Ciuc-based “Vinuri şi Băuturi,” with the legal assistance provided by a UDMR attorney who was soon to become Minister of Public Health: Hajdu Gabor.
In early 1998, the Bucharest headquarters of the State Ownership Fund (FPS) hosted the auction for the spirits factory takeover. FPS was asking over ROL 3 billion for 40% of the stock, but the Senator’s company – “Ivo” SRL from Odorheiu Secuiesc – wouldn’t pay a dime over 650 million. Anyway, he did win the auction on little money, which drove FPS head Alin Giurgiu bonkers. Since he didn’t want to sell the plant to the Senator for chicken feed, Giurgiu cancelled the auction, so Verestoy sued FPS and won the factory for a penny.
But things are not particularly great in the Ciuc plant either. Half of the alcohol production equipment is rented out to companies owned by Csibi Istvan, Harghita County’s most feared businessman. So the UDMR Senator is afraid to set foot in his own company before striking a deal with Csibi. And Verestoy knows what sort of a person Csibi is; he’s known him ever since they were both alcohol dealers for “Spirt-Amidon” company in Harghita. And SRI must have told him a thing or two about the stuff Csibi Istvan is made of and about the businesses he has in Hungary. A business partnership between the two could have compromised Verestoy’s image as an honest SRI Committee member.
By Cezar DOBRE
To be continued
