Anca Paduraru in Bucharest -

What should've been a week of basking in the international limelight for Romania and Kazakhstan has ended in embarrassment as Romania's National Securities Commission (NSC) launched an investigation August 29 into the suspicious trading of the shares of the listed subsidiaries of The Rompetrol Group on Friday and Monday ahead of the announcement of its sale to KazMunaiGaz.

Rompetrol is locked in a bitter argument with the NSC, the Brokers' Association and the Bucharest Stock Exchange (BSE) over the exact time it made public on Monday that it had struck a deal to sell a 75% stake to KazMunaiGaz, in a transaction reputed to be worth $2.7bn. The time lag between striking the deal on Friday and making it known to the BSE on Monday would have allowed some people to have indulged in some insider trading.

Rompetrol states that its PR company, PR Newswire Europe, informed "the London and Bucharest stock exchanges, plus the Romanian National Securities Commission" about the deal on Monday, at 1000 GMT, or 1200 local time. (To read the release click here)

However, when questioned by bne, John Catmur, head of investor relations at PR Newswire Europe, refused to provide the exact time that the Bucharest exchange confirmed it received the press release, stating only that, "he would not comment until the issue was resolved with the BSE."

The NSC states that the Bucharest exchange stopped transactions in Rompetrol shares only when it noticed a sudden surge in the prices over a 20-minute period, which would have caused the system to automatically halt trading anyway. The exchange officially halted trading in the shares of Rompetrol companies at 1323 local time.

The Brokers' Association has asked for trading of Rompetrol shares to remain frozen until the matter is clarified and the investigation completed. It said that Rompetrol was in breach of the law on three counts: "It did not inform the relevant authorities within the 24-hour legal period from striking the deal; it filed the official report with BSE only on Monday evening, and that the report was not complete, lacking information regarding the price of the transaction and its clauses, thus failing to properly inform investors." The Brokers' Association also said the exchange stopped trading in Rompetrol shares after seeing reports of the deal on live television, while having no official information from the oil company.

On Monday, prior to the halt in trading of Rompetrol shares, Rompetrol Rafinare ended up 14.3% on the day, Rompetrol Well Services closed up 13.1% on the day, while Rompetrol SA Bucuresti, traded on the RASDAQ market, closed up 21.95% on the day. The volume of the trading Monday in shares of the three Rompetrol companies was €2.18m.

No strangers to controversy

The issue highlights the problems of corruption and dodgy practices that still plague Romania even though it is now part of the EU. The European Commission on June 27 chided its two newest members Bulgaria and Romania over their efforts to stamp out corruption in its latest report on their progress since joining in January.

Dinu Patriciu, president and CEO of Rompetrol, also is no stranger to controversy. He was indicted in February 2006, along with a good number of his business associates and friends, on charges of share manipulation during transactions performed in 2004. The investigation is ongoing. He was also indicted and briefly detained in May 2005 on seven counts, ranging from the misappropriation of funds and money laundering to embezzlement, tax evasion and fraud, during the privatization of Rompetrol. That investigation is ongoing too.

Murkiness surrounding the deal has also spilled into Kazakhstan. On Tuesday, Reuters reported that Kazakh President Nursultan Nazarbayev sacked his influential son-in-law Timur Kulibayev, husband of Nazarbayev's middle daughter, from the position of deputy head of Samruk - a state holding that manages some of the Central Asian state's most strategic assets, including those in oil.

As KazMunaiGaz was part of that holding, the reports prompted worries in the Romanian media that the deal with Rompetrol might be reversed. However, Patriciu told the media here that there was no such danger, since the Kazakhs had already deposited the money in an escrow account.

Kulibayev's removal, which came on Monday, came a day after Nazarbayev sacked his oil minister at the height of a row between the government and the Western operators, led by Italy's Eni, of the huge Kashagan oilfield in the Caspian Sea. The official presidential Website gave no reason for Kulibayev's departure.

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