Romania’s Anticorruption Directorate (DNA) announced on May 5 it has started an investigation into several current and former members of the management team of local telecom operator RCS&RDS and the former head of the Romanian Professional Football League (LPF), Dumitru Dragosmir, on suspicion of corruption.

The announcement comes as the parent company of RCS&RDS, Digi Communications, is carrying out a IPO on the Bucharest Stock Exchange. The investigation is likely to affect subscriptions as it will have a negative impact on the company’s image and reputation. Until now, interest from both retail and institutional investors has been strong, a Digi spokesperson told bne IntelliNews before the probe was announced.

Prosecutors have started a criminal investigation into Ioan Bendei, current vice president and executive director of RCS & RDS, on suspicion of bribe giving and money laundering, and Mihai Dinei, a non-executive director of RCS & RDS and former head of the company’s legal department, on suspicion complicity to bribe giving and complicity to money laundering. Former general manager and head of the managing board Alexandru Oprea is also under investigation for complicity to bribe giving. 

The former Romanian football league official has been put under judicial control for a period of 60 days on suspicion of bribe taking and complicity in money laundering, while Florin Badita, the manager of another company controlled at that time by Dragomir, is being investigated for complicity in bribe taking and money laundering.

According to the DNA statement, in 2008, the LPF organised a tender for granting exclusive rights to broadcast the matches of the First League for the 2008-2009, 2009-2010 and 2010-2011 seasons. The tender was won by a consortium comprising RCS&RDS and another firm, for a price of €101.1mn. In 2009, against the background of the economic crisis, the consortium asked LPF to give it more advantageous conditions.

Specifically, Dragomir, who was head of LPF at that time, asked representatives of RCS&RDS to enter into a business agreement with a company that he controlled. In return, he would have supported the company’s interests at the LPF level. The contract between the telecom company and the company, which was then represented by Florin Badita, was signed in August 2009. According to the contract, RCS&RDS paid €3.1mn to the company controlled by the former football official. Between 2015 and 2016, the two companies took action to “launder and clean it from its criminal character with the aim of dissimulating its illicit origin,” the DNA alleged. Finally, in 2016, RCS&RDS bought the business on which the association agreement was based.

Digi Communications had warned in its IPO prospectus of the risks stemming from anti-corruption investigations and warned that if found to have violated anti-corruption laws, this would have an adverse effect on the business.

“While we are committed to doing business in accordance with applicable anti-corruption laws, we face the risk that members of the group or their respective officers, directors, employees, agents or business partners may take actions or have interactions with persons that violate such anti-corruption laws, and may face allegations that they have violated such laws,” Digi Communications said in its prospectus.

“For example, a complaint that we filed with the DNA in 2013 alleging that a criminal offence had been perpetrated against one of the directors of RCS & RDS prompted the DNA to look into a 2009 joint venture agreement between us and Bodu SRL with respect to a large events hall in Bucharest and question whether the agreement complied with Romanian anti-corruption laws. Bodu SRL is controlled by Mr. Dumitru Dragomir, the former President of LPF, the entity that organizes and runs the Liga 1 competition,” the company explained.

In the past, the DNA also investigated certain commission payments that the LPF allegedly made at Dragomir’s request to a certain intermediary using the funds it had previously received from the telecom company in return for exclusive rights to broadcast the football matches. Dragomir has received a seven-year sentence, subject to appeal, for illegal use of funds, money laundering and tax fraud. 

“Our broadcasting contract with the LPF is not being investigated. Also, we do not, and did not in the past, have any commercial relationship with the intermediary that is claimed to have been involved in the alleged money laundering scheme. No accusations have been advanced against us by the Anti-Corruption Directorate in relation to the above matter. However, if we are alleged or found to have violated applicable anticorruption laws in this or any other matter, any such allegations or violation may have a material adverse effect on our reputation and business,” Digi Communications has said.

Shareholders of Digi Communications aim to obtain up to RON1.2bn (€264.9mn) from the sale of 21.7mn shares in the company during the IPO. The IPO of Digi Communications follows the December 2016 IPO of healthcare provider Medlife, the first of a Romanian private company since the onset of the global financial crisis, and is expected to be the largest IPO of a private company on the Bucharest Stock Exchange and to help revive the Romanian capital market.