Romanian anti-corruption prosecutors freeze assets of ruling party leader

Romanian anti-corruption prosecutors freeze assets of ruling party leader
By Iulian Ernst in Bucharest November 22, 2017

Prosecutors from Romania’s National Anticorruption Directorate (DNA) froze the assets of senior ruling party leader Liviu Dragnea, who also serves as the Chamber of Deputies speaker and informal leader of the ruling coalition, on November 21. 

Assets worth RON127.5mn (€28mn) were frozen as the DNA initiated criminal investigations against Dragnea and several other people in a case related to public contracts awarded to Tel Drum construction company.

Dragnea is suspected of setting up and coordinating a criminal group with the aim of siphoning money from EU-funded projects coordinated by Teleorman county council, which he headed at the time the group was set up in 2001. 

The group allegedly coordinated the county council’s auctions with Tel Drum officials with the aim of helping the latter win lucrative road rehabilitation contracts. The formal owner of Tel Drum, Fiscuci Marian, is only an intermediary for Dragnea, prosecutors claimed. They also said the criminal group is still active. 

In total, the company was awarded €90mn worth of public contracts. The value of the assets frozen by DNA prosecutors was calculated as the sum of the contracts awarded under allegedly fraudulent circumstances.

Dragnea has denied the accusations, saying he is no way connected to Tel Drum.

A key ally of the Social Democratic Party (PSD) leader, Sevil Shaideh, recently came under investigation by the DNA on suspicion of abuse of office in a separate case related to a land transfer in Teleorman county. MPs blocked a request from the DNA to probe former environment minister Rovana Plumb in the same case, but both Plumb and Shaideh have resigned from the cabinet. 

Rising political turmoil

While the legal case against Dragnea is not straightforward and is expected to take a long time to resolve, the intensification of the DNA’s investigations into Dragnea’s actions is likely to weaken his position within the ruling PSD. 

So far, however, the party has been bullish in its criticism of the DNA. It has already issued a formal statement accusing DNA prosecutors and Romania’s intelligence services (SRI) of acting as members of a “parallel and illegitimate state” and claiming they are planning to seize power in the country. The statement was officially endorsed by the party despite objections from some members including two of its MEPs. 

Whichever course the party takes, it will add to the political uncertainty in Bucharest. 

The ruling coalition has embarked on ambitious changes including amendments to the Fiscal Code, which have not yet been endorsed by lawmakers. Nor has the 2018 budget planning been endorsed by the government, and the fate of planned wage hikes in the public sector remains unclear. All these steps are controversially being pursued by the ruling coalition despite criticism from the opposition, the Fiscal Council, the European Commission and the International Monetary Fund (IMF). 

Another major topic on the country’s political agenda is the ruling coalition’s plan to amend key judicial laws, which again has met with strong opposition, with critics claiming the changes are intended to increase political control over the judiciary and help top officials avoid prosecution. 

Increased political uncertainty, combined with overheated economic growth over-stimulated by public spending, is likely to cause the country’s risk profile to deteriorate significantly. Recent movements in the exchange rate and the cost of public debt indicate this has already begun: the local currency lost 0.2% d/d to the euro and 0.6% d/d to the US dollar on November 21, reaching the weakest level in five years.