Romania’s Directorate for Investigating Organised Crime and Terrorism (DIICOT) said on May 24 it will request the president’s approval to start an investigation into four former ministers on suspicion of setting up an organised criminal group.
The investigation concerns the conversion of Rompetrol Rafinare's historic debt into bonds when the company was owned by the now deceased Dinu Patriciu. The refinery’s current owner, KazMunaiGas (KMG) International is in the process of selling it to a Chinese investor. DIICOT may have opened the investigation at this point in an attempt to recover debts to the government before it changes hands again.
Rompetrol, the former state company dealing with oil and gas exploration, was owned by local investor Patriciu when it took over the majority stake in Romania’s largest refinery, Petromidia, in 2000 and registered it as Rompetrol Rafinare.
The company was privatised to Patriciu under unclear circumstances after the original winner of the process, a Turkish investor, was unable to pay. Patriciu reportedly also failed to pay the purchase price, but Petromidia's debts to the state, dating from before the privatisation, allegedly plus the purchase price, were converted into convertible bonds under an emergency ordinance in 2003.
The investigation comes shortly after prosecutors seized around €680mn worth of assets owned by four people involved in the privatisation of Petromidia. Prosecutors also seized assets of the refinery’s current owner KazMunaiGas (KMG) International, Oilfield Explorations Business Solutions (formerly Rompetrol) and Rompetrol Rafinare.
DIICOT said in a statement that it plans to start criminal investigations into former Finance Ministers Mihai Tanasescu, Sebastian Vladescu and Gheorghe Pogea and former Economy Minister Dan Ioan Popescu.
DIICOT claims that between September-October 2003, Tanasecu and Popescu exercised their duties in bad faith following an agreement with Patriciu and several others, by initiating and promoting an emergency ordinance on the conversion of Rompetrol Rafinare’s debt, amounting at the end of September 2003 to around $603mn, into bonds subscribed by the finance ministry.
Rompetrol is now owned by the Dutch-registered Rompetrol Group, which was re-named KMG International after Patriciu sold it to Kazakh state company KMG in 2007. The Kazakh company acquired 75% of the Rompetrol Group NV in 2007 and later took over the remaining 25%.
KMG International is now in the process of selling the majority stake in the refinery to China Energy Company Limited (CEFC) in a $680mn deal.
Rompetrol was supposed to buy back the bonds by the end of September 2010, but it didn’t, and Romania then sued the company.
The month before the deadline, Rompetrol Rafinare bought back bonds amounting to just $70mn. In September the same year, the shareholders decided to convert the bonds it had not bought into equity, thus giving the Romanian state a 44.7% stake in the company. KazMunaiGaz, which had previously bought back the $70mn worth of bonds, remained the majority shareholder.
Romania challenged the decision, but in February 2013 the government decided to sign a memorandum of understanding with Rompetrol Group. The Romanian government accepted a $200mn cash payment for a 26.7% stake in the refinery. This was much lower than value of the bonds Rompetrol had not bought back. In addition, Romania was offered a 20% participation in a $150mn investment fund. The investments were supposed to reach $1bn, but it seems there were no clear deadlines for this.
Romania’s government endorsed in July 2015 a decision to sell the 26.7% stake held by the ministry of energy in Rompetrol Rafinare refinery under open auction. Under the agreement signed between the Romanian government and KMG International, the latter promised to pay $200mn for the stake. But by law the government has to sell the stake under an auction rather than not through a direct agreement. It seems the decision did not state when the sale procedure should be launched.
Also, it seems that no investment fund has been set up either. According to Hotnews.ro, in September 2015 the government approved a draft emergency ordinance which allowed the energy ministry to create a state company which would set up the investment fund alongside Rompetrol. According to sources quoted by the news portal, nobody on the Romanian side wants to launch the procedure as long as there is suspicion about the way the government decided to give up its claims.
Taking into consideration that KMGI is going to have a different owner, the chances for Romania to recover the debt are diminishing, as long as there are no definite deadlines in the memorandum. This might explain why the investigation started right after the sale agreement was announced.
In its statement, DIICOT says that Popescu continued to support the criminal group even when he was no longer a minister by making false statements during an arbitration trial in order to favour Patriciu. DIICOT also claims that Vladescu and Pogea blocked the adoption of a government decision allowing the sale of the bonds on the Bucharest Stock Exchange.
In recent years, Romanian has taken important steps in fighting high level corruption. Nine other former ministers are being investigated in a different case that concerns the reselling of educational software licences for Romanian schools.