Moldovan court sentences businessman Shor in $1bn bank fraud case

Moldovan court sentences businessman Shor in $1bn bank fraud case
Shor was found guilty of siphoning off $360mn from Banca de Economii.
By Iulian Ernst in Bucharest June 22, 2017

A Moldovan court has sentenced Ilan Shor, the main suspect in the $1bn bank frauds that surfaced in 2014, to seven and a half years in prison. In his capacity as head of the management board of Banca de Economii (BEM), Shor was found guilty of siphoning off MDL5bn ($360mn) from the bank in November 2014.

Shor is the third suspect convicted in relation to the bank frauds that cost Moldova more than 10% of its annual GDP, leading to the eventual bankruptcy of BEM and two other banks in 2015. Former Prime Minister Vlad Filat and reputed corporate raider Veaceslav Platon have already received prison sentences. 

During the trial, Shor’s lawyer Denis Ulanov claimed that BEM incurred only MDL2.6bn losses related to the loans mentioned by the prosecutors. He also claimed that the final beneficiary of the fraud was Platon, who was convicted in April. 

While the Buiucani court in Moldova’s capital city Chisinau issued the sentence on June 21, a final decision in Shor's case is expected on July 17, as both the businessman and prosecutors appealed the sentence. Prosecutors asked for a harsher sentence of 19 years in prison, while Shor’s lawyers continue to assert their client is not guilty. Shor also stressed that he was promised a milder sentence after testifying in Filat’s trial. 

Shor had been under house arrest since May 2015, but the court set more flexible restrictions on his movement when it announced the sentence on June 20. Shor now has some freedom of movement until the appeal is judged, although he cannot leave his home town Orhei, where he is mayor. 

The report commissioned by the Moldovan government from consultancy Kroll identified Shor as the visible beneficiary of the frauds, which saw around $1bn siphoned off from three local banks, although it stopped short of indicating who the ultimate beneficiaries were. 

The Kroll report revealed that Banca Sociala extended MDL13.7bn worth of loans to several Moldovan companies within the so-called Shor Group (firms identified by Kroll as being related to Shor) on November 25-26, 2014. The loans were extended mainly from money borrowed from the other two banks involved in the scheme, BEM and Unibank. The money borrowed by the Moldovan firms was then converted to foreign currency (€545mn and $232mn) and immediately transferred to offshore firms.

Eventually, the bad loans extended by BEM were covered by emergency aid extended by the central bank with government guarantees. The government then issued bonds to repay the central bank, meaning the thefts will be repaid with taxpayers' money.

Shor was a key witness in Filat’s trial, testifying that he paid a $250mn bribe to the former prime minister. Shor claimed he paid $190mn in return for Filat instructing the government not to exert pre-emptive rights and thus allow private investors represented by Shor to take control of BEM. The money was taken from BEM as loans to his own firms, Shor admitted, but he claimed that the money was later transferred to Filat.

Filat was sentenced to nine years in prison for passive corruption and influence peddling in connection to the $1bn frauds in June 2016. However, there were some holes in the case. Three witnesses supposedly involved in the transfer of bribes from Shor to former Filat were never heard during the trial and their identity seems to be fake, research by investigative journalism portal has revealed.

In April, the Buiucani court sentenced Platon to 18 years in prison after finding him guilty of siphoning off MDL800mn from BEM. The case against Platon was also related to the laundering of $46bn siphoned off from Russian banks, through Moldova’s second largest bank Moldindconbank.

During his trial, Platon repeatedly accused oligarch Vlad Plahotniuc, the leader of Moldova’s ruling Democratic Party, of being the mastermind behind the $1bn bank fraud. However, Shor never mentioned Plahotnuic during his own trial. 

Israel-born Shor was the heir to Miron Shor who died in 2005 after building up a business empire in Moldova starting with insurance and duty-free shops, and later diversifying into other sectors including pharmaceuticals and retail.

In addition to the Moldovan bank frauds, local investigative journalists recently revealed Shor’s involvement in the so-called Russian Laundromat, in which $80bn was siphoned off from Russia to offshore firms with the involvement of the Moldovan judiciary between 2011 and 2014. An initial investigation into Novaya Gazeta’s pool of data, carried out by Moldova’s Rise investigative journalism project, named Shor as one of the final recipients of the money. Six companies in the Shor group of companies were the final recipients of $22mn.