Moldovan pro-Russian leader sentenced to 15 years jail for massive bank fraud

Moldovan pro-Russian leader sentenced to 15 years jail for massive bank fraud
Ilan Shor was head of the BEM bank at the centre of the fraud; now he leads a pro-Russian party from exile. / bne IntelliNews
By Iulian Ernst in Bucharest April 14, 2023

Moldovan banker turned politician Ilan Shor has been given an increased sentence of 15 years’ imprisonment for his involvement in the country’s $1bn banking fraud that came to light in 2015. Shor will have MDL5bn (€250mn) of his assets confiscated as well. 

President Maia Sandu saluted the sentence, saying that it was required by “the people and the authorities”, and stressed that the judiciary can become legitimate again only by such sentences that “punish the thieves and make justice”.

Shor, head of the BEM (Banca de Economii a Moldovei) bank before 2015, was held responsible for the loans extended by the bank to firms that were never paid back. Another two banks, Banca Sociala (BS) and Unibank were involved in the fraud by loans given to BEM.

Shor had already been given a 7.5-year jail sentence in 2017 in this case for large financial fraud and money laundering.  He appealed the verdict but this appeal was delayed – reportedly at the behest of his alleged accomplice and head of the then ruling coalition Vlad Plahotniuc (Democratic Party) – until both fled the country in 2019 to avoid prosecution by the new ruling coalition formed by Sandu.

The ruling comes at a good time for the pro-EU authorities in Moldova: Shor has become the leader of the (allegedly Russian-backed) anti-government street protests, while the conviction could encourage the EU to start accession negotiations later this year.  Justice reforms promised by the ruling PAS party when it won the general elections in 2020 are otherwise currently in limbo.

However, the sentence on Shor will be difficult to enforce. Shor is currently in Israel and is refusing to return, while currently only MDL1bn of his assets have been seized by the Moldova authorities, according to the head of the anti-corruption prosecution office Veronica Dragalin, who  commented on the case.

Shor said that the sentence was illegal and will be reversed "the very next day after a democratic regime takes office".

"I am not going to comply, and this decision will be annulled exactly the day after the change of the current regime by an equidistant and fair court," Shor said.

Dragalin expressed hopes that the state of Israel might recognise the sentence given by Moldova. She said that other states might also cooperate in seizing the €250mn worth of assets the country has to collect from Shor.

While Shor is subject to sanctions by the US and UK, the EU currently lacks the framework for similar sanctions. Asset confiscation outside Moldova requires further court trials, which is time consuming and has uncertain results.

The EU does not have a mechanism to impose asset seizures at the request of states that are not members of the bloc, the head of the EU delegation to Chisinau, Janis Mazeiks, told Free Europe on March 22 in response to Moldova’s request for broader international sanctions against pro-Russian oligarchs.

It cost the Moldovan authorities some 10% of GDP to clean up after the country’s massive banking fraud. Firstly, the government extended guarantees in the amount of MDL14.5bn (some $1bn at that time) for emergency loans given by the central bank (BNM) to the three banks involved in the frauds with the aim of paying back the deposits of firms and households. In 2016, the government issued MDL13.6bn (€610mn, $680mn) bonds to cover the money lost by the three banks, which had gone bankrupt.

Shor claims that the losses in the banking system were in fact $625mn: a $250mn bribe given to the then prime minister Vladimir Filat and $375mn non-performing loans inherited by his management from former BEM manager Grigore Gagichevici.

Filat was originally convicted of being involved in the bank fraud but his sentence was subsequently overturned. This February the European Court of Human Rights said his trial had been unfair and Moldova is to pay him €7,500 in compensation.