8th Global Conference on Business & Economics ISBN : 978-0-9742114-5-9

THE ROLE OF CORRUPTION IN EMERGING ECONOMIES

THE CASE OF ROMANIA
Daniela Frederick
Adjunct professor of economics
Johnson County Community College
Overland Park, Kansas
913-434-8924

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THE ROLE OF CORRUPTION IN EMERGING ECONOMIES:

THE CASE OF ROMANIA
Daniela Frederick
Johnson County Community College
Overland Park, Kansas
913-432-8924

ABSTRACT

The emerging economy of Romania has been on a yo-yo diet since 1990,
when Eastern Europe opened to the free world. GDP growth rates, inflation and
unemployment went up and down over the years producing great disruptions in the
labor market . At the base of these economic problems there is the disturbing
phenomenon of corruption.
A number of studies, such as those of Daniel Teodorescu (Romanian
Journal of Forecasting,4/2007), looked at the causes of corruption (lack of
democratic tradition, inconsistencies of the reform process in local government
agencies will decrease corruption. A survey by the World Bank and Management
Systems International of more than 1,700 households, businesses and public
officials produced an extensive report that shows the consequences of corruption :
decline in the standard of living, moral decline in society a, less foreign investment
in Romania. The report lists a number of steps that emerging economies should
take to correct this debilitating problem.
My own research on the role of corruption took me in a different
direction. I set out to
prove that the process of privatization and the rampant corruption in this emerging
economy are blended . At the core of the matter there is the flowed privatization
that started in 1990. Until then the state was the owner of all the resources,
enterprises and businesses in the economy. After 1990 the ownership went from
the state to the state again! The Commercial Enterprises (Societati Comerciale)
functioned as state-owned businesses from 1990 to 1997 when they became
private(Almos Telegdy, Privatizare MEBO in Romania, 2002). The former communist
bosses were now the managers and the CEO’s who let these enterprises run to the
ground for seven years. Then they turned around and bought them at auction or
through direct negotiations for pennies on the dollar.
The second type of businesses that went from state ownership to state
ownership(!) were the
Regii Autonome. They were controlled by various ministries and were not supposed
to became private because they operated in strategic sectors of the economy, such
as energy and army goods. Over the
years , these enterprises have become highly inefficient and corrupted, allowing
private and state
firms alike to pay almost nothing for their energy needs. (Ilie Serbanescu, Revista
22, 2005). In the end, t he Romanian government ended up selling the whole
energy sector on the cheap to foreign holdings,
endangering the national security.

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Both types of privatization were accompanied in may cases by theft,

briberies and money laundering from the part of business people and government
officials.
The repercussions on the economy are very serious. As much as 10% of
the labor force works
abroad and the economy has become increasingly dependent on the money these
people send back
home (Edward Hugh, Romania GDP Q4 2007, 2008). The solution I think will
decrease corruption, from top to bottom, is a real and permanent reform of the
justice system. The so-called reforms done in the
past were short lived and reversed by the Parliament. Traian Basescu, the current
president, and Monica Macovei, the former minister of Justice, were at the helm of
a major reform of the justice system that was supposed to set the country on the
right track. However, right after Romania entered
the European Union, the Parliament reversed the course of action. At the present
time, many
officials and business people involved in illegal activities that drain money and
resources away from the
country are walking the streets free.
INTRODUCTION
There are many things that can disable an economy but perhaps
nothing is more damaging than corruption. Emerging economies particularly are
easy targets because they are in a transition state and thus in continuous
transformation. Romania is such a market riddled with bribery and corruption of all
kinds and at all levels.
I looked into many studies and surveys that deal with corruption in
Romania and summarized the most compelling. My thesis goes in a different
direction from the studies I commented on. I found that the process of privatization
of state-owned businesses that started in the 1990s is at the basis of the most
corrupted forms of markets in Romania. I will analyze the three stages of
privatization and point out how they lead to market and political corruption. I will
show what the consequences on the economy and the people of Romania.
Specific examples of corruption are given with emphasis on the most
egregious case of fraud, money laundering and traffic of influence. That is the case
of Rompetrol.
STUDIES AND REPORTS ON CORRUPTION IN ROMANIA
Causes and remedies
The emerging economies in Eastern Europe are engulfed in a sea of
corruption. Corruption discourages investment, lowers efficiency and erodes
democracy. Robin Theobald argues that entrepreneurs decide not to start a new
business because being a corrupted public official is more rewarding. He believes
that the most significant effect of corruption is the disinvestment in public goods, as
government officials reap huge benefits by privatizing or auctioning state-owned
investments.
Paolo Mauro found out that corruption is more likely to appear where
governments have unlimited powers to grant privatization and extraction rights and
to exercise price controls in the form on system shows that descentralization
lowers corruption in the system. Daniel Teodorescu and other researchers surveyed
local public administration officials in 2005 and with a error margin of +-1.2%
found out the following causes of corruption in Romania: lack of consistency in
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applying the reform system (i.e. privatization), lack of traditions that support a
market economy, present administration system reluctant to change, low salaries in
the public sector , lack of financial discipline in the public system, and fluctuations
in the number of civil servants.
As ways to decrease the level of corruption in Romania, Teodorescu and
others suggest the following. First, the reform process at the local level needs to
emphasize descentralization , an increased local authority and a higher pay for civil
servants. Secondly, the tasks and responsibilities assigned to local government
people need to be clear in nature, especially in city halls. The next steps
have to do with a unified pay system for civil servants, more training offered on
topics of reforms and less fluctuations of personnel at city hall as a result of political
changes
The World Bank and Management Systems International, a partner of the
United States Agency for International Development, surveyed more than 1,700
households, businesses and public officials.
67% of households believe that all or almost all public officials are corrupted and
50% think that bribery is widespread. The report also shows that 70% of businesses
think that public officials are corrupted and 44% of the public officials surveyed
think the same. The other 56% must be in a state of denial. It is interesting to look
at the ranking of state agencies by households from the most corrupted to the least
corrupted (page 5) :
*judiciary – courts and prosecution and parliament 55%
*customs officials and ministry/government 52%
*health and police 47%
*state property funds 44%
*notaries/lawyers 43%
*financial guard and presidency 40%
*local elected officials 35%
*housing services and local administration 31%
This is how public officials rank the same state agencies:
*custom officials 62%
*judiciary-courts and prosecution 53%
*state property fund 52%
*health 41%
*police and financial guard 39%
*housing/communal services 38%
*parliament 37%
*notaries/lawyers 35%
*elected officials 27%
*local administration 22%
There are only minor differences in the ranking of the most corrupted state
agencies by households and public officials. It is worrisome that the three
branches of the government ( judiciary, legislative and executive) are in the top
ten, as well as the police, custom officials, health workers and notaries and lawyers.
It seems that everywhere you go where state agencies operate, whether it is the
police station, the hospital room, the housing office or the financial guard, which by
the way is supposed to track down corrupted officials, you need to be prepared to
anoint somebody.
Households feel they need to offer bribes (atentie) as follows (page 13):
*dentist 39%
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*hospital stay 37%

*medical specialist 33%
*gas installation and repair 31%
*emergency room 29%
*power connection and repair 28%
*building permits 19%
*general practitioner 17%
*driving license 17%
*courts 16%
When asked about bribes going in the society at large, households feel they have
to give something extra to dentists , doctors and medical personnel, as well as to
people to come to the house to repair or connect things and to the driving-school
instructor.
The firms surveyed believe that the greatest obstacles of doing business are
the following (page 12):
*inflation 90%
*constant changes in regulation and
tax regulations 88%
*bureaucratic delays and tax rates 84%
*corruption in administration 82%
*inadequate infrastructure 79%
*ambiguous legal standards 74%
*political instability 71%
*skew courts 68%
*shortage of local resources 67%
All the impediments to doing business in Romania are rooted in a political
framework plagued by instable and unreliable rules and regulation, bureaucracy
and high tax rates, corrupted officials and courts.
The causes of corruption are listed below (page 25):
households
enterprises
low salaries/personal gain 55% 48%
imperfect legislation 53% 32%
immense bureaucracy 21% 29%
poor law enforcement 13% 18%
imperfect judicial system 7% 10%
too many regulations 5% 9%
Individuals and businesses alike believe that corruption in Romania is rooted in the
desire to get rich quickly, maybe because the disposable income is low, inadequate
laws and poor enforcement of the existing ones.
It is no surprise that the remedies offered by households and enterprises to
correct the situation begin with the enforcement of anti-corruption laws and with
severe sanctions of corrupted officials (page 31). 75% of households and 81% of
enterprises believe that teaching ethical education will alleviate the problem. 56%
of households and 78% of enterprises want both the civil service and the judiciary
to get stronger. Almost 70% of households and businesses alike would like state
officials and political candidates to make public their financial assets. Almost the
same ratio would like the mass media to inform the public about ongoing
corruption. Other suggestions to combat corruption involve easier administrative
procedures, more anti-corruption units and higher salaries for public officials.
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Sebastian Burduja explains the magnitude of corruption in Romania by

making reference to the occupation of the country by the Ottoman empire in the
15th century. The Turks introduced the custom of bribery of public officials, which
continued under communism in the 20th century. He thinks that the level of
corruption went up between 1999 and 2002 and decreased afterwards, which is not
consistent with data from other sources. Burduja’s model suggests that the
European Union standards for the acceptance of Romania as a full member offer
plenty of incentive to the elite political class to fight corruption. Membership to the
EU that will come too soon would be detrimental because the political apparatus
will have nobody to answer any longer and thus corruption will continue to flourish.
This is exactly what happened after the publication of his research paper. Romania
has been accepted as a member in the EU and the flood gates opened. The ministry
of Justice, Monica Iacovescu, who was a leader in the anti-corruption war was fired
right away. The fight against this national plague has slowed down considerably.
Letting Romania in the EU before making sure that country is stable and clean was
a mistake.
CONSEQUENCES OF CORRUPTION
The economy
The World Bank found out that 51% of all Romanian firms pay bribes in
order to do business, which amounts to 4% of their total annual revenues. The
managers surveyed declared that the major obstacle they face is non other than
corruption. That is why foreign investment in Romania is slow to come by. Business
owners want to be sure that laws and regulations will not change at the whim of
dubious political figures, threatening their investments. The state was oppressive
and corrupted under communism and now in this transition period it is still a vehicle
of mistrust and corruption.
The many facets and ramifications of corruption, from bribery to get a legal
document to the intricate schemes of the political apparatus, contribute to the
disequilibrium of this transitional economy. In my opinion, it is the main reason the
economy is inefficient in so many regards. A study done by Scriecui and Winkler
analyses the banking system in the 1990s In the first part of the decade, the
government subsidized two sectors, agriculture and energy. Across the board in the
economy tax arrears were tolerated, thus tax revenues reached an all time low.
State-owned banks with a high rate of non-performing loans were allowed to exist.
In 1998 only one IMF and WB loan went through, while the others were cancelled
due to the under-performing of the economy.
I want to add that the above study shows how the government has
protected failing businesses and industries that were state-owned, fully or partially,
keeping inefficient and underproductive units on the market. I will show later what
happened to those units and how the economy was adversely affected by them.
Edward Hugh offers a recent and very poignant birds-eyes-view of the economy.
Right after Romania became a full member of the EU in January 2007 the GDP rose
by 6% as a result of more foreign investment pouring into the country and of an
increase in remittances from Romanian workers abroad. He believes that the
economy will have a hard time sustaining the boost in wages and consumption that
followed. The inflation rate of 7.3% in 2007, he thinks, will prompt the National Bank
to raise interest rates. Although it is difficult to calculate the exact amount of
remittances, the World Bank estimates they are about 4.1% of GDP. Hugh believes
that because they finance mortgage and construction loans not only in Romania but
all over Eastern Europe, there may be unintended consequences for the future.
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The people
According to the Romanian National Institute of Statistics, one third of the
labor force worked for the state at the end of 2007. Romania has the second
highest youth unemployment rate in the EU. Scrieciu and Winker assessed that the
unemployment rate in emerging economies rises with the implementation of free-
market reforms. State-owned businesses, even when they are failing, are less likely
to fire employees because they’re kept afloat by government subsidies.
Scrieciu and Winker also believe that In Romania the agricultural sector acted
as a buffer, absorbing some of the people who lost their jobs in the city. This is how
they explained a lower than normal unemployment rate in 1997, compared with
other emerging economies in the area. The big question here is, in my opinion, how
the unemployment rate is calculated. There is an increasing percentage of the
population that works abroad, where wages are higher than those offered in
Romania. They’re working, but the output they produce is not counted in the
Romanian GDP and the fact that they have a job has nothing to do with how the
economy is performing.
There is another aspect that I want to mention. I came across the fact that a
huge number of Romanians went into retirement even when they did not have the
legal right to do so by accident. Empirically, I was able to assess that able bodies in
the labor force went to the extreme in order to retire, even though they took a big
cut in income. Some of the reasons behind this social phenomenon in the years
1990s were: un uncertain labor market, difficulties adapting to a free market
economy, lack of work ethics, common in the former communist Romania, and a
labor market dominated by low wages.
The fact of the matter is that, according to my research, the
unemployment rate does not reflect the true nature of unemployment. The
tendency as we speak is for qualified and unqualified labor to migrate to EU
countries where the wage rate is higher than in Romania. On the other hand,
construction and trucking companies in Romania face a shortage of workers. Italy,
France and Spain are the countries of preferences of migrant workers. The most
significant social problem, and by far the saddest, s temming from labor migration
is that of the children left behind by parents who went to work abroad. Most of them
live impoverished villages in the countryside. Grandparents or relatives try to raise
these children, some of which are as young as two or three years of age. What will
happen to a whole generation of abandoned children is everyone’s guess.
MY THESIS: PRIVATIZATION AND CORRUPTION: TWO FOR THE PRICE OF
ONE
My thesis will show that corruption has penetrated the socio-economic
fiber of the society to such an extent that the whole mechanism is disabled. Also,
the roots of corruption are to be found in the way the process of privatization took
place in Romania.
The privatization of some of the factor of production in Romania was done
in three stages. Almos Telegdy from the University of Budapest has done an
extensive study of the process of privatization in Romania. I will follow this thread
and will link it to the pervasive corruption that accompanied every step of the
privatization process.
Step one
The first phase of privatization started at the very beginning of the
transition period. In 1990 business firms were divided in two groups. Societati
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Comerciale were those businesses that would be allowed to go private after seven
years. For the time being they were still under the ownership of the state. Regii
Autonome , still under state ownership, remained under the control of various
ministries and although they were eligible to break away in 1997, they were not
included in the process of privatization. These regii autonome covered strategic
sectors of the economy, such as energy and national defense. But soon retail and
cigarettes companies were let in. All these businesses accounted for 47% of the
capital invested in state-owned firms the first seven years, that is until 1997
(Telegdy).

My analysis is that such a plan allowed the people who would become
very rich very soon to
operate in the shadow with the blessing of the state. Disperse ownership and state
subsidies are two major features of a corrupted system, according to my research.
Disperse ownership in the case of the
societati comerciale meant that that good and bad firms, efficient and inefficient
ones will continue to operate for ever and ever. State subsidies will keep afloat
failing enterprises. This is exactly what happened to the regii autonome .
Each Societati comerciale was owned in proportion of 70% by the Fondul
Proprietatii de Stat (FPS) – State Ownership Agency- and in proportion of 30% by the
Fondul Proprietatii Private (FPS) – Private Ownership Agency- (Telegdy). The State
Ownership Agency was present in all the economies in transition in the 1990s. The
second holding, the Private Ownership Agency was instrumental in distributing 30%
of the shares of societati comerciale to the population. These shares supposedly
gave the citizen the ownership and control of such business firms. In reality, the
shares were absolutely worthless. No dividends were ever distributed during the
five years of existence of the program. No control was exercised by citizens, who
had no idea of what was going on, because the board of directors was nominated by
the Parliament.
In conclusion, the first step of the privatization process in Romania, while
claiming to give the people ownership and control of a number of business firms,
ended up by reinforcing the power of the state in the economy. A number of
political figures and mafia-type individuals became CEOs and directors overnight
and this is how the happy hour started. In a short period of time they manipulated
capital, influence and favors and now one can find them of the list of the richest
people in Eastern Europe.
Step two
Next, the travesty continued with the second part of the privatization when
the people holding shares of ownership in societati comerciale were allowed to
exchange them for…new shares, as part of
the so-called mass privatization. According to A. Telegdy, this type of privatization
is criticized frequently because it creates a disperse form of ownership. He
concluded that in Romania, the ownership became even more disperse due to the
piece of legislation that set the program in motion. This legislation prevented
anyone to have a majority of shares at any given time. Furthermore, the buying and
selling of shares were prohibited. It turned out that the mass privatization had little
to do with the masses for the following reason. The state maintained ownership in
proportion of 40% or 51% in each of the societati comerciale (Teledgy).
Again, I want to reiterate the fact that the state and its cohorts
maintained a good grip on the only business firms that were being privatized. How
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easy was it to control, manipulate, subsidize and appropriate funds from such
businesses.
Step three
Finally, the last method of privatization allowed the societati comerciale to
sell their shares at auction, through direct sale or public offering. Between 1996
and 2000 the ownership of the businesses allowed to go private went from the
citizens who sold their shares to domestic or foreign owners who were able to buy
them (Teledgy).
This looks almost decent on paper but in reality things got ugly. The era
of big scandals, traffic of influence, illegal transactions between the local
government or the state and dubious individuals and enterprises. From the
beginning of the privatization process until the last phase, private individuals or
employees of specific businesses that were going to become private, were made
“owners” on paper. They could not benefit from being made “owners” nor could
they exercise any influence in the life of the business. Then, miraculously, a transfer
of ownership took place and this time the new owners were real owners. They could
buy or sell the business, hire or fire employees, and above all, they paid almost
nothing for what they got. Many of the businesses that were privatized in step three
were in such a bad shape that one couldn’t give them away.
The nouveaux rich: how the people of Romania got ripped off
A case in point is that of minister Paul Pacuraru, accused by the National
Anticorruption Agency of traffic of influence. The site Coruptie/Aluzii reveals that in
January 2008 the minister helped his son buy at auction several mines in the region
of Oltenie. However, premier Calin Popescu Tariceanu refused to have the minister
investigated. Eight present and former member of the government were
investigated for corruption this year according to the same site. Here are some of
the charges:
*bribery and traffic of influence (Adrian Nastase, former prime minister)
*bribery, false in public documents (Miron Tudor Mircea, former misiter of housing
and transportion)
*abuse of power contrary the public interest – dossier “Posta Romana” (Tudor
Alexandru Chiuariu, former minister of justice)
*abuse of power contrary to the public interest – dossier “Posta Romana”; high
treason by stealing economic secrets and organizing a criminal group acting
contrary to the national interest (Zsolt Nagy, former minister of communication and
information technology)
*bribery and abuse of power (Victor Babiuc, former defense ministry)
*bribery and helping his son’s business land a contract with the state (Nicolae
Pacuraru, former minister of labor, family and equal opportunity)
*high treason by stealing economic secrets and organizing a criminal group acting
contrary to the national interest (Ioan Codrut Seres, former minister of economics
and commerce)
*traffic of influence (Decebal Remes, former minister of agriculture and rural
development)
Unbelivable! Even the Romanian soccer is riddled with corruption. The site
Coruptie/Aluzii gives the names of agents, clubs presidents and team owners
investigated for money laundering, fraud and tax evasion. During the third step of
the privatization process in Romania, one of the regii autonome acquired in
proportion of 51% by the Austrian firm OMV in 2004 was the national oil company
Petrom. Petrom was at the time not only the largest Romanian company, but also
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one of the most strategic ones in the energy sector. The selling price was $669
million euros, a pittance for a company that has the exclusive right to extract
natural gas and crude oil in Romania. The site Presa zilei reported that the buyer’s
net profit in the first semester of operation was 403 million euros! This is one sad
example of a pattern that accompanied especially the second and third phase of
privatization. The state sold low and bought high. The buyers got rich, the state lost
money and the people who own the stock got nothing. In the case of Petrom, the
buyer got also the privilege of paying low taxes for the next 10 years.
Presa zilei reports that Aro Cimpulung was boughtby Cross Lander USA for
only $153,000, the cost of a medium -size condo ! Aro’s official value was of $15,8
million and its debt amounted to $11.4 million, yet it was purchased for practically
nothing. Cross Lander turned around and sold it for $2.7 million. What happened to
the employees who supposedly were the “owners” after the privatization? What did
they gain? The answer is simple: nothing. In many cases, many people were let go
after such a “smart” move because the new ownership did not need them any
longer or because they wanted to bring in their own people.
How do you become the richest man in Romania. Ask Dinu Patriciu. This is
probably the most egregious example disastrous privatizations. The company
Rompetrol produces petroleum products and petrochemicals. It was founded in
1974 by the communist regime and in 1993 was part of the privatization program.
While in step two, the employees were given certificates of ownership in 1993, in
step three the shares were purchased by a Dinu Patriciu and a local investor group
in 1998 (Wikipedia). My question is: after 45 years of communism and eight years of
painful transition, what private individual had the kind of money that would
purchase shares in a company as Rompetrol? Nobody had extra money under
communistm, except for the communist elite. The Diplomat Bucharest in February
of 2006 talks about the local investment group that purchased Rompetrol in 1998,
managed by US born Philip Stephenson. He claims that his investment group raised
$80 million from institutions around the world. Then he says that he met Dinu
Patriciu in Romanai, whom he refers to as the CEO and owner of Rompetrol.
The timetable given by the Wikipedia shows that in 1998 both Patriciu and
the local investor group managed by Stephenson purchased Rompetrol , yet
according to Stephenson Patriciu was already the owner when the two met in 1998!
Shortly after this miraculous encounter, they went on a shopping spree. The
headquarters were moved in 1999 to the Netherlands and by 2005 the company
operated in 12 countries in Europe. (the Diplomat Bucharest). My guess is that they
moved to Amsterdam right after wrestling the company away from the employees-
owners because they probably had access to the immense bank accounts of former
nut-case Ceausescu. Nobody was able to ever find them and nobody knew where
they were! Also, nobody believes this nonsense. The shopping spree that ended in
2005 during which companies were bought in Romania and all over Europe in the
name of Rompetrol was financed in what way?
In 2007 Patriciu sells 75% of Rompetrol to KazMunaiGaz, a company
controlled by the country Kazahstan. Now he is the richest man in Romania and
Kazahstan has control over Romanian resources of gas and crude oil. He still owes
20% of shares and Stephenson has now 5%. Patriuciu, Stephenson and another
representative of Rompetrol Group BV Olanda were charged last year by the
General Prosecutor’s Office (PG) with money laundering , tax evasion and fraud.
They allegedly did not make the promised investment to the refineries Vega in
Ploiesti and Petromidia at the Black Sea. The alleged crooks turned around the
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started an international arbitration proceedings against the government of Romania

at the world Bank ‘s International Center for the Settlement of Investment Disputes
in Washington DC (the Diplomat Bucharest) . Another good reason to have the
headquarters in a different country!
Here are the facts given by the news site Anuntgratis. The government of
Romania, owner of Rompetrol in1992, leased the exploitation of crude oil in
Romania to the Spanish fiem Repsol Ecploracion for 45 million USD and 85 million
USD to be paid in the years to come. In 1998 Patriciu acquires Rompetrol .
Rompetrol sells the IOU of 75 million USD to Rompetrol Group BV Olanda (the new
headquarters) for 35 million USD. Romoetrol Group BV does not return the 35
million dollars to the Romanian governenment, which is defrauded for the total
amount of 75 million dollars
What next?
The prevailing corruption and theft that accompanied all the phases of
privatization in Romania hit hard the economy and the worker. Employees that were
made “owners” on paper were fired or mistreated when firms started to break away
from government ownership. Capital goods and human capital become pawns in
the game played by many dishonest and even dangerous individuals who managed
to put their dirty hands on business firms.
The migration of labor to EU countries where wages are higher will
continue to take place. This hurts the economy. The political apparatus is part of the
problem since many politicians are deeply involved in economic transactions where
traffic of influence and fraud are present.
The justice system is riddled by corruption, too. Even the Anticorruption
government agency employs people who were indicted for fraud and money
laundering. Some judges, prosecutors and lawyers are operating under the radar
and are “anointed” with bribes and traffic of influence.
What is the solution? The European Union can help by keeping the
pressure and demanding results that show less corruption. But since the country is
part of the EU, it is a bit late to address the problem this way. Still, the Eu has the
power to correct some of the problems stemming from corruption.

The 35 million dollars fraudulently obtained by Patriuciu and Stephenson

are used to purchase the Petromidia refinery in Romania. The General Prosecutor’s
office alleged that they lied about the provenience of the money. This is how
peteromidia was “privatized”. They failed to make the promised investments two
years after Petromidia was bought.
In 1998 Patriuciu and Sorin Marin, president of Rompetrol, ask General
Assembly of the Vega refinery to issue shares in the name of the company. Patriciu
buys them all, leading to another “privatization”. Rompetrol fails to make the
investments they promised .
In 2003 Rompetrol failed to document and legalize the sale of 22,00 0 tones
of gasoline to RAFO Onesti. The state is defrauded of 251 billion lei.
Prosecutors charged Patriciu, Stephenson and other brokers with inside
trading and fraud. The scheme the alleged crooks devised this time involved a
company by the name of Saltville Limited. This company bought a billion Rompetrol
shares for 116 lei per share. Some of the shares were sold later to Patriciu’s
associates for 250-300 lei per share. Some other shares were sold back to
Rompetrol for 690 lei per share. Patriciu and his associates gained six million
dollars from manipulation the stock market.
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