Corruption, Romanian Style

In winter 2012, Romanian protesters posted in Bucharest’s University Square this message to their political elites: “Sorry! We fail to produce as much as you can steal.” The then Prime Minister, right-winger Emil Boc, stepped down in February. His successor from the same party, Mihai Razvan Ungureanu barely lasted a few weeks. He was brought down not only by his own failings—a poorly explained EUR 160,000 from an energy company on his wife’s account and a huge protocol bill of luxury goods in just a few weeks on the public payroll—but also by his attempt to be virtuous, by denying local politicians their usual petty allocations alongside the approved budget which are used to show off to constituencies, church building and the like. Later on in the year, a centrist coalition won elections and a new young PM, Victor Ponta, was instated. He was barely a few weeks in his office when he was denounced as a plagiarist by Nature, possibly the most prestigious science publication. Worse still—as low quality degrees in Law are the rule, not exception in Romania, and are cherished by all local heads of police and Courts—he also proved to have a soft spot for energy and companies, whom he granted favors without mentioning that his family’s businesses had had services contracts from them for many years. Meanwhile, President Basescu finished his second term and had to leave after ten years—a few weeks before his brother was arrested for influence peddling—and he is accused of taking money from some organized crime pals of his to ease their sentence in a criminal court.

Romania has seen quite interesting times between 2010 and 2015. Perhaps the most interesting was that while the country’s judicial anti-corruption accelerated, pressed by the European Commission (EC) and desperate to rise to the challenge, using to an unprecedented maximum the accession safeguard clause, which is tied to progress on corruption in Romania and Bulgaria, the population only complained in surveys that corruption is getting worse and is becoming more systematic. Global Integrity, a good governance legislation watchdog also recorded Romania, together with Bulgaria and Macedonia, as top of the world when anti-corruption legislation is concerned, but on the bottom when it comes to implementation. EC highly appreciated the work of Romania’s anti-corruption agency, and so did the public. Starting 2013 the agency (DNA) became more and more aggressive, encouraged by Brussels, whose monitoring reports regularly asked the Parliament to give up protecting its corrupt members from prosecution, arresting former and current minister, charging both the father-in-law of Mr. Ponta and the son-in-law of Mr. Basescu, two political archrivals, as well as many others. But still corruption resisted. In December 2013 the judicial committee of the Parliament spent an evening after the press was gone erasing from the legislation conflict of interest for politicians altogether. It took a public rally and protests from Brussels to have it reinstated. This explains the paradox of tough anti-corruption and flourishing corruption: political parties and politicians have built a completely corrupt system where they cannot stop even when danger is close, such is the vicious circle of complicities.

A few examples are perhaps more telling. Romania has the lowest tax collection rate and EU funds absorption in the EU. Both these systemic failings have systemic explanations. The World Bank considers the Tax Authority in Romania one of the most corrupt entities in the administration of the state—even though taxation in Romania is roughly similar to the European average, the actual collection rate is consistently between 29–31% of GDP, a full 10–15% of GDP lower than in most Central and Eastern European countries. In a recent paper, I showed that tax collection alone would return EUR 323 billion (a double of EU’s 2013 budget), if all EU members controlled corruption at the Danish level. As the most corrupt country in EU-28 Romania loses a tremendous amount of money.

Mr. Sorin Blejnar, the head of tax office under Mr. Basescu, who protected DNA and liked to show himself as Godfather of anti-corruption, has been indicted for selective enforcement in exchange for bribes. His head of cabinet was running an organized crime ring and has fled in 2012. He is presumed killed so as not to reveal his accomplices: he has been internationally searched without any results. The other political camp, which won in 2012, appointed three key people in this area. As Minister of Finance they appointed Mr. Daniel Chitoiu, Mr. Dan Rusanu as head of the Financial Services Authority and a Mr. Gelu Stefan Diaconu to the positions of head of Tax Authority (ANAF), successor of Mr. Blejnar, all three from the same party. Mr. Rusanu, appointed by the Parliament as head of a complex agency regulating EUR 10 billion worth of business in the stock market, insurance and private pensions, is a typical Romanian successful businessman, who had amassed a fortune from dealings with the public sector. According to the Romanian media, he was at the time of his appointment the godfather of both Mr. Diaconu and Mr. Chitoiu, plus of the transportation Minister Relu Fenechiu. Establishment of such parentage links is more than a hobby for Romanian politicians and explains their close ties with organized crime. No politicians would dare refuse a Roma leader who asks him to become godfather of a child and a network of such relationships connects the political world with the underworld—if indeed a distinction can be made. As I write, in January 2015, Mr Chitoiu, Rusanu and Fenchiu are all in jail, some finally sentenced, others waiting for their final sentence in a mix of fraudulent and corrupt acts. It is Mr. Diaconu only, who still continues the reform of the tax office under the benevolent patronage of the World Bank.

The European funds work no differently than tax collection. Selectivity is the rule and the party has to have a share. Funds are left unused (explaining their lack of absorption) if they cannot be directed to favorite companies. Favoritism is rampant. Even in the EU funds for administration prosecutors found that whole government agencies had to contribute, employee by employee, in paying a bribe to some central office for the matching funds from central budget—funds which without bribes would never have arrived. A variety of schemes exist, but the common model is this: poorly funded parties and public offices spoil to support themselves and their campaigns. A slogan on the door of Social Democrats in the poor town on Roman in Moldova says it all: Join us. Invest in your future. Public sector is severely politicized (down to hospital managers and school directors), top government agencies frequently buy their offices, then recuperate their money and pay the party share. Parties are like medieval armies: they are not paid, they cater for themselves from spoils, but also give a commission for the joint interest. The edifice started to crumble only in 2014, when the National Anti-Corruption Directorate (DNA) came to grips with a huge corruption scandal that revealed deep-seated clientelistic networks stretching over four subsequent governments. It concerned a large public procurement contract that was signed by various governments, and in which Microsoft software licenses were purchased 30% to 40% above market prices through an intermediate company. The DNA has started investigations against nine former ministers who supervised this rent-extracting scheme throughout four subsequent governments.

Politics is not the only field where corruption is deep and where anticorruption, a combination of media and watchdog disclosures leading to prosecutorial action has started to unravel the rotten rules of the game. In 2014, several Romanian club owners and former footballers involved in transfers of football players have been sentenced to jail, with charges of tax evasion and money laundering. The clubs involved are FC Rapid, FC Dinamo and FC Steaua. The impresarios Ioan Becali and Victor Becali, cousins of George Becali, also received prison sentences. They have all been selling and buying soccer players for years in the amount of millions of euros declaring only peanuts to the Tax Office. Former football star and national coach Gica Popescu also received a sentence of three years and one month in jail.

The other seriously afflicted area is media. Only 10% of Romanian media published—and 90% declined to publish—its sources of financing from owners and advertising, following an appeal for a clean press by Alliance for Clean Romania, a watchdog. In 2014 the Appeals Court finally gave a ten year prison sentence in the corruption case of Romanian media owner Dan Voiculescu related to the privatization of the Food Research Institute (ICA). This was seen as a historical landmark and comes after years of judicial delays, political maneuvering and media attacks on the judiciary. The case was started in 2008 and the previous court had given a five year sentence in the same case, but it was appealed. The Court also decided on property seizures and penalties amounting to about half Mr. Voiculescu’s fortune, raising doubts on the ability of his media empire to go on. Twelve other people also involved in this corruption case received sentences of up to 8 years. The case also exposed the fact that Mr. Voicuelscu’s fortune was not only built on his ties with Ceausescu’s Securitate, as previously thought, but also on plain post-communist corruption and fraudulent privatization. In another trial he was accused that his company, Grivco, bought electrical energy from the state-controlled Rovinari complex, and sold the energy back to Electrica, another state-controlled company, at a large profit. The journalists of Voiculescu’s TV Antena 3 spent most of the last years attacking prosecutors and the judiciary, even the Constitutional Court, displaying on TV their pictures and even home addresses accompanied by hate speech.

What anti-corruption in Romania desperately needs is politicians able to change the rules of the game. A start was made by elections of Sibiu Mayor Klaus Johannis against favorite Mr. Ponta, with a clear anti-corruption mandate. Mr. Ponta showed in his defeat clearer than ever why old politics cannot work anymore. For instance, he passed a decree at the end of summer 2014 called “Government ordinance 55/2014 on regulating some measures regarding the local public administration,” which targeted local mayors and county and local council members and gave them 45 days to change—if they wished so and without losing their mandate—their political affiliation (only once) and join any other party than the one through which they were elected in office or become an independent. The ordinance exempted local officials from the provisions of Law no. 393/2004 regarding the Status of locally elected officials which states that local/county councilors and mayors will lose their mandate if they migrate to a party through which they were not elected. Following the failure of the Ombudsman to attack it, the ordinance was enacted and hundreds of locally elected officials switched party, followed by huge budgetary allocations to their constituencies which swallowed the budget deficit. The Constitutional Court ruled after second round of presidential elections at the end of November that the law was not constitutional, as it could change the majority results from elections, asked all councilors to resign and left the Parliament to find a solution for the mayors. Mr. Johannis’ party had lost over a third of his locally elected officials during the electoral campaign when the law was still active.

His first act as a president was to require the Parliament to kill an amnesty law for corruption which they had been breeding for a while, and they promptly delivered. He then asked for electoral reforms and a prompt lifting of immunities of MPs when prosecutors ask for it. On previous elections the joke was that whoever lost elections would go to jail. The feeling now is that everybody is going to jail, and the President simply has to wait patiently for the 2016 legislative elections to bring in a new political class. His 6.5 million voters who defeated the electoral bribing machine of his opponents, many of them queuing for hours to vote for him, gave him a strong mandate.