By Neil Barnett and Stefan Wagstyl in London
Published: May 2 2008 03:00 | Last updated: May 2 2008 03:00
A British company is suing the Romanian state for $100m in a high-level corruption case involving a former prime minister, airport and airline duty-free concession contracts and an audio tape recording of alleged demands for a $2.5m bribe.
The case, expected to be heard at an international -tribunal in Washington this year, will cast a rare light on the sometimes murky world of Romania's public sector contracts and judicial institutions.
It comes at a time when Romania, which joined the European Union last year, faces heavy criticism from Brussels over its record in fighting corruption and implementing judicial reform.
Like neighbouring Bulgaria, which faces additional accusations over organised crime, Romania could lose EU aid if it fails to take effective action.
"As highlighted by this and other cases, high political corruption is still present in Romania and the anti-corruption prosecutors are under strong pressure from the current political class," said Monica Macovei, who was Romania's minister of justice from 2005-07.
The case involves Eastern Duty Free (EDF), a UK-based duty-free operator with other operations in Laos, Vietnam and the Philippines, which is taking legal action at the World Bank's International Centre for the Settlement of Investment Disputes (ICSID).
It is claiming $100m (€75m, £51m) in damages for the loss of two contracts for duty-free sales at Bucharest Otopeni airport and on Tarom, Romania's national airline.
EDF alleges that in 2001-02 it was approached by officials working for Adrian Nastase, prime minister in 2000-04, demanding a $2.5m bribe to retain contracts it had originally won in 1992 and 1996.
When the company refused to pay, it claims it was forced out of the business. Mr Nastase's government passed an emergency ordinance, which can override contracts, temporarily banning duty-free retail and later gave EDF's contracts to a number of Romanian -companies.
Rick Weil, EDF's managing director, says he went to Bucharest in August 2001 to meet Sorin Tesu, Mr Nastase's chief-of-staff. Mr Tesu chose the novel venue of the Hilton hotel car park for their meeting.
In Mr Weil's statement to the DNA, Romania's anticorruption agency, in 2006 he says: "[Tesu] told me he was meeting with me in the name of his 'chef' or chief.
"He explained that he had good news on how I could ensure the continuation of EDF's venture in Romania. He said that others had contributed $2.5m to Prime Minister Nastase's campaign, for which they had been promised the duty-free business at Otopeni airport.
"However, this money could be refunded to them if I paid $2.5m to Mr Tesu on behalf of his 'chief'.''
EDF refused to pay, creating an impasse.
Two months later, on October 20, Marko Katz, then an EDF director, says he visited Mr Nastase's counsellor Liana Iacob searching for ways to resolve the problem.
On a tape-recording that EDF will assert was made at that meeting and which has recently come to light, she tells Mr Katz in Romanian: "I was at the government, it was a government meeting and I had with him [Sorin Tesu] a discussion and I asked him to stay away from this issue and I told him: 'Well. Do you let me solve this issue? I promise you that I will give also money to you but not in the manner you want to proceed. The money will go directly to the premier [prime minister] in the proportion of 95 per cent and from those [remaining] 5 per cent I will give to you those five. But it is not possible to do how you want, with these kind of things. You know, they don't want to give money. They don't want to give.' And I asked him to let me resolve this issue, to not interfere in any way in this matter, that I will discuss [missing words] that I will . . . "
At the end of the tape she again solicits the bribe as the solution to EDF's problems: "I know very clearly that without money this will not be done. OK? Because I told you from the beginning and I repeat to you that they took some money."
EDF says this refers to the supposed need for the $2.5m to reimburse a campaign contributor who has paid that amount in order to take over EDF's contracts. This campaign contributor was not among the companies that eventually took over EDF's contracts.
The tape will be submitted to the Washington tribunal.
In a statement to the DNA in 2006, Ms Iacob accepted that she had met Mr Katz at her home in autumn 2001, but disputed his account of their conversation.
"Mr Katz came to my house uninvited, without me having given my address, which displeased me . . . I have never requested money from Mr Katz, nor have I received anything from him . . . " she said.
The Financial Times asked both Mr Nastase and Ms Iacob to comment on the tape.
Mr Nastase said: "No comment." Ms Iacob said: "We've got nothing to talk [about] on this matter, the media have already covered this issue in an exaggerated manner.
"There are prosecutors' decisions that show I'm innocent. Goodbye."
As Ms Iacob said, the DNA did indeed look at the case in 2002 but decided not to pursue criminal investigations, citing lack of evidence of criminal behaviour. After EDF appealed against this decision, it was upheld on the same grounds in 2006.
EDF's lawyers last week deposited the new audio evidence with the DNA and again requested the reopening of the file in light of this evidence. The DNA said it was mandatory policy not to comment on evidence.
In an affidavit signed with EDF on Wednesday, Mr Katz confirmed: "The voice on the audio recording is his voice [and] the audio recording is a recording of a meeting held with Ms Liana Iacob on October 19 2001 at her private residence."
Darryl Lew, of White & Case, a Washington law firm that is Romania's international counsel in the case, said: "The only appropriate forum for us to discuss issues related to this case is before the ICSID arbitration tribunal."
Christoph Liebscher, of Wolf Theiss, EDF's lawyers, said: "We have submitted this new evidence [to ICSID] as it fully supports the claimant's claim and confirms the content of the other evidence we have submitted so far." Mr Liebscher added: "The visitor [on the tape recording] is Marco Katz and EDF confirms that it is in fact Mr Katz's voice on the recording."
Mr Nastase has been subject to a number of DNA investigations and indictments. In November 2006 he was sent for trial on bribery charges relating to the unlawful importation of 12 containers of Chinese consumer goods. In May 2007 he was again sent to trial, for bribing an official from the National Office for Preventing and Combating Money Laundering. In September, a third case was opened involving alleged bribery and trafficking in influence.
The three cases have been shelved pending parliamentary debates on the extent of legal immunity enjoyed by MPs, including Mr Nastase. His spokeswoman said: "At this stage, Mr Nastase has no penal case with DNA."
Ms Macovei blames political interference in cases involving senior politicians, saying: "The DNA prosecutors were never afraid to investigate. But the constitutional and supreme court were appointed mostly by PSD [Mr Nastase's party], so I believe they acted outrageously, gave clearly political decisions and lack independence. They want to protect the political powers that put them in their positions."
While ICSID's judgments will not change the face of Romanian justice, the verdicts could make embarrassing reading for Bucharest at a time when it is under Brussels' microscope.
Additional reporting by Catalin Prisacariu in Bucharest
In the EU's doghouse
Romania, and neighbouring Bulgaria, are on the rack in the European Union over their alleged failure to fight corruption and implement judicial reforms. Bulgaria faces further complaints over its record in dealing with rampant organised crime.
The European Commission is due next month to deliver its latest progress report on both countries and it is unlikely to make happy reading in either Bucharest or Sofia. Under rules agreed when Romania and Bulgaria joined the EU in January 2007, the two states are being watched by Brussels in line with "safeguard" clauses that run until the end of 2009.
The Commission could next month recommend sanctions, which might include delaying EU aid or permitting other EU states to stop recognising Romanian and Bulgarian court judgments. However, some member states doubt whether such measures would work.
Bucharest has created a new National Integrity Agency, with powers to punish civil servants for financial wrong-doing. But its effectiveness has yet to be tested.