Corruption and obscure privatisations: a dive into the Moldovan kleptocracy

By Julian Muller

Many gray areas surround the process of state property privatization in Moldova, but some cases look even more like institutionalized theft. The sale of Kishinev’s press house is one of those. Already at the heart of an embezzlement case in 2014, the press house recently found itself on the headlines once again for the wrong reasons. In early August, the Moldovan anti-corruption prosecution unit closed a criminal case concerning the privatization of the building (as well as the former State Chancellery’s canteen’s one) in the absence of enough proofs. A decision that relieved some and riled up many others.

Indeed, a glance at the local land registers indicates that the buildings in question were acquired on February 18, 2019 by three companies created on the same day and domiciled at the same address. Behind these three companies three men, all former employees of Aria Grup, a construction company run by Constantin Hincota, the best friend of former Prime Minister Pavel Filip’s son, Iulian.

Two months later, Aria Grup paid 9.2 million Lei (about 474,000 euros) in dividends to the wife of Constantin Hincota, who rushed to sign two interest-free loans – each one equivalent to half of the sum – to her husband and to Iulian Filip.

The coincidence turns out to be even more striking when it appears that Aria Grup won numerous (and juicy) state contracts during Mr Filip’s time as head of government. In 2019, for instance, the group was entrusted with a 11 million Lei (more than 560,000 euros) mandate from a public service agency created by Pavel Filip for construction and repair work.

So astonishing coincidence or payback time? The question arises, especially since the case of the “press house” is apparently only the tip of the doubtful privatization’s iceberg which has heavy impact, year after year, on Moldova’s real estate and economic assets.

The most emblematic case in terms of self-serving denationalisation remains to date that of Air Moldova. In October 2018, the national company was urgently – if not hastily – privatized to prevent a supposedly inevitable bankruptcy. In fact, Air Moldova had been intentionally mismanaged (and its accounts manipulated) as prelude to “forcing” its sale (for 50 million Lei – a little over 2.5 million euros – a pittance compared to its real value).

Tutun-CTC, Moldova’s largest cigarettes producer, suffered more or less the same fate. This national economic flagship was privatized in January 2019 for 166 million Lei (about 8.5 million euros), not even half of its real value.

What do these cases have in common? They all involve former Prime Minister Filip. The above-mentioned privatizations were indeed authorized while he was in office. More disturbing is the fact that Filip led Tutun-CTC from 2008 to 2011, a “reign” that earned him accusations of embezzlement and money laundering, but most of all, allowed him to appoint his relatives in key positions in the company, paving the way for the future privatization.

Unmistakable sign of things to come, one of the succeeding government’s first actions was to order the establishment of a parliamentary investigation committee and to involve the Court of Auditors on the matter. Their conclusions proved to be beyond dispute: just like for the Air Moldova case, Tutun-CTC had been artificially indebted, its financial value deliberately reduced, its accounts manipulated while its production capacities had been hampered as of 2016 (precisely at the time Pavel Filip took office). It was also noted that all the rules usually applied in this kind of procedure had been disregarded.

Tutun-CTC was not Filip’s first try. During the 2000s, he had already tried his hand in the private sector while managing the Bucuria confectionery group. In 2004, for instance, he authorized the sale of a piece of land belonging to the company for 211,000 Lei (a little over 10,000 euros) while it was estimated to be worth … At least a thousand times more.

But these facts, all established, appeared to have no consequences for their authors. Shortly after taking office, Maia Sandu’s pro-European government, who declared war on corruption, was ousted and replaced by a motley coalition bringing together the pro-Russian Socialist Party of President Dodon and the Democratic Party of… Pavel Filip.

With this coalition still in place, it seems that only a setback for Igor Dodon in the upcoming presidential elections could see the former prime minister eventually held to account. These cases are indeed a sword of Damocles hanging over Filip’s head, guaranteeing at the same time the docility of the Democratic Party within the coalition.

As scandalous as they may seem, these more than doubtful privatizations are only a few examples of the national heritage’s organized squandering that has taken place in Moldova since the fall of the Soviet Union, a country remaining one of the poorest in Europe.

Julian Muller is a visiting researcher and invited professor, currently based in Romania (between Bucharest and Galati). His main field of interests are society rights, regional development, regional industrialization, and corruption and his work currently focuses on principles and processes of privatization in Eastern Europe (mainly Romania, Ukraine and Moldova).