MONEY AND POLITICS

the links between public procurement

and political parties

WHAT MONEY ARE WE TALKING ABOUT?35 bln EUR

EU funds 2007-2013

1.5 bln EUR

National Program for Local Development 1 – 2012-2016

6.5 bln EUR

National Program for Local Development 2 – 2017 -2020

CONCLUSIONS – PARTY FINANCING

•Politicians keep the money for their personal use; or give a fraction to the party

•Party related companies prefer national funds; still, EU funds are also vulnerable

CONCLUSIONS – PARTY FINANCING

•Some companies donate to all the parties: local networks

•Some companies or individuals donate to parties that are theoretical political enemies; money is more important than the party adversities

CONCLUSIONS - PROCUREMENT

•National funds are more vulnerable to less scrutiny and less institutional capacity

•Big companies get money due to capacity and resources; they had political support to get here (“the first million”)

•A significant number of companies in top 20-30 (works, consultancy etc) are politically connected or have criminal record

CONCLUSIONS - PROCUREMENT

•Conflicts of interests

•Systematic contracting for feasibility studies (copy paste studies) + additional costs

•Consultancy – one of the main vulnerabilities

•Lack of capacity in contracting authorities; documentation of low quality

CONCLUSIONS - PROCUREMENT

•Big difference between the estimated value and the final value of the contract; over evaluated contracts

•Subcontracting and supporters

•Lack of interdisciplinary institutional analysis; institutions do not communicate

PATTERNS Rapidly increasing companies or party/government connected wins

WHO ARE THE OWNERS?A. Real owners - ANI – 2008 -2012, ½ out of 2856 councillors were shareholders or administrators; 190 signed 802 contracts = 25 mln EUR; 50% in conflict of interests

•PSD 393 (93 mln RON) + PDL 221 (11 mlnRON)

B. Camouflaged owners – indirect control, so that they go around the law

FRAUDMECHANISMS

•Legal donations by companies are a small portion of the way parties ensure their survival;

•paying a commission (typically 10-20%) of the contract value by a company to the contracting authority in order to win a public procurement; requesting bribes by decision-makers (eg mayor, county councilor) to approve payments for works already executed by companies

•the use of false or overrated consultancy contracts to mask the illegal campaign funding

•obtaining funds in situations of conflict of interest– the decision-maker is the shareholder, administrator or is controlling the firm in any other form and uses the public office to directly or indirectly get contracts for the company– the existence of firms whose owners are decision-makers who work or worked at public institutions such as CNADNR or MDRAP –institutions that manage funds and procurement procedures

•soliciting from companies various products or services for electoral campaigns (campaign materials electoral, consulting or advertising services, food, etc.)

•determining the local decision-makers by a political leader to cast votes in exchange for approving funds (for example, from the National Program for Local Development).

•obtaining funds illegally under the pretext of organizing events, by paying participation fees

•overestimating contracts illegally, although there is no justification for works or services (consultancy, feasibility studies, etc.)

•appointing people close to political parties in key positions (for example at the head of state-owned companies) to facilitate the procurement of public procurement contracts; part of the money to get to the party

WHAT DOES THE DATA SHOW?

CONCLUSIONS - DATA

•Poor quality data

•Databases do not communicate

• Issues with input from CA and exports – may cause significant errors

GENEROUS COMPANIES WITH THE PARTIES

•Total donations of 263 mln. RON / almost 80% came from individuals

•1724 companies that donated 2006-2015

• more than 600 companies had contracts with the state / 303 from EU funds

•Main beneficiary is PD / PDL (36%), followed by PSD (22%)

2012a 2014 20162012b

2004 2007 2008 2009 2010 201120062005

Map of governments2004 - 2016

Partidul

Democrat

Liberal, 36%

Partidul Social

Democrat, 22%Partidul

Național

Liberal, 9%

Uniunea Social

Liberală, 7%

Partidul Noua

Generație-Creștin

Democrat, 5%

Alianța Politică Partidul

Social Democrat +

Partidul Conservator,

5%

Uniunea Democrată

Maghiară Din România,

4%

Sorin Mircea Oprescu,

3%

Partidul Conservator,

2%

PNTCD

1%

Partidul Mișcarea

Populară, 1%

UNPR

1%

Total donations to parties,

companies and individuals, 2006 -2015

0

5

10

15

20

25

30

35

40

45

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millio

ns

All donations / years

* PNL does not contain info for some years

PD + PDL + DA PNL PSD + USL + PSD/PC

1.57

2.31

22.66 - top year

for donations

17.08

1.86 1.40

6.35

0.24

2.75

0.540

5

10

15

20

25

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Millio

ns

Donations per year, companies

BROKEN RULES OF DONATION

Art. 25/33, Law 334/2006(1) It is forbidden to finance in any way the electoral campaign of a party, of their alliance or of an independent candidate by a public authority, public institution, autonomous administration, national company, company or banking company, to which the state or administrative-territorial units are majority shareholders, or by companies that carry out activities financed by public funds. The ban applies to commercial companies that have carried out activities funded by public funds 12 months before the beginning of the election campaign.

TYPOLOGY OF COMPANIES

VICTOR CONSTRUCT – universal donor

> 475,000 RON to PSD, PDL, PNL, USL from 2007, almost half to PDL and half to PSD

CONREC – family relations

> Mihai Vrăjitoriu, administrator –godfather of the PNL mayor of BotosaniCătălin Flutur (2004-2012)

ASESOFT INTERNATIONAL / TEAMNET–donors to political opponents

> Companies controlled by Sebastian Ghiță, former PSD MP (2012-2016). Both donated to PDL in 2009. Until 2012, PDL was in power

INSTITUTUL DE STUDII SI PROIECTARI ENERGETICE SA / ROMELECTRO – power relations

> ISPE donated 15.000 to PDL in 2008.

Dan Ioan Gheorghiu - former advisor on energy of PSD

PM Victor Ponta, personal advisor to PDL minister

Adriean Videanu and PSD Minister of Industry, Dan Ioan

Popescu.

Romelectro (shareholder at ISPE) was part of the foreign trade network in the communist regime. ISPE isshareholder to other companies with

CONSIZO SERV - S.R.L. - power relationsConstantin AVRAM was county councilor, sub-prefect,PC/ALDE parliamentary in the 2012-2016 mandate

> more than 30 contracts with Bacau Municipality, between 2007-2009, when Avram was county councilor and shareholder. 45 % of the company revenue comes from Bacău Municipality.

SC CCCF DRUMURI ȘI PODURI, FILIALA ROMÂNIA (bankrupt) – former employees

Virgil Icleanu is a former director in the National Roads Company (CNADNR)

CCCF was a shareholder of Societatea de Constructii In Transporturi Bucuresti SA –the company had 16 contracts between 2007 and 2015 with the Roads Company.

Icleanu is also administrator at SC ConstructiiFeroviare Iasi that has 30 contracts with CNADNR. The company donated 20,000 RON in 2008 to PDL.

CONBAC S.A. – conflicts of interests

Mihai Șlic, local councilor (PDL) and vicemayor of Bacau (PNL) was shareholder until 2015. He lost his mandate due to conflicts of interests: CONBAC and Profinstal got contracts from the Municipality. The company donated 15,000 RON to PDL in 2012.

18 out of 42 contracts are signed with the National Investments Company, mostly in 2008-2010, when PDL was running the Ministry of Regional Development.

CONSMIN (insolvency) – the briber

Donated to PNL in 2012

Marius Botoroagă (administrator), involved in the “Gala Bute” case

Admitted to have bribed former PDL minister of Development, Elena Udrea and the head of the National Investments Company (CNI), Ana Maria Topoliceanu to make sure he would receive money for the works (10%).

Almost 45% of the revenues of the company came from CNI. Almost 50% of the contracts were signed with ApaServ Valea Jiului S.A (105 contracts).

TOP WINNERS AND POTENTIAL POLITICAL CONNECTIONS

- VEGA 93 – Corneliu Istrate- PSD

- CONFORT S.A. – Cornu Georgica - PDL (denied connections)

- DELTA ACM 93’ – PDL (Ionel Pirpiliu, brother of former PDL deputy, Stefan Pirpiliu)

- ELSACO ELECTRONIC SRL – PNL

- TANCRAD SRL* – PSD - Traian Stăncic (founder), former work colleague of Nicolae Dumitru, former PSD mayor of Galați

* In 2014, Tancrad SRL was indicted by DNA in

a case where the PSD president of CJ Brăila, Gheorghe Bunea Stancu, was convicted for abuse in office, conflict of interest and obtaining undue advantage for himself or for another.

Prosecutors said that four contracts concluded between Tancrad SRL and Braila County Council were attributed fraudulently, with an estimate value of 2,450,752.88 lei.

- SC DIMAR SRL – Iulian Dragunoiu - donated 50,000 RON to PDL in 2009

- IRIDEX GROUP CONSTRUCTII - Corneliu Pascu, former PC Senator from Buzau between 2004 and 2008, close to the Voiculescu family

- UTI GRUP SA - Tiberiu Urdăreanu, former MAPN major, UNPR member

Urdăreanu declared in 2016 that he bribed the former PSD minister of Energy, Constantin Nita to intervene for a contract related to the traffic management at the former PSD mayor of Iasi, Gheorghe Nichita

FINANCIAL CORRECTIONS – POR

Non-eligible

payment

20%

Restrictive

criteria

60%

Reducere

de termen

7%

Others

13%

Type of irregularity, top 150 projects

T DANCOR and ROMCONSTRUCT – Cornel Ciocan, convicted for tax evasion. Brother Dan Ciocan was county councillor and deputy (since 2012) – PSD; donated to PSD in 2008, 2009, 2013 and 2014.

CAST SRL – Gimi Palada said under investigation that he gave 10% of the contract to Vlad Cosma (PSD) through a fictive contract. Cosma intervened with his father (Mircea Cosma) to ensure that the bills are paid on time. According to Palada, the money also went to PSD Prahova. The company was involved in a bribery network in Prahova for roads and snow contracts

EUROVIA-CONSTRUCT INTERNATIONAL SACRISTESCU ILIE DAN (godfather of Mircea Drăghici, leading figure in PSD) and CAZACU C. DANUT MIRCEA, former general councilor (PD) in Bucharest; his wife, Cornelia Cazacu was PD senator between 2004 and 2008.

TEHNOLOGICA RADION

BERNA GH. THEODOR, former advisor of mayor Traian Băsescu (PD), denounced that the former PSD deputy Sebastian Ghiță asked bribe from him (RTV case)

TEL DRUM

Connection to PSD President, Liviu Dragnea, according to press

50% of all contracts are signed with CJ Teleorman

NATIONALINFRASTRACTURE FUNDS

NATIONAL INVESTMENTS COMPANY (CNI)

306

124 111 82124

33

156

101230

65

0

100

200

300

400

500

USL PSD PNL PDL UDMR Altele

Comparison, no of contracts

-reported to the political colour of the mayor-

2004-2008 2009-2012

39.91%

15.80% 16.55% 11.32% 16.43%5.81%

24.70%

13.17%

43.85%

12.47%

0

0.2

0.4

0.6

0.8

USL PSD PNL PDL UDMR Altele

Comparison % of sum-reported to the political colour of the mayor-

2004-2008 2009-2012

Proportions change as the government changes

TERMOGAZ COMPANY

In 2010, Minister Udrea Elena Gabriela received indirectly, for hemself and for another, through Lungu Ştefan, material benefits from Gardean Adrian and Gardean Miron, to ensure the timely financing of works contracts concluded by SC Termogaz Company S.A. with several territorial administrative units under the "Skiing for Romania" program. […]

In 2011, Udrea Elena Gabriela requested and received from the defendant Gărdean Adrian, for hemself and for another, material benefits worth 10% of the payments made by the Ministry for the works contracts concluded by S.C. TermogazCompany S.A. and S.C. Kranz Eurocenter S.R.L., in exchange for the guarantee that the funding will be approved in time

“

“

MBS Group

Former PDL municipal councilor in Turda SILAGYI GABRIEL

Natalia Silagyi, his wife, held the position of councilor on evaluation in the Project Monitoring Department, MDRT, while MBS was implementing projects signed with CNI

NATIONAL PROGRAM FOR LOCAL DEVELOPMENT (PNDL)

www.expertforum.ro/clientelism-2016

In each county between 30-50% of the winners are not published in SEAP

In each of the counties surveyed, almost 50% of the contracts are won by 5-6 companies, out of 40-50 competitors. A significant number of them have been subject to criminal investigation or have political or family ties at the local or central level

Ties are in many cases party-based, but tend to be built around local power relations. Some owners of companies donate to several parties simultaneously, act as political go-betweens or have family ties with people from other parties.

Some companies are nominally administered by façade administrators; in reality they are ran by politicians or other powerful individuals. In some cases identified, real owners (public officials) do not even make much effort to hide and engage in direct transactions with their firms.

The rule of county/regional monopoly seems to apply

THANK YOU!

septimius.parvu@expertforum.ro

www.expertforum.ro

More details on https://goo.gl/TURzYk