On Monday, Liviu Luca, one of the most powerful trade union leaders in Romania, and Sorin Ovidiu Vintu were detained for 24 hours and the prosecutors will ask that they be taken into preventive custody for embezzling Petromservice funds and for money laundering, with the company incurring over EUR83 million in damages.
Petromservice’s history started in 2002 when then-Economy Minister Dan Ioan Popescu decided to separate activities auxiliary to oil and natural gas extraction at Petrom in order to make the company more attractive in view of privatization.
Petromservice took over a set of Petrom auxiliary assets, as well as over 15,000 employees. When Petromservice was established, half of the company’s shares were controlled by Petrom’s Employee Association, headed by Liviu Luca, one of the strongest trade union leaders in Romania, while the remaining 50% were held by around 8,500 individuals, most of them Petrom employees.
The company’s turnover grew significantly in its first few years after establishment, helped by the major service supply contracts from Petrom, exceeding EUR300 million in 2005, when Petrom was taken over by Austria’s OMV.
The Austrian company continued to offer contracts to Petromservice and in October 2005 it announced it had sealed a service supply contract worth EUR1 billion, which extended until 2012.
Cypriot company Elbahold Limited also became a shareholder of Petromservice in 2005, following a capital increase that the other shareholders did not contribute to. Elbahold, which is allegedly controlled by Sorin Ovidiu Vintu, paid around RON45.6 million in two installments to take over 49% in Petromservice. Petrom’s shareholder association reduced its stake to 25%, while the other shareholders held on to around 26%. It is still not known to this day why Petrom shareholders consented to this deal, which allowed Vintu to take over control of Petromservice.
During the same period, Petrom’s shareholders association was looking for money to take over 8% in the oil company that the state committed to sell to Petrom shareholders through the company’s privatization law.
In September 2007, Petromservice sealed an agreement with Petrom, whereby it parted with some of the company’s activities (maintenance, workover and transportation linked to the exploitation and production activity) and the around 9,000 employees involved in such activities. The transaction amounted to EUR328.5 million, which went into Petromservice’s accounts when the transaction was finalized in 2008.
This transaction raised and continues to raise questions. Why did the Austrian company pay such a high amount for assets that the government parted with so easily before privatization? The transaction saw an additional 9,000 employees added to the Austrian company, which was making big efforts to restructure and to get rid of employees.
What happened with the money received from Petrom? In 2008, Petromservice reached a record turnover of EUR384 million and a net profit of EUR45 million, with the company’s assets amounting to around EUR380 million. The company changed its name to PSV Company. One year later it went insolvent.
Money from the Petrom transaction ended up in companies controlled by Petromservice
The bulk of the money received from Petrom ended up in companies in which Petromservice held stakes, according to the company’s reorganization plan. The value of securities in Petromservice’s portfolio climbed from RON300 million at the end of 2007 to RON940 million at the end of 2009, to which over RON50 million in loans granted to affiliated entities were added.
Only a small part of these investments are presented in the reorganization plan.
Many of these companies in turn had problems. Catavencu SA, for instance, the company that used to publish satirical weekly Academia Catavencu, entered bankruptcy proceedings and the brand was auctioned off and bought by Dan Adamescu.
Why did PSV Company go insolvent?
PSV Company went insolvent in mid 2009, following litigations with employees. According to the restructuring plan, the company ended up having around 14,000 work litigations in which it was brought to court by former employees who were looking to gain back salary rights. Some of the employees won in court and on March 25th 2009 the company was foreclosed on, and had to pay RON113 million, to which contributions to the state budget were added, amounting to RON76.7 million.
“This caused an arrearage for the company, which no longer had the working capital for its ongoing contracts,” the reorganization plan reads. PSV Company asked for its insolvency and the Bucharest court approved the request, appointing RVA Insolvency as judicial administrator. The firm is controlled by lawyer Arin Stanescu, who also handled other famous insolvencies in Romania.
According to the final list of debts, creditors of PSV Company have to recoup RON717 million, and, according to the reorganization plan approved in October 2010, they stand to recoup RON670 million.
The company hopes to get the necessary money to pay its debts by selling assets.
(English version by Daniela Stoican)