Vol. X No.11
November 2005

HERZFELD & RUBIN, P.C. LAWYERS PROFESSIONAL CORPORATION
IN ASSOCIATION WITH
RUBIN MEYER DORU & TRANDAFIR

Corruption and EU Accession on a Collision Course:
The Greed of a Few Delaying the Dreams of Many?

INSIDE:
Corruption and EU Accession on a Collision Course...
Romania’s Corruption Problem Singled Out
On October 25, the European Expansion Commissioner, Mr. Olli Rehn, presented the European Union’s monitoring report for Romania and Bulgaria regarding their EU accession undertakings, before the European Parliament. The report focusing on Romania was comprised mainly of technical data concerning the monitoring of the country’s compliance with its commitments under the EU Accession Treaty.

While the report indicated that Romania made significant progress in the reform of its legal and competition system, shortcomings in Romania’s justice reforms, customs and border enhancements, environmental protection and, most especially, the fight against corruption, were significant enough to cause Mr. Rehn’s report to preserve the EU’s safeguard clause, which allows the European Union to put back Romania’s accession until 2008. The fate of the safeguard clause will be decided during the spring of 2006, when a new report regarding the progress of Romania will be published.

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“A Cause for Serious Concern”
Despite the apparent commitment of the EU towards Romania’s accession, as set forth in the Accession Treaty, Romania’s corruption problem, especially as it relates to the corruption of high-level officials, was singled out in Mr. Rehn’s report for particular scrutiny. In a pointed attack on the subject, Mr. Rehn noted that “the failure to obtain even a single significant conviction for high-level corruption in recent years, despite commonly available information on its scale, is a cause for serious concern." He called upon Romania to implement “urgent and forceful action” to demonstrate the country’s ability to “combat corruption effectively and to set in motion an irreversible decline in the levels of corruption.”

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Similar Assessments by the NGOs
Echoing EU criticisms, Transparency International, which acts as the world’s barometer in discerning the perception of official corruption in a state, recently published its 2005 report on the perception of public corruption in Romania. According to the report, Romania is among 60 countries where corruption is perceived at “a general level” and which received a score (in Transparency International’s “Corruption Perception Index” -- or CPI) equal to or less than 3.0, on a scale of 0 (very corrupt) to 10 (not corrupt). Romania obtained a CPI of 3.0 points, exceeding last year’s score by only one decimal point, but still below the average of 5.04 for new EU members, and below other EU candidates, such as Bulgaria (with a CPI of 4.0) and, surprisingly, Turkey (with a CPI of 3.5). In fact, Romania’s slow year-on-year progress, and its continued low score (on a par with countries like Armenia and Rwanda), made Transparency International’s experts conclude that Romania’s anticorruption reforms are both slow and ineffective: “Romania is still confronted by major problems regarding the implementation of legislation and the administrative ability to implement public anticorruption policies.” In a press statement, the Ministry of Justice noted that the Transparency International Report ranked Romania 85th in the perception of corruption index, demonstrating that it was necessary to accelerate the implementation of anticorruption legislation and carefully monitor the process in order to “improve both actual anticorruption activities and how they are perceived.”

Adding to the calls for change, Freedom House, Inc., the U.S.-based NGO, recently drafted its “Assessment Report for the Anticorruption Policy of the Romanian Government” which was commissioned by the Romanian Ministry of Justice. In its report, Freedom House acknowledged that the past few years had brought about “an impressive arsenal of legal instruments of transparency, accountability and anticorruption in Romania,” but that many such initiatives “still have to prove their usefulness.” Indeed, Freedom House went out of its way to list recent bright spots in the country’s anticorruption campaign, including the enactment of the “Freedom of Information Act” and the decision to make transparent the public declarations of assets and conflicts of interests of dignitaries and civil servants. It also lauded the authorities for their creation and strengthening of the National Anticorruption Prosecutor’s Office (NAPO), which “resulted in an agency which is better organized and has superior resources to the rest of the prosecution offices, but still has to prove its political independence and effectiveness.” Other bright spots were not so much intended, as imposed, such as the December 2004 elections, which, according to the report, had created a more “pluralistic” political situation offering “a better environment to curb corruption.”

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Legislative Action, but Few Concrete Results
The feeling that Romania has done much in the field of anticorruption legislation while achieving so few practical results is not without justification. In their respective reports, both Freedom House and Transparency International identified several areas which impeded Romania’s progress on the ground:

• Insufficient use of administrative means to combat corruption and the over-reliance on prosecution in a judicial environment of low effectiveness. In other words, the current alternatives seem to be between prosecution (highly expensive on a nation-wide scale) and the free practice of corruption.

• The poor link between control and prosecution of alleged corruption, the poor quality of the management of information and the weak coordination in the general implementation of the strategy. The secret services and control bodies seem to contribute insignificantly to the prosecution policy of NAPO.

• Lack of political independence, impartiality and effectiveness of prosecutors, especially in an environment where little was done to grant autonomy to the individual prosecutor and the investigation is strictly controlled hierarchically. Until the last elections, NAPO treated most of the top-level alleged corruption officials as untouchables.

• Insufficient implementation of current anticorruption legislation and lack of monitoring mechanisms; and frequent violations or lackluster enforcement of legislation already enacted, especially legislation dealing with the transparency of the decision-making process.

• The institution that monitors and controls “conflicts of interests,” incompatibilities and wealth control was not established although the period for its implementation has already expired.

• Lack of progress on implementing and further developing “whistle-blowers’” protections.

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Some Improvement on the Part of the Authorities
Responding to this consistent problem, the Romanian authorities have made some progress in the fight against corruption. In March of this year, the authorities submitted an anticorruption plan for 2005-2007, containing strict deadlines for adopting anticorruption laws and for promoting the efficiency and transparency of the judiciary. Under the plan, the government has committed itself, amongst other things, to draft new legislation on the granting of state contracts and the allocation of state procurement, as well as ensure the independence of prosecutors. The existing legislation on funding political parties will be reviewed by December, while the general anticorruption framework will be streamlined, with fewer offices fighting along more clearly-defined lines. The 2005-2007 anticorruption plan is generally considered to be an improvement over plans adopted in previous years, with more of a focus on priorities and a clearer definition of remedial measures to be enacted prior to accession. The Romanian government has agreed to report its progress under the 2005-2007 Plan to the European Commission semi-annually.

Progress was also recorded at the institutional level. NAPO’s investigative powers were expanded, allowing its prosecutors to investigate deputies and senators. Meanwhile, the new National Anticorruption Department was established to handle major cases of corruption. Another positive change was the establishment of the General Anticorruption Division within the Ministry of Administration and Internal Affairs.

Recently, Prime Minister, Calin Popescu Tariceanu announced the creation of a new police department to fight corruption among Interior Ministry employees. The new department, which will be led by a prosecutor, was designed in collaboration with British and Spanish experts. Tariceanu later said he was confident that his Cabinet's measures to introduce more transparency in public contracts and make the judiciary more efficient would succeed in reducing corruption. He said there was already progress in stopping high-level corruption because none of his Cabinet ministers had been entangled in corruption scandals.

With respect to fiscal matters, the Romanian authorities enacted the new Law No. 241/2005, regarding the prevention of fiscal evasion. The Law was designed to criminalize ‘financial crimes’ by, amongst other things, applying jail terms to an entire category of ‘fiscal evasion’ which had heretofore been punishable solely by fines.

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Further Improvement Required
Despite the Prime Minister’s optimism on his government’s performance, or the recent rash of new legislation, it appears as if much work needs to be done. A general anticorruption legislative framework remains incomplete, and several provisions initiated by the Minister of Justice are still in the drafting stage (such as an expansion of the applicability of “conflicts of interests” and the establishment of the National Agency for Integrity). Despite the recommendations of the European Commission formulated as of 2004, the delay regarding the establishment of the National Agency for Integrity remains the principal reason why too much evidence is still necessary to launch an investigation into the wealth of public officials suspected of illegal activities.

A case in point in terms of what needs to be done is NAPO. In a recent article printed in Romania’s press, Daniel Morar, the young prosecutor who was appointed chief of NAPO in August, has indicated that he is not satisfied with the Office’s current activities: "We found numerous files treating small corruption cases, which are suffocating our specialists. Meanwhile, the 40 cases of big corruption mentioned by the former management last year are only five … I have noticed a restraint at my prosecutors when public persons are to be investigated," he said recently. Moreover, according to Mr. Morar, only 20 of the 83 prosecutors in NAPA are qualified for their positions. He also revealed that NAPA suffers from a lack of cooperation from supporting agencies, such as the Romanian Secret Service: “Only 20 per cent of the information they provide is valuable. In many cases, they offered us information which has been already published in the newspapers."

Morar appears determined to reopen some of the most controversial corruption cases in recent years. He has already ordered the review of the file involving Hildegard Puwak, European accession minister between 2000 and 2003. Puwak and her husband were accused by the media of the embezzlement of over Euro 150,000 of EU-financed funds, but the prosecutors at the time decided against bringing them to trial. Among others investigated but not yet brought to trial are former Prime Minister Adrian Nastase, former Transportation Minister Miron Mitrea, and Bucharest District Mayor Marian Vanghelie.

According to political analyst Cristian Parvulescu, president of the Pro Democratia Association, Morar has a tough job ahead of him. "The only chance for the National Anticorruption Prosecutor's Office to be independent will be the prosecutors' passion for their work," Parvulescu believes. Morar, however, is undaunted. He has even called for his office's scope to be expanded to include parliamentarians, whose cases presently are handled by the General Prosecutor's Office.

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Conclusion
Romania’s track record on corruption has been decidedly lackluster. On the one hand, the past few years have seen a flurry of legislative initiative followed by grand statements of optimism for the future. On the other hand, legislative initiative has been accompanied, almost uniformly, by bureaucratic inefficiency, political hesitation, organization ambiguity and legislative insufficiency. While exceptions of enthusiastic enforcement are there, such as Daniel Morar’s stewardship of NAPO, efforts such as these are lonely and often sisyphean efforts in an environment of inertia. Although Romania’s current government should be lauded for wishing to combat corruption, it has not as yet convinced the EU, the media, or its own public, that it is at all seriously committed to doing so.

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Editors Note: It is our policy not to mention our clients by name in The Romanian Digest™ or discuss their business unless it is a matter of public record and our clients approve. The information herein is correct to the best of our knowledge and belief at press time. Specific advice should be sought from us, however, before investment or other decisions are made.

Copyright 2005 Rubin Meyer Doru & Trandafir, societate civila de avocati. All rights reserved. No part of The Romanian Digest™ may be reproduced, reused or redistributed in any form without prior written permission from the publisher.

 
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