“Chisinau” Hotel Case

(Continuation from 20 July)

One of the cases of illegal privatization, currently investigated by AECCC, is that of “Chişinău” Hotel. Over 6.5 thousand shareholders invested their patrimonial bonds in the joint stock company with the same name. They had high hopes about that transaction, but came to be fleeced by a group of racketeers…

Located in the center of the capital, “Chişinău” Hotel was to make the object of massive investments, which would have transformed it into a modern, European-style, locale. However, things happened exactly on the contrary. Although the building passed through many hands along the years, the hotel looks today exactly like on the day of its commissioning, more than four decades ago. The building has not been repaired for many years, and its interior is old, like the furniture. The shareholders have countless times appealed to many structures, but things would not budge.

The epic starts on 14 January 1998, when the former Ministry of Privatization and State Property Administration sells the block of 60% of state shares in “Chisinau” Hotel to “Transimex-Prim” SRL. The new owner paid 3.6 million lei in the state treasury, which is a rather small sum for a building located in a prestigious zone, where building prices reach astronomical sums. However, the price at which the state assigned its property was not by accident so modest: according to the contract, the buyer had to invest other 12 million dollars in the modernization and reconstruction of the hotel. The investment plan had to be finalized within 2.5 years, the final investment term being established for 14 July 2001. That is, by that date, the buyer of “Chisinau” Hotel had to honor all its commitments. However, “Transimex-Prim” did not invest a cent in the modernization of the building, which he had bought at a derisory price.

State, fooled of 12 million dollars

According to the legal provisions, given that the majority shareholder – “Transimex-Prim” – did not implement the investment plan, the state could have adjudicated the right on its former property. An attempt was made in this sense – the Department of Privatization filed a complaint with the court to terminate the said contract, but it was rejected by the Economic Court. Having got away with it, the management of “Transimpex-prim” thought to get rid of the building. At least this is what results from the owner’s subsequent actions, who decided to take a bank loan of 7 million Lei “to develop the company’s commercial activity”. The loan was taken from “Victoriabank” for 12 months, as collateral being offered the hotel’s building (9,460.8 sq. m.) and its adjacent land (0.56 ha). It is still to be seen why the Department of Privatization authorized that transaction, although, as we said above, the shareholder had not fulfilled its previous commitments.

The shareholders’ representatives told us that those 7 million were used to buy… barley. What beats it all is that the supplier of the grains was going to be the majority shareholder of Chisinau Hotel – “Transimex-Prim”. Nobody will probably answer the question: why would a hotel owner need barley, which… it had to supply by itself?? The circumstances in which the loan was obtained and used are to be established during the criminal investigations. Anyway, the loan from “Victoriabank” was never returned, or, better to say, only a part thereof was reimbursed – about 1.5 million Lei – by Chisinau Hotel JSC. As a result, the bank capitalized its receivables from the collateral – the hotel building and the land adjacent thereto (over 9,000 square meters of space and a land plot of 0.53 ha).

From hand to hand

On 15 August 2003, “Victoriabanc” assigns its rights related to the loan contract to the company “Art-Vin” SRL, which becomes owner of Chisinau Hotel on 27 February 2004. At the same time, “Transimex-prim” remembers about those 12 million Lei, which it had to invest in the reconstruction of the hotel and, together with the management of “ART-Vin”, files a request with the Department of Privatization for extension of the investment program until the end of 2005. Later, the investment obligations accumulated by “Transimex-prim” were taken over by “Art-Vin”, based on a decision of the Commission for Holding Contests and Direct Negotiations on Privatization of Public Property. The request was satisfied and it seemed that the managers of the two structures had serious intentions. However, instead of honoring its obligations, “ART-Vin” SRL sells the estate, in a few months after the expiration of the deadline for execution of the investment plant, i.e. on 4 August 2005, to “Tower Grup” for 7.4 million Lei. Not two much for a building of nine thousand square meters and 0.56 ha right in the center of Chişinău, where real estate prices are the highest… But “Tower Grup” enjoyed its new property for only five months and then, at the beginning of 2006, sells it to “First Hotel”, also for 7 million Lei…

The damages caused to the state and the shareholders by those who planned this fraudulent scheme are hard to estimate. If the investment plan had been observed and Chisinau Hotel had been modernized, its revenues would be much higher, and so would the shareholders’ dividends. The state budget would have also had to gain. The shareholders of Chisinau Hotel JSC – over 6.5 thousand people who had invested their patrimonial bonds here – did not know anything about the machinations planned by the first buyer of the hotel and its subsequent owners. At present, the hotel’s management rents in from “First Hotel” the entire space of the building for a monthly fee of 15 thousand Lei. Taking into account that the hotel’s space accounts for about nine thousand meters, we have about 1 Leu 70 bani for each square meter. And this happens in the center of Chisinau, where the rent of real estate reaches hundreds and even thousands of dollars per month!

As a result of all these shady affairs, Chisinau Hotel JSC and its over 6,500 shareholders are left only with the name and the stamp. The shareholders were left both without dividends and property. A control conducted by a commission of inspectors appointed by Chisinau Hotel JSC found that “Transimex-Prim”, the hotel’s first owner, has a four-million debt to the hotel, and the company “Larga-Vin” has a debt of over 1.4 million Lei. Among the debtors there are also other companies.

According to Oleg Mancevschi, President of the Shareholders’ Board “Spada”, the state should, in such conditions, take control of the situation and adjudicate its right on the hotel, because the conditions of the sale and purchase contract, by which the hotel had to benefit from an investment of over 12 million dollars, were not fulfilled. On 25 September 2006, AECCC started criminal Investigations on the appropriation of extremely large amounts of money by the management of “Transimex-prim”. The investigations are unfolding. We will follow this subject.

NOTE. Observing the presumption of innocence of the individuals and legal entities to whom this article makes reference, we would like to inform the readers that no final sentence has been pronounced that would confirm their guilt. We will follow this subject.