In mid-July, Romanian Prime Minister Victor Ponta was formally charged with forgery, money laundering and complicity in tax fraud. It had long been alleged that Ponta was involved in corrupt activity before he took office, and anti-corruption authorities finally brought a case against him for activity during his time as a lawyer. Ponta, who had held office since 2012, stood down from his role as leader of the Social Democratic Party until he could be proven innocent.
The allegations against Ponta stated that he forged documents to justify his income during a time when he had a private legal practice. Prosecutors said that the evidence had given rise to reasonable suspicion. Ponta had weathered a number of accusations in the past, and had bounced back from presidential-election defeat.
Ponta will not hold a position in the party until the accusations are cleared but will sit in on leadership meetings, according to Bloomberg.
The allegations against Ponta could be considered a watershed moment in Romania’s efforts to tackle corruption and improve its judiciary, some 13 years after the country established its National Anticorruption Directorate (Direcţia Naţională Anticorupţie or DNA) and eight years after it joined the European Union (EU). These efforts were praised in a 2014 report by the European Commission.
The EU set up the Cooperation and Verification Mechanism in 2007 to monitor judicial reform in Romania and Bulgaria as well as fight corruption, according to the BBC. The success of the Mechanism is crucial for allowing Romania to enter the Schengen group, which is the EU’s open-board regime.
In recent months, a host of high-profile individuals have been investigated and arrested for corruption as Romania’s crackdown reached the country’s elite. The European Commission’s First Vice-President Frans Timmermans was quoted as saying, ‘Romania is on the right course and needs to stick to it. Tackling corruption remains the biggest challenge and the biggest priority.’
The president of the independent policy institute, the Romanian Academic Society, Alina Mungiu-Pippidi has attributed much of the turn-around to the character of newly-elected President Klaus Iohannis who, as a political outsider, who has not been tainted by the many years of secret deals involving Romania’s political parties.
The last couple of years have seen a much-welcomed increase in the number of senior officials in Romania that have come under scrutiny by the now internationally-praised DNA. As a result, politicians of all rankings, senior public officials, wealthy businessmen, media moguls, judges, former and current ministers – including a former prime minister – as well as church figures are now either being prosecuted or are already behind bars having received a definitive sentence.
DNA’s legal jurisdiction is set by the contents of Law No. 78/200, which is aimed at preventing, uncovering and sanctioning corruption deeds and other serious crime directly linked to corruption practices. It is also set by the contents of Government Emergency Ordinance No.43/2002.
On the material side, DNA has legal competence in cases where the financial prejudice exceeds €200,000 (US$223,000) or the value of the object representing the act of corruption exceeds €10,000 (US$11,000). DNA also has competence in investigating corruption affecting the financial interests of the European Communities as well as in the area of law related to the abuse of office leading to financial prejudices exceeding € 1 million (US$1.11 million).
On the statistical side, according to the DNA’s 2014 annual report, 48 percent of the cases instrumented in 2014 concerned crime falling under the auspices of Law No. 78/200 (i.e. corruption practices). Moreover, DNA reports to have successfully instrumented 1138 cases in which the defendants received definitive sentences – an impressive 8.28 percent increase on top of the 1051 reported in 2013. And in 2014 the number of cases to be investigated increased by 41.66 percent, while those that were settled saw a 32.94 percent bump.
The numbers will not surprise anyone who has been following the extensive reporting of the Romanian media or even European media throughout the past few years. This has covered countless landmark cases of locally-notorious corrupt politicians and businessmen – who ordinary citizens once regarded as untouchable – being brought to justice and serving prison sentences.
The recent revelations of major pharmaceutical companies engaging in corrupt practices in Romania is a good example of how the country’s anti-corruption crusade is beginning to bite into the reputations of some international companies.
As recent as late July 2015, local and international media outlets began reporting that drug-makers such as GlaxoSmithKline (GSK) and Roche were at the centre of bribery allegations, this time in Romania. DNA prosecutors reportedly uncovered a generalised practice of ‘masked corruption’ whereby international medical producers would sponsor Romanian doctors’ travel and attendance at various medical events and conferences in Canada, France and the United States.
According to data collected in the anti-corruption prosecutors’ files, these sponsorships were made by the pharma companies via local representatives and were intended to incentivise doctors to consider driving the drug-makers’ sales by prescribing their drugs to patients. Moreover, other doctors were reportedly also sponsored to conduct various clinical trials without any real scientific data supporting such trials.
As part of this investigation, DNA has conducted 61 country-wide searches and is investigating drug-makers, their distributors, doctors, clinics and hospitals. According to international media, GSK is likely to come under investigation by the United States Department of Justice for the Romanian case as it appears to constitute a breach of the Foreign Corrupt Practices Act.
The fight against corruption in Romania has now gained strong momentum and is likely to continue in the coming years regardless of which party governs. This is in part thanks to strong support from the EU and the United States. In the context of the recent cooling in relations with Russia, Romania has made the fight against corrupt elite networks in Eastern Europe a foreign policy priority in an attempt to limit the Kremlin’s capacity to spread its influence across the region.
Companies looking to engage in business in Romania must now be aware that relevant core sections of the country’s justice system are now very active in fighting the phenomenon of corruption – a phenomenon that has plagued the country’s recent history and hindered its development.
This means that companies must diligently develop and maintain credible knowledge about business partners, suppliers and distributors in Romania. Building an effective compliance programme that is focused on developing adequate insight into any third party’s background, operations and practices, and updating that insight on a timely basis, must be a priority.
Conducting enhanced due diligence investigations will be the key tool in avoiding unpleasant situations, and accruing reputational intelligence should be considered a core component of the due diligence effort.