Less than a month before resigning form the position of Transport Minister, Dan Sova reported his subordinates to the Anticorruption Department (DNA) on suspicion of fixing an auction for coal transport services bought by state-owned energy holding CE Oltenia. In the complaint Sova sent the chief anticorruption prosecutor, Laura Codruta Kovesi, the former Transport Minister said he suspected the management of state-owned railway freight carrier CFR Marfa of participating in a concerted action meant to financially destabilize the freight carrier.
In the complaint Sova sent the DNA the former minister states officials of CFR Marfa, his subordinates within the Ministry of Transport, had drawn up six different financial bids. Sova calls on anticorruption prosecutors to investigate who decided to submit the envelope with the lowest bid, of RON256,484,282, and why. The bid was nearly RON1 million higher than the price asked by Gruia Stoica’s Grup Feroviar Roman, which was declared the winner, on the lowest bid criterion.
In the same document, obtained by the Investigative Media Center, Sova also says Gruia Stoica’s company won this auction using assets of Rolling Stock Company SA, train cars that come from CFR Marfa and which were used in the auction to compete against the state company due to a document signed by CFR Marfa officials.
The contract, vital for CFR Marfa’s survival, was won in May by a hair by a consortium led by Stoica’s Grup Feroviar Roman (GFR). CE Oltenia was seeking a contractor to ensure the railway transport of the coal needed to keep its divisions running for the next three years.
The coal transport contract, initially estimated at EUR100 million, was awarded to the private carrier to the detriment of the state owned carrier, and the difference between the bids submitted by the two competitors was minuscule. This suspiciously small difference triggered a scandal that led to the arrest and current indictment of Stoica and attorney Doru Bostina on auction fixing suspicions.
The complaint submitted by former minister Dan Sova left the Ministry of Transport on May 27, 2014, five days after the opening of the bids CE Oltenia had received from CFR Marfa and GFR. Sova calls on prosecutors to investigate potential abuse of office regarding the auction for the contract proposed by CE Oltenia.
CE Oltenia had announced the auction on May 9, 2014. The state owned energy holding was seeking a railway freight carrier to transport coal for its Turceni, Craiova and Isalnita power plants for three years. Bids would be open on May 22, 2014.
This auction was in fact resuming a procedure from January 2014, when CFR Marfa bid approximately RON357 million fro the same services. For this reason, Sova states in his complaint to the DNA, “(…) we cannot explain such a large difference between the two financial offers in such a short period”.
“Even if we were to disregard the fact that CFR Marfa’s financial bid was much lower compared to its initial bid, it is worth noting CFR Marfa submitted a bid that is suspiciously close in value to that of the association led by Grup Feroviar Roman SA,” former minister Sova wrote in his complaint.
Noting the small difference between the two bids, Sova also draws attention to the confidentiality of CFR Marfa’s bid, reminding prosecutors that three days after the company was invited to bid for the CE Oltenia contract, its manager Dan Valentin Belcea resigned and his successor Pavel Barculet, appointed on May 19, did not require full confidentiality regarding the bid until May 20.
CFR Marfa’s bid: six envelopes with different financial offers
All this complicated story, with resignations, bribery, influence peddling and arrests, becomes even more complicated when, on May 22, when CFR marfa and GFR were to submit their bids in sealed envelopes, the CFR Marfa official goes to the auction bearing six envelopes containing different bids, the largest of which being the value estimated by CE Oltenia, namely RON467 million, and the lowest the one ultimately submitted, of RON256 million.
The information regarding the six bids appears in Sova’s complaint, which may be consulted below, on page 3.
On the other hand, according to the document, GFR submitted its bid of RON255 million at 12:42, while CFR Marfa submitted its bid of RON256 million at 12:56.
Sova asks, DNA must answer
The small difference between the two bids made Sova send the DNA several questions to which “The Ministry of Transport has no answer at this time”.
The first question: why six envelopes and not two at most (one for the price estimated by CE Oltenia in case there was no other contender and one with the lowest price to beat a contender – e.n.).
Second question: why was the price calculation method not confidential before the start of the procedure?
Third and, judging by the hypothesis that contains exact data, the essential question: who did CFR Marfa officials speak to during the contract award procedure, between 12:42 and 12:56, and who decided to submit the envelope with the lowest price?
The Investigative Media Center has attempted to contact Mr. Bercea and Mr. Barculet but they were not found at the known phone numbers.
Conclusion: Sova accuses CFR and GFR of rigging the auction
Despite acknowledging he lacks important data regarding this auction, Dan Sova makes a clear, albeit general, accusation.
“We suspect the price offered by CFR Marfa is not a profit-oriented price but a concerted action of several persons (including from among CFR Marfa staff) and Grup Feroviar Roman SA meant to economically destabilize and challenge the viability of CFR Marfa, in view of forcing privatization at a much lower market value than at present,” the former minister wrote on page 4 of the document presented here exclusively.
Another accusation: Rolling Stock Company
Sova makes another veiled accusation in his complaint, targeting a non-combat situation if not another self-sabotaging action by CFR Marfa, regarding the assets of Rolling Stock Company. Following the negligence or complicity of CFR Marfa officials, the consortium led by Gruia Stoica underbid the state company at this auction using assets belonging to CFR Marfa.
The details, available on page 2 of the document, can be summarized simply: Rolling Stock Company, a company controlled by GFR but to which CFR Marfa contributed several thousand train cars and a few dozen locomotives, signs a lease contract with one of Stoica’s companies fir 650 train cars for the exact period CE Oltenia required coal transports.
Stoica’s company leased CFR Marfa train cars and then won the auction to its detriment because it had these train cars available. Meanwhile, CFR Marfa did nothing to secure its position and counter its future competitor.
Sova himself said, in the document sent to the DNA and registered by prosecutors on May 28, that this contract is of major importance to CFR Marfa.
Experts interviewed by the Investigative Media Center also consider the contract was very important to the state-owned railway carrier.
“This contract is vital to CFR Marfa. The company lost half its turnover between 2008, when it made EUR465.6 million and posted losses of EUR45 million, and 2013, when its turnover barely reached EUR200 million and losses had gone up one third to EUR60 million. This contract’s total value is half of CFR Marfa’s annual turnover and losing this contract could be the end of the company, even though winning the contract doesn’t solve everything,” Razvan Zamfir, managing editor of Business Cover, the Investigative Media Center in an interview.
Zamfir believes the story of the CE Oltenia auction should be understood considering CFR Marfa’s erosion of the past 25 years.
“There was always someone one step ahead and often that someone was GFR, which, alongside other companies in this sector, gradually climbed onto CFR Marfa’s shoulders, probably with the complicity of managers of the state company and that of authorities,” said Zamfir.
Although it was awarded the CE Oltenia contract, GFR has not started work on it as CFR Marfa challenged the outcome at the National Settlement Board (CNSC).
Five days ago, the board rejected CFR Marfa’s contest but the decision may be appealed at the Bucharest Court of Appeals within ten days.
Former Transport Minister Dan Sova announced the submission of his criminal complaint on June 10 but gave no further details at the time.
On June 10, Şova told MEDIAFAX news agency that he filed an in rem criminal complaint regarding this auction where the difference between bids was small and the procedure should be resumed because only two bids had been submitted.
“A winner cannot be declared, one condition specified in the task book was that three bids were required and there were only two. They’ll have to do it again,” the former minister said at that time.
A day later, GFR responded, saying there was no reason to cancel the auction and its result benefits CE Oltenia, which is currently paying a lot more than it would under the new conditions.
(This story is part of the project “Public Funds in Romania – corrupt tenders, mismanagement and theft “, carried out by the Media Investigation Center in partnership with Freedom House Romania and Expert Forum Romania within a grant of the U.S. Department of State, through the United States Embassy in Bucharest. The Media Investigation Center is solely responsible for the content of this story, which does not necessarily reflect the opinions of the U.S. Department of State or the United States Government. The partners and sponsors of this grant are in no way liable for this story.)