Judicial sources: "Bîlteanu and Lakis, charged with having embezzled funds from SIF Banat-Crişana, through Azuga Turism"

According to the report of the prosecutors, business people Dragoş Bîlteanu and Najib el Lakis have embezzled money from SIF Banat-Crişana, by acquiring "Azuga Turism", with the help of lawyers Nicolae Mergeani and Victor Prodan, and the proceeds of that deal went towards increasing their stake in SIF1, exceeding the legal holding cap of 5%.

Dragoş Bîlteanu and Najib el Lakis were detained last Monday, following searches that the prosecutors of the DIICOT conducted at the offices of SIF Banat-Crişana, SIF Muntenia and Swiss Capital, and arrested on Tuesday, for 30 days, in a case containing charges of embezzlement, stock market manipulation and money laundering.

The investigators showed that "Azuga Turism", spun off from Romenergo SA, controlled by Gheorghe Bîlteanu (father of Dragoş Bîlteanu) and Nabil Lakis (brother of Najib Lakis), became the property of SIF Banat-Crişana - where Dragoş Bîlteanu served on the Board of Directors - via Romenergo Holdings Limited, through a procedure which was intended to cause the trail of the company go cold.

To summarize, prosecutors think that Dragoş Bîlteanu operated as follows: a stake of 96.87% of Azuga Turism was sold to an off-shore - Mergina Holdings Limited (which according to the report of the prosecutors, appointed Lakkis Ep. Ammar Lakkis Sahar - the sister-in-law of Nabil Lakis, brother of Najib El Lakis, as the beneficiary of the account of the tourism company). The company was then sold to Fratelli Azuga (later renamed to Torch Invest, controlled by lawyers Nicolae Mergeani and Victor Prodan), from where it ended up in the portfolio of SIF1.

Given the origin of "Azuga Turism" and his position of CEO of SIF1, Bîlteanu may have been involved in a conflict of interest.

With the money it got in exchange for the stake in Azuga Turism, "Torch Invest" bought shares in SIF1 from "Industrialexport" and "Romenergo", companies acting in concert with the Bîlteanu-Lakis group, and, in the end, "Torch Invest" was acquired by "Mergina", according to the investigators.

In August 2013, the representatives of SIF Banat Crişana sent a statement to the press in which they said that the acquisition of "Azuga Turism" was not performed using an affiliate person, which, in light of what the prosecutors claim, is false.

In October 2013, Dragoş Bîlteanu told "BURSA", in an interview:

"Concerning Azuga Turism - this acquisition was made during the term of the previous Board of Directors, after I took over the position of chairman (ed. note: while Bîlteanu was acting CEO).

This is an acquisition that we have worked on for several months, it has been thoroughly documented through due-diligence both with our in-house experts, as well as through outside consultants, and we think that the price it was concluded at was very good for the SIF (a significant discount of approximately 50% compared to the evaluation of the company's net assets). "Azuga Turism" owns significant assets in the Azuga resort, namely the modern gondola lift (its most important asset, valued at a relatively low price compared to the other similar investments in the area), several important plots of land in the best areas of the resort, a hotel with all the required facilities, as well as several public catering facilities. The company has no difficulty in repaying the outstanding part of the bank loan, which is insignificant compared to the value of its assets".

• The route followed by "Azuga Turism"

"Azuga Turism" was incorporated in 2011, being spun-off from "Romenergo" SA, taking over the real estate assets of Azuga, as well as a loan of 16,067,150 lei from BRD, contracted by Romenergo SA, controlled by Romenergo Holdings Limited. The prosecutors maintain that Gheorghe Bîlteanu (father of Dragoş Bîlteanu) and Nabil Lakis (brother of Najib Lakis) are the real beneficiaries of Romenergo Holdings Limited, which would suggest that they are the owners.

The investigators state that "Azuga Turism" was sold to "Romenergo Holdings Limited" by off-shore company "Mergina Holdings Limited Nicosia" for an estimated 1 million Euros, in May 2012. The representatives of Azuga Turism filed with BRD a statement concerning the true beneficiary of that company's account: Lakkis ep. Ammar Lakkis Sahar, the sister-in-law of Nabil Lakis (brother to Najib El Lakis), judicial sources say.

In July 2013, "Mergina Holdings Limited" sold "Azuga Turism" to "Fratelli Azuga" SRL Bucureşti (later renamed SC Torch Invest SA and controlled by lawyers Nicolae Mergeani and Victor Prodan - see insert), in exchange for approximately seven million Euros, of which a downpayment of 250,000 Euros was paid, and the rest was going to be paid in installments, and in February 2013, "Azuga Turism" was sold to SIF Banat-Crişana in exchange for 20,340,000 lei (approximately 5 million Euros), which was paid immediately, according to the report of the prosecutors.

Torch Invest used the money it was paid by SIF1 to repay a loan of 250,000 Euros to Nicolae Mergeani and to buy shares in SIF Banat-Crişana from the stock market.

"By corroborating the bank transactions with the stock market trades, it was found that the amounts that SC Torch Invest SA received from SIF Banat-Crişana SA were used to buy shares in SIF Banat - Crişana SA once again from entities controlled by Bîlteanu Dragoş-George and El Lakis Najib, thus concealing the concerted holdings which the law no. 297/2004 prohibits, but by using funds that belonged to SIF Banat-Crişana", the prosecutors' report states.

According to the investigators, one such example would be the acquisition, by "Torch Invest" of 2,442,000 SIF1 shares from Industrialexport SA and Romenergo SA, which had reported their acting in concert with Dragoş Bîlteanu and Najib Lakis, as well as the fact that they had exceeded the 5% holding cap in the SIFs. After the transaction, the group pared down its holdings, to 4.55%.

At the end of March 2013, "Torch Invest" held 2.51% of SIF Banat-Crişana. Its stake had remained the same, according to a report on June 30, 2014, according to the sources.

Investigators note that the final stage of the agreement between Dragoş Bîlteanu, Najib El Lakis and Nicolae Mergeani consisted of having "Mergina Holdings Limited" acquire "Torch Invest" SA, through the conversion into shares of the receivable it had against it, as a result of the sale of "Azuga Turism", as no installment had been paid, which is what should have happened according to the initial agreement.

After the acquisition of the block of shares from "Azuga Turism", SIF Banat-Crişana participated with 9,180,310 lei in the share capital increase of the company, amount which would have been used to repay the loan that Romenergo had taken out from BRD and which had been taken on by "Azuga Turism", upon the spin-off, according to the judicial sources.

In order to hide the connection between the purpose of the share capital increase and the real beneficiary of the operation, in 2013 a refinancing loan from Banca Transilvania was taken out in April 2013, the report further mentions.

In the case, the prosecutors of the DIICOT are also making charges of market manipulation in the case of transactions made in September 2013, as well as of embezzlement from SIF1 through the investment in the Globalworth fund, created by Greek businessman Ioannis Papalekas, who subsequently acquired the Bucharest Tower Center (of Victoriei Square) building, of which half was owned by Dragoş Bîlteanu.

SIF Banat-Crişana denied that information, by telling us that it has never traded, owned nor does it currently hold any shares issued by Globalworth Real Estate Investments.

Prosecutors show that the facts were committed as SIF Banat-Crişana and SIF Muntenia are selling the stakes in Erste and BRD (liquid and profitable), in order to raise cash to carry out their own interests, to the detriment of minority shareholders.

The investigators also claim that Dragoş Bîlteanu owned more than 25% of SIF1 together with other shareholders, thus having control of the company.

The shares were owned through Oshia Holdings Limited (4.99%), Aris Capital SA (4.55%), Macelia Investments Limited (4.4%), Monticlifti Management Limited (2.53%), Torch Invest SA (2.51%), Smart Capital Investments (4.45%) and SIF Muntenia (2.18%).

Given these circumstances, it seems that the Bîlteanu group has behaved as if the 5% holding cap had already been lifted and it was hoping they would become compliant once it would be.

The dropping of the holding cap in the SIFs was proposed in the first version of the draft for amending the capital market law, announced by the Ministry of Finance on October 7th, but it was removed from the next version of the draft (November 7th).

In September 2013, Monticlifti Management Limited SRL sued SIF Banat-Crişana, demanding the reduction of the quorum requirements for the general shareholder meetings, in line with the provisions of the law no. 31/1990 concerning Romanian companies.

One month later, the Board of Directors of SIF Banat-Crişana decided to reduce the company's share capital, based on article of the company's bylaws, according to a report sent to the Bucharest Stock Exchange.

At the time, there were multiple opinions which claimed that the reduction of the share capital of SIF1 without holding a General Shareholder Meeting was illegal, and the ASF later did not allow the operation to proceed.

In the last two years, SIF Banat Crişana has not paid out dividends.

According to some sources, the losses in this case amount to approximately 14 million Euros.