Florian Buzatu, accused of defrauding SIF Oltenia

• Buzatu: "The audit contains subjective remarks"

Serious accusations are being brought against Florian Buzatu, former director of SIF5 Oltenia, whose term expired on Thursday. He is accused of having defrauded SIF5 and the companies in its portfolio, causing them to incur losses.

The internal verification performed at SIF5 in February, upon notification from some of the company"s shareholders, proved that Florian Buzatu favored the conclusion of certain deals between companies in the portfolio of SIF5 and the members of its own family.

The Board of Directors of SIF "Oltenia" has also required the companies in its portfolio to perform a specialized audit of the issues which were uncovered.

"I won"t consider this control to be an audit, since it makes subjective remarks", said Florian Buzatu, on Saturday, adding that he is waiting for the audits of the companies in question to be completed, "so it can be proven that things are not the way the auditor of SIF5 presents them".

The investigation was launched just one month after Vasile Şalapa returned to the Board of Directors of SIF5 after almost five years of having been relieved of his position as president and chief executive officer by the directors of the company at the time, which also included Florian Buzatu.

The former director is convinced that his current troubles come from the former disagreements with the other directors. "They tried to find some dirt on Buzatu, but I do not wish to enter a polemic", he said.

When contacted by BURSA on Friday, Tudor Ciurezu, the deputy CEO of SIF5, said that he did not wish to comment on the actions of this colleagues, referring to Florian Buzatu.

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• What the audit report says

The audit report details a losing deal between "Construcţii Feroviare" Craiova, in which SIF Oltenia holds a controlling interest, and of which Florian Buzatu is currently CEO and the company "Multifunctional Ecologic Sistem" SRL, in which the two sons of the director of SIF5, Mihai Răzvan Buzatu and Bogdan Alexandru Buzatu hold equal stakes.

In 2008, the two companies entered a ten year partnership in order to manufacture and distribute asphalt mixtures.

According to the contract, Multifunctional Ecologic Sistem would contribute a 600,000 Euros asphalt making station, but there are no papers that state the real worth of the installation. In turn, Construcţii Feroviare was supposed to contribute a plot of land of 4,000 square meters, the assembly, electricity and natural gas infrastructure, even though the land in question was not connected to the natural gas network nor was there the possibility of doing so, since the nearest natural gas pipeline was about 1 km away, and the expansion would have involved even higher costs.

Moreover, Construcţii Feroviare pledged to bear all the production costs, to pay 10,000 Euros a month to the company owned by the sons of Buzatu and to pay 535,000 lei for the transport of the production equipment and its commissioning.

Moreover, the contract does not specify the method used for the distribution of profits.

Aside from the provisions of the articles of association, "Multifunctional Ecologic Sistem" also sold to "Construcţii Feroviare" an installation for the production of asphalt for a price of 1.2 million lei. The payment was supposed to be made in tranches, and as a result the company only paid 637,000 lei. The auditor considers that the company was harmed "given the fact that the installation is not functional nor will it function in the future".

"The initial contract, as well as the totally unfavorable clauses included in the Appendix to the Contract which were the responsibility of the Construcţii Feroviare, are worsening the already precarious state of the company"s finances, as well as its overall state, also due to the fact that the company had to take out a loan of 250,000 Euros, supplemented by 100,000 Euros, from GarantiBank and to liquidate its most important asset, a plot of land of 11,372 square meters, located in Craiova", the auditor considers.

Another one of the irregularities found is the fact that even though "Construcţii Feroviare" is listed, it did not report its insider trades.

• Prejudices at "Univers" Râmnicu Vâlcea, "Construcţii-Montaj 1" Craiova and "Alimentara" Slatina.

A member of the Board of SIF Oltenia since 2000, Buzatu appointed his entire family in the management of companies in the portfolio of SIF Oltenia, the report of the internal audit reveals.

According to the auditor, the sons, the brother and the wife of Buzatu are involved in deals which are causing SIF to lose money.

Mihai Răzvan Buzatu, the son of the former director of SIF5, was a member on the board of directors of "Univers" Râmnicu Vâlcea, another company controlled by SIF5, between January 2008 - April 2010, currently serving as managing director of the company in question.

From this position, Mihai Răzvan Buzatu sold to "Multifunctional Ecologic Sistem" two buildings and concluded two other contracts which caused the "Univers" Râmnicu Vâlcea to incur a loss of 931,162 lei plus VAT, according to the auditor"s calculations.

The report also shows that another company, owned by the wife of Florian Teodor Buzatu, Viorica Buzatu, bought two apartments from "Construcţii-Montaj 1" Craiova, controlled by SIF Oltenia, at prices below their market value.

Something also is fishy when it comes to the share capital increase of "Alimentara" Slatina. In short, the internal audit report of SIF5 states that before the share capital increase, on June 15th, 2010, the company was appraised at 1,543,358 lei, which was less than what the company had in cash on June 30, 2010 (1,581,873 lei). Florian Buzatu decided that SIF Oltenia should not participate in the share capital increase of Alimentara Slatina. This benefited "Multifunctional Ecologic Sistem" SRL, precisely the company controlled by the two sons of Buzatu, which appears to have a controlling interest in Alimentara (over 33%). "It is not hard to discover the obvious interest of Mr. Buzatu Florian Teodor in acquiring a substantial stake of "Alimentara" Slatina at a far lower price than its true value", the internal audit report states.

Marian Buzatu, the brother of Florian Buzatu, is currently a managing director and member of the Board of "Alimentara" Slatina.

• CNVM should take a position in the case of SIF5

It remains to be seen what SIF Oltenia will do to address this matter and whether or not Florian Buzatu has some aces up his sleeve himself.

The Romanian National Securities Commission will also have to take a position in this case, as it has been notified ever since 2006 about the actions of Florian Buzatu. "Among the things that we have notified the Romanian National Securities Commission about, we also showed that Mr. Buzatu Florian Teodor, aside from the fact that he serves as director as well as CEO of SIF 5, an incompatibility which is expressly mentioned in the law of companies, is only interested in obtaining more positions that would increase his income", says Vrancuti Victor, a shareholder of SIF "Oltenia", in an open letter to the Romanian National Securities Commission, published by BURSA on June 21st, 2006

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