Former football referee Constantin Frăţilă sparring with SIF "Transilvania"

• Shares of SCUT Constanţa have already been suspended from trading for two months, due to the dispute with the management of the company

• Stuck in the middle in the fight between the two sides, the BSE is being threatened with legal sanctions

A fierce battle for the management of SCUT Constanţa has been waged for a few months now, between SIF "Transilvania", one of the most important players on the Romanian capital market, and investor Constantin Frăţilă, a former referee in the A Division of the Romanian Football Championship, who has invested millions of Euros on the stock market.

On the other hand, SIF "Transilvania" attacked the former referee at "COMCM" Constanţa, where it sued him requesting that he be held liable for his actions as the administrator of the company. Not to be outdone, Constantin Frăţilă, who, according to his own statements, owns 1% of the shares of SIF3, announced that he has begun raising signatures for a new General Shareholder Meeting at SIF "Transilvania" in order to "review the dividend" for 2010, among other things.

The struggle between Constantin Frăţilă and SIF3 seems to have at stake the appointment of the fifth member of the Board of Directors of SCUT Constanţa, which is a key person in the management of the company, as having control over that seat would ensure the majority for one of the two factions.

SIF3 currently has two members on the Board of Directors of SCUT (Floriean Firu and Iulian Stan), being "tied" with the former football referee, who has the other two directors on his side (Iancu Guliu and Mitică Guliu). 64% of SCUT Constanţa is owned by COMCM Constanţa, in which SIF3 is a majority shareholder, with 56.72%. Constantin Frăţilă owns 31.56% of the shares of COMCM and 32.76% of SCUT. He considers that his direct and indirect holdings in SCUT ensure his majority in the company, thus entitling him to become a member of the Board of Directors.

Constantin Frăţilă said: "I will run for the vacant seat on the Board of Directors of SCUT, in the General Shareholder Meeting of COMCM of July 25th. I have requested that the nomination of the chairman of SCUT be made in the General Shareholder Meeting of COMCM, but the board of Directors of the company has not yet published any document. My argument is that I am a majority shareholder in SCUT through the direct shareholder in the company (32.76%) and through the fact that I own 31.5% of COMCM. COMCM, SIF3 holds 56.7% of COMCM, which owns 64% of SCUT. Therefore, I hold 52.98% in SCUT through my direct and indirect holdings, and SIF3 indirectly holds 36.31%. COMCM bought the 64% stake from SIF3 for approximately 2.3 million Euros. You can"t sell your stake and still want control of the company. SIF3 wants to manage my share of the company, even though I am a majority shareholder".

The management of SIF3 didn"t seem too convinced by the argument of the former referee. In the General Shareholder Meeting, the shareholders of COMCM, where SIF3 is a majority shareholder, rejected the proposal of Frăţilă for the directors of SCUT to be appointed based on the size of indirect holdings of the significant shareholders of COMCM.

The Romanian National Securities Commission (CNVM) has not yet issued a ruling on the validity of the calculations concerning indirect holdings which the former referee made, even though he claims he submitted a request in this respect.

• A dispute over the position of general manager

The struggle between the two factions intensified after the Board of Directors of SCUT decided, on May 16th, to dismiss Constantin Frăţilă from the position of general manager of the company, two weeks before the expiration of his tenure, according to a communiqué published on the website of the Bucharest Stock Exchange.

Ioan Mărieş, who is a close to SIF3, was appointed as general manager of the company.

The decision to dismiss Frăţilă was signed by Dan Simionescu (of SIF Transilvania and the current president of the Sibiu Exchange), who, meanwhile, has been appointed as temporary administrator who in the interim has been appointed as temporary director of the Board of Directors of SCUT.

Frăţilă says that there was no meeting of the Board of Directors that met the legal requirements by which Dan Simionescu was appointed director and chairman. Moreover, the former referee claims - in a report sent to the BSE - (which the exchange posted with a delay of two days) that the notification concerning his dismissal from the position of general manager is a personal vendetta of Dan Simionescu and that the company has filed a criminal complaint against him. The report is signed by Frăţilă in his position as managing director, and countersigned by the Chief Financial Officer and by a representative of the Legal Department.

"Dan Simionescu was never the director or the chairman of SCUT.

I am still the general manager of the company, as proven by the document remitted to the BSE on July 4th, and by the attached confirmation from the Trade Registry", said Constantin Frăţilă.

The former referee doesn"t seem too concerned with the fact that his mandate would have expired on June 1st, even if he hadn"t been dismissed from his position, and claims that as long as no managing director was appointed at SCUT, he needs to continue to managing the company.

Contacted by BURSA, Dan Simionescu said that SIF3 does not acknowledge the position Constantin Frăţilă "arrogates" at SCUT and that the directors of the company have filed a complaint with the BSE after the publication of the report of July 4th.

He said: "The directors of SCUT have sent a notice to the BSE protesting the publication of the report of July 4th, since it creates even more confusion concerning the management of the company. The BSE should abstain from publishing such reports, when there is a dispute concerning the management of the company. There have been several discussions with the management of the Exchange and we have requested that it stops the publication of these reports until we can clarify the situation of the company"s management.

We will also be looking into the legal aspect of the publication of these reports by the BSE. As for the disagreement of SCUT, the mandate of general manager of Mr. Frăţilă has expired on June 1st, 2011. SIF 3 does not acknowledge the position of general manager that Mr. Frăţilă claims he has, and which he used to sign the report that was sent to the BSE on July 4th".

• The fate of Frăţilă at COMCM could be decided on July 25th

The name of Constantin Frăţilă appears in a report of COMCM which mentions that the former referee is a party in a criminal case set up as a result of the company having filed a complaint against some of its former directors.

The report also specifies the self-denouncement of a director of several companies, which concluded transportation contracts with COMCM, at the disposition of Constantin Frăţilă, for which were issued several invoices which were cashed through the bank, even though the transport services were never provided.

Dan Simionescu considers that the situation of SCUT is tied to the one of COMCM, where the shareholders were summoned, on July 25th, to decide on whether the company should file a lawsuit against administrator Constantin Frăţilă.

Dan Simionescu said: "The situation at SCUT is connected to what is happening at COMCM, which is what caused the entire dispute to begin in the first place. We have summoned the General Ordinary Shareholder Meeting at COMCM, and we had on the agenda holding Constantin Frăţilă liable, as he has worked as the administrator of the company for several years. We have suspicions concerning his activity with COMCM, we haven"t proven them yet, but we are getting close to doing that. If the AGOA will vote to hold Constantin Frăţilă liable, he will be suspended from the position of administrator of COMCM. This is perhaps the reason why Constantin Frăţilă has initiated these actions with SCUT. He is using SCUT as if it were his own property, he is disregarding the decisions of the Board of Directors, he is blocking access inside the company and he personally decides - at the entrance - on who gets in and who gets out; at the meeting of the Board of Directors of 07.07.2011, Mr. Frăţilă did not allow the lawyer who was assisting the directors based on a proxy to enter the company".

Constantin Frăţilă claims he has not been indicted in any criminal lawsuit, and in turn, will propose for Dan Simionescu to be held liable in the General Shareholder Meeting of COMCM scheduled for July 25th.

The former referee accuses SIF3 that it wants to control both COMCM and SCUT and that his fight against the SIF is only intended to protect the only profitable construction companies in the portfolio of SIF "Transilvania".

Constantin Frăţilă said: "The stake of the dispute at SCUT is the appointment of the fifth director, as SIF3 already has two representatives.

The problem is that SIF3 wants to control everything, and the appointment of the fifth director would allow it to have the majority on the Board of Directors. I am against that because the two companies (COMCM and SCUT) have been profitable under my management. Besides, they are the only profitable construction companies that SIF "Transilvania has in its portfolio.

I do not agree with the fact that at COMCM, SIF3 has made important appointments in violation of the law and the company"s bylaws. The general manager does not have the technical qualification to lead the company, and the engineering manager has a very dubious resume, as most of his companies entered bankruptcy".

The Board of Directors of Scut seems to have currently reached a deadlock, as its members can"t agree on the date for summoning a General Shareholder Meeting which would elect an administrator and the company"s president, as requested by COMCM, the majority shareholder of SCUT.