Răzvan Temeşan - confessions of a banker

The Court of Bucharest recently ruled that the former president of Bancorex, Răzvan Temeşan (ex lege the current employee on the equivalent position of CEO of BCR, according to the ruling no. 51 of the High Court of Cassation and Justice), must be paid over 4.5 million Euros, by Banca Comercială Română (BCR), representing wages for the February 2009 - September 2014 period. In an interview he granted us, Răzvan Temeşan claims that he was never let go from BCR, and the courts are reproaching BCR precisely with the fact that they have not settled the professional relations with Răzvan Temeşan. This ruling is final and enforceable, according to the law, the banker told us. BCR filed an appeal, and the ruling was temporarily suspended, until the suspension gets tried in the second appeal.

Mr. Răzvan Temeşan recently told us: "The recent compensations granted by the Court of Bucharest represent wages for the period between February 2009 and the date of the ruling (09-09-2014). BCR did not comply with the ruling no. 51/2002 of the Supreme Court of Justice (the panel of 9 judges) nor with the decision of the General Shareholder Meeting of BCR SA of 06.09.2002. The decision no. 8176/2014 of the Court of Bucharest is Final and Enforceable, but not irrevocable (instead of < is not final >), and as evidence I can show you that BCR has asked the Court of Appeal of Bucharest on September 12th, 2014 to temporarily suspend the ENFORCEMENT of the ruling 8176/2014 of the Court of Bucharest, and the Court of Appeal of Bucharest has admitted, on September 23rd, the request for the temporary suspension of the enforcement of the ruling, due to the amount being < colossal >! Officially, BCR claims that it doesn't understand that the lawsuit is not derived from the activity of Bancorex. The lawsuit comes from the refusal to reinstate me and to pay me my outstanding wages, in other words the failure to fully comply with the ruling 1766/2011 of the Court of Appeal of Bucharest, of the ruling of the General Shareholder Meeting of BCR of September 6th, 2002, as well as of the ruling 51/2002 of the Supreme court of Justice (rendered by the panel made up of 9 judges).

As a joke, I can tell you that BCR has had rulings against it by every competent court (the High Court, the Court of Appeal, the Court), and now all that is left of them is to follow every other rung downwards (The General Prosecutors' Office, the National Anti-Corruption Department, the Police, the Gendarmerie)".

"Bancorex" is the former Romanian Bank of Foreign Trade (BRCE), set up in 1968, currently BCR SA, following the merger of 1999. According to some information quoted on Wikipedia, which was never officially acknowledged, some of its first shareholders have included certain heads of the Italian mafia from the entourage of Licio Gelli, who had ties to the "Propaganda Due" faction. For over two decades, BRCE was used for conducting most of the special commercial operations of the communist regime. After 1990, Bancorex has maintained its status of bank specializing in foreign financial transactions, as it was considered a kind of "queen" of the Romanian banks.

Răzvan Temeşan was the chairman of the bank between 1993 and 1997, and the accusations made against him are that it was during his mandate that the bank granted most of the non-performing loans, accusations which have never been backed, according to his own statements, following the investigation of over 40 criminal cases, as not one accusation has been proven over the course of 17 years.

In 1999, Bancorex merged with BCR, the second largest bank in the system at the time.

Răzvan Temeşan has won every lawsuit against the Romanian state and he is also considering filing a lawsuit with an international court. He was never convicted.

Răzvan Temeşan was an undercover agent of the Foreign Intelligence Service (Serviciul de Informaţii Externe - SIE). His mission was to draw up macroeconomic analyses, as well as recouping the funds deposited in the secret accounts of the Securitate. He was outed in the press in 2002.

The elimination of Bancorex from the domestic banking market

Reporter: What can you tell us about the 1999 merger between Bancorex and BCR of 1999?

Răzvan Temeşan: On the date of the merger between Bancorex-BCR, in September 1999, the rating of Bancorex was "BB+", down from "BBB+" in 1997, and the rating of the absorbing bank - BCR - was "BB-".

The entity that resulted from this merger became the 16th largest in Central and Eastern Europe.

Obviously, the merger with Bancorex, with the potential and the assets that the bank had and which it brought into this merger, were the reasons why the international ratings firms have improved the rating of the new BCR from "BB-", to "BB+", which is what Bancorex had at the time of the merger. Also, the business capability of the new bank increased approximately three times. In other words, BCR, which at the time was the second largest bank after Bancorex in Romania, became the first, leaving its competitors far behind.

The merger occurred when the non-performing loans of Bancorex were minimal, because in the interim, the non-performing assets had been transferred from Bancorex to the AVAB.

At the time of the merger, basically, the level of the non-performing loans was negligible. Also, it needs to be said that both the collaterals on the loans that Bancorex transferred to the AVAB, as well as the amount of the assets that came into the merger with BCR were not appraised according to the legislation in effect and the resulting undervalued assets were fraudulently transferred to third parties, over time.

Synthetically speaking, the government issued government bonds of 580 million dollars for the assets it took over from Bancorex, and those assets had collaterals worth 2 billion dollars, and in reality, without being reevaluated, over the course of the operations, their value rose in line with the market all the way to approximately 6 billion dollars.

Thus, the government paid 580 million dollars for assets acquired in time, which eventually came to be worth approximately 6 billion dollars. Out of those assets, until today, many have been sold for a pittance, for a total amount of 800 million dollars.

In other words, the proceeds of the state in the operation of taking on the so-called non-performing loans was the minimum, plus 200 million dollars, as, just like it has happened with all the assets of the national economy, those undervalued assets have been sold at bargain basement prices.

There is one such famous example in the trade and finance world, which concerns a ship which was put up as collateral for a loan of 200,000 dollars. The AVAB put it up for sale with 100,000 dollars, with it obviously having been set aside for a specific buyer, meanwhile the ship did not pay its freight and was seized in Bangladesh for owing over 50,000 dollars to the port administration. According to the procedures, it was auctioned off, the ship was sold for 400,000 dollars, of which 50,000 dollars went towards the port expenses, and 350,000 were returned to the owner, namely AVAB. This allowed the repayment of the 200,000 dollars loans, and left a profit of 150,000 dollars. This is because the sale was done in Bangladesh. Had everything happened in Romania, the ship would have certainly been sold for just 120,000 dollars, the actual money might have never been paid, and the ship would have quickly ended up scrapped for a pittance.

Everything happened in a similar manner with the assets of Bancorex. For example, the new building on Calea Victoriei, was acquired for 200 lei by BCR from Bancorex.

For that construction, a company was set up which included the share capital of 200 lei subscribed by Bancorex, the rights over the plot of land of the mayoralty of Bucharest, the builder and other companies involved. Meanwhile, the building was erected on credit, it was not reevaluated, and at the moment of the merger, BCR acquired Bancorex, assets included, and implicitly the building on Calea Victoriei, for 200 lei.

I will give you another example, the old building of Calea Victoriei, which now belongs to BCR and which is not being used, was worth, at the time it was included in the assets of the Romanian Bank for Foreign Trade, later renamed to Bancorex, in 1954, 1000 new lei in 1999, was acquired for the same amount of 1000 lei (10 million old lei), in other words five times more than the price of the new building of Bancorex.

Also, the building on the Eugen Carada Street, opposite the National Bank of Romania, which is on the corner with Calea Victoriei was acquired by BCR for 5.4 million old lei.

Reporter: Were these buildings evaluated upon the privatization of BCR?

Răzvan Temeşan: This is a question I can't answer because I did not participate in the privatization.

In Romania, all evaluations and due-diligence procedures are secret, even though in other countries they are published in their Official Journal.

It can be assumed that the reevaluations did not match the actual market value the assets had at the time of the privatization because the sale of BCR, in 2005-2006, was done in a market that was rising, and which peaked in 2008 in Romania.

According to my calculations, the real value of the assets of Bancorex, which it entered the merger with, in September 1999, was about 1 billion dollars. By 2008 when it peaked, the valuation had increased approximately 15 times. Let's say that in 2006 they had only increased about 6 times.

Thus, the value of the assets taken over from Bancorex, in 2005-2006, would have been at least 4 billion dollars. I assume that BCR had some assets of its own and that also included in the valuation was the goodwill which it acquired.

At the time of the merger, in 1999, Bancorex had approximately 70% of the international business conducted by Romanian companies, amounting to approximately 25 billion dollars per year. This was the volume of business that Bancorex brought with it into the merger and, when you do a privatization, it's obvious that aside from the physical assets, the goodwill, and the future prospects should also be taken into account.

I don't want to make any evaluations, I assume a due-diligence study exists and, since the foreign investments are checked by the authorities in the countries where these investments are made, I think that this due-diligence conducted in Austria is available to the authorities and can be made public. At any rate, compared to the big fat zilch that was earned from the privatization of the remaining economy, the 3.75 billion Euros received in exchange for BCR is actually something.

But obviously, plenty of investors that have a morality and business behavior that is beyond reproach turn into something else when they come to Romania.

Reporter: Some just give in.

Răzvan Temeşan: In fact, in a country that is ruled by savage capitalism, it's natural, you take advantage of the circumstances, and first of all of your partner's stupidity, slowness, corruption, etc.

In Western countries, this kind of things don't happen anymore, over there, the few negative examples that were made public have been drastically punished, and people don't do anything stupid.

Investors have to display a certain level of morality, or else they aren't going to be long-lived in business, because, the moment you do immoral deals, they are disclosed, banks have access to information and don't want to be partners of plunderers that take advantage of circumstances.

One of the definitions of money laundering that is applied very strictly in the West is that any transaction that is 10% above or below the market price automatically gets reviewed by the entities that investigate money laundering.

That tells us something about the manner in which you can still take advantage of circumstances and of the weakness of the partners in the West.

Reporter: You've said that the loans you granted were compliant with the banking legislation, but you were detained for several months. And then you have won every lawsuit against the Romanian state, but nobody rehabilitated you.

Răzvan Temeşan: I've won every lawsuit in Romania and against the Romanian state, but in this country, if you are honest, you get isolated and eliminated.

The environment doesn't allow the truth, because the truth and reality, laid on the table, wouldn't allow all those who have gotten rich or who want to get rich through all kinds of political manipulations to act. There are also direct interests of some people, but aside from that, there is also the general interest of the political class to maintain a state of uncertainty that would allow them to conduct this type of transactions, in other words to obtain great wealth with small wages.

Had I not, back then, when the putsch which led to my dismissal happened at the bank, taken the stance of defending the interest of the bank and the overall interests of the economy, I would have probably been left alone and I would still be in the banking system.

But I didn't keep my mouth shut, I went to the press and I tried to tell people what was happening, including how Bancorex was going to be destroyed.

The scenario used to destroy Bancorex was nothing new, especially to me, it went just like it did with the rest of the valuable assets of the Romanian economy.

Perhaps the bank would have been left alone if it hadn't made exceptional progress during my mandate, going from an institution that was required to pay its partner banks in advance, when making a deal, to borrowing money through a simple phone call, after one week, as well as having extremely valuable assets.

The assets that weren't valuable were ignored, they were scrapped and that was that.

Those that had an intrinsic value, which was supposed to be hidden from the public and the decision-makers, were the focus of some circles that have benefited from the expertise of other, international circles, that do this kind of deals.

The extraordinary variety of Italian companies, especially from Southern Italy, that have been involved in Romania in the field of privatization and of land acquisitions is not an accident. I am not saying that these operations were all acts of corruption and illegal, but rather that they made undeserved profits due to exceptional circumstances, namely the general ignorance, the indifference of the majority of the decision-makers and the specific and corrupt interest of a minority that did as it pleased without any checks in place and without any liability.

Liability sometimes exists, but very to a very little degree, compared to the scale of the nation's economy.

The occasions where the people who did shady deals actually paid the price are negligible in number and the state is incapable of recouping the losses.

Concerning the reevaluation of the assets that were included in the merger and which were privatized through the transfer to the AVAB, if the bank had been left alive, it couldn't have afforded to sell its assets put up as collateral below price, because otherwise it would have gone bankrupt directly. Thus, the other option was chosen, to have them transferred to the state and sold just like the other assets in the economy, without any sort of audit.

Reporter: Did the World Bank play any part in the situation of Bancorex at the time?

Răzvan Temeşan: Of course it played a part.

What happened after I was replaced was that the bank's philosophy was radically changed, and the new management made absolutely ridiculous mistakes when it comes to the participation in the Romanian economy.

The World Bank realized that if the bank would no longer be actively involved in the financing of the Romanian economy, and in keeping it alive, destroying the macrostability of the latter in the next cycle would turn against the lender, in other words against Bancorex itself.

Immediately after I was replaced as CEO, the financing of the Romanian energy system was stopped, Bancorex stopped opening new letters of credit for the oil industry, and other banks did that with guarantees from the state.

The moment refineries stopped having enough energy to pump into the nation's economy, and the entry price was deregulated, without the same thing happening with the exit price, energy consumers were forced to sell their products at prices that were controlled and deliberately kept low.

The sudden liberalization of the entry price has affected the companies ability to operate and raise financing, especially since Bancorex stopped offering that financing based on strictly banking-related criteria, there was no way other banks would finance them. It was obvious that they were working at a loss. You can't raise financing from a bank if you are losing money.

Bancorex financed them because it inherited the nation's economy and the retooling programs. Up until 1989, the economy was for the most part very profitable, it wasn't a heap of junk, it was a profitable economy, which had exports with high added value.

There was the ability to gradually liberalize the domestic market, in order to turn it into a viable market. Bancorex would have gradually found its place with a more reserved attitude when it comes to the general interests of the economy and, more specifically, focused on its own interests, but over a longer period of time, not straight away.

In the short-term, the bank's interests were the same as the interests of the nation's economy, if the nation's economy collapsed - which actually happened - it is obvious that there would be no one to repay the bank.

Up until 1997, when I was abusively replaced as CEO, the loans granted by Bancorex were all compliant with the law, we had loan committees that reviewed every application and made the decision.

The loans that exceeded certain amounts were approved by the Committee of Direction and the Board of Directors of the bank.

Over 90% of the loans granted by Bancorex went to the state sector. At the time of the merger with BCR, the percentage had dropped to 70%, and 30% were intended for the private sector, with the difference consisting of the privatizations done with loans included.

One example is the Azochim plant of Săvineşti. Ioan Niculae is often accused of not having returned the money to Bancorex, but in fact, he never took out a loan from it. In reality, Ioan Niculae bought a company that had a loan with a 4-5 year maturity, and which was ongoing. Thus, the company was left with a loan that was not repaid, and Ioan Niculae is accused of having become rich using public money. In reality, the plant was privatized 3-4 years after the retooling loan had been contracted and implemented.

During my mandate, Bancorex had the same interests as the economy, which resulted in a policy of supporting the national economy for the bank's own benefit, because, during that time, the assets of Bancorex have increased from minus 25 million dollars to over 600 million dollars cash.

Reporter: At what time did Bancorex have minus 25 million dollars?

Răzvan Temeşan: When I took over the bank, in 1994. And I am not saying here that there have been management mistakes, but Bancorex did take over all of Romania's foreign loans. In 1990, after the revolution, almost all of these loans suddenly became non-performing (for example, the loans granted to Iraq, Syria), because nobody wanted to repay them anymore. All the economic contracts were terminated, and obviously, those entities had no reason to repay the loans.

Since all of them were the burden of Bancorex, it's only natural that it took quite some time until we managed to clean up all of these non-performing loans which came from the past.

When I took over the management of the bank in 1994, the ratio of non-performing loans was 27% and, within three years, it reached 6%. That ratio subsequently started rising, because of the deadlocks in the economy.

I think that any objective analyst can't deny that the Văcăroiu government (1992-1996) was, by far, the most lucid and the most effective in liberalizing the economy, in introducing the principles of the private economy and the market economy and, especially in protecting the general interests of the population in economic management, in general.

The next governments did things too quickly, without knowledge, without experience and with an absolutely shocking greed displayed by all of those that were involved. Which unavoidably led to catastrophic results.

That is what happened after 1996, also because of the fact that Bancorex changed its policy and stopped financing the national economy, and also because of the policy that gave free reign to savage capitalism and allowed the debauchery in the outrageous undervaluation of the privatized assets and in the deals with the state made at exaggerated prices. Let's remember neckties that were sold at 150 dollars a piece or tie pins sold for 200 dollars a piece.

All of these things have happened even in the case of goods were the plundering was not so obvious. For example, the railroad tracks would not cost just 120 dollars, which is what they used to cost on the international market, instead you would have to pay 180 dollars for them.

The difference was not huge, but when dealing with large volumes, you can imagine what that did to the economy.

As a result, the controlled and quick liberalization, like it has happened in all the other countries, led to the outcome that Romania was competing with Albania and for a long time, it was on the same level as Bulgaria. But currently, Bulgaria is doing better than Romania.

Reporter: Why were you dismissed?

Răzvan Temeşan: Because at the time, there was the temptation among the members of the political class to accept the arguments and the interests of a certain political-administrative class that infiltrated the antechambers of political leadership and has imposed a measure that was unacceptable for Bancorex, which couldn't even agree with the sale of the assets which were used as collateral for the loans of 90% of the state economy.

What would have happened had Bancorex been left alive, with me in charge? The system, the refineries of Galaţi, Călăraşi, all the major chemistry units, instead of being sold at risible prices, would have become the property of Bancorex which would have concluded a contract with Lukoil just to manage Rafo Oneşti, or it would have concluded a contract with Kazmunaygaz to manage Petromidia, with OMV for Petrom etc.

Reporter: Bancorex was one of the top largest banks in Eastern Europe.

Răzvan Temeşan: In Romania, Bancorex was twice as big as all the other banks in the system combined, with the National Bank of Romania included.

In March 1997, when I was replaced, Romania's currency reserves amounted to 1.05 billion dollars, of which 780 million were at Bancorex and the remaining 270 million were deposited with the other banks - 40 of them - together with the National Bank of Romania.

This is what the balance of power was like at the time.

The elimination of "Bancorex" has widely opened the path towards the privatization without any equivalent compensation of the entire economy.

If you look at the transactions done at the time, you will see that until 2000, approximately 70% of the national economy was privatized, at bargain basement prices.

Reporter: Do you think that the case will be reopened eventually? You should get rehabilitated, given that you have won every lawsuit against the Romanian state.

Răzvan Temeşan: I think that in the end, I will file a lawsuit in Strasbourg, because here, in Romania, it is very hard to overcome the influences that affect the judicial system.

There is a framework, but it is almost incidental. Other than that, there is string pulling and there is influence being exerted by those that have interests, first of all pecuniary, as well as in maintaining the confusion.

One of the main interests of the class of criminals that leads Romania directly or indirectly is maintaining a situation of confusion which allows them to do things such as, for instance, buying neckties that are 100 more expensive than reality. After 20 such process cycles, things end up being valid.

The lawsuit against BCR

Reporter: If BCR doesn't pay you the money, what are you going to do? BCR says that the ruling is not final.

Răzvan Temeşan: According to the Civil Code and the Labor Code, art. 254, all trial court rulings are final and enforceable, because there are no longer three legislative degrees, there are only two of them. The rulings in trials that have only two levels of jurisdiction - the initial lawsuit and the appeal - are enforceable as soon as the court of first instance has rendered them.

Reporter: Will you hire a bailiff?

Răzvan Temeşan: There is also the institution of suspending the enforcement, the rulings are enforceable, but their enforcement can be suspended temporarily.

Reporter: For how long?

Răzvan Temeşan: Until the second appeal is tried.

Reporter: BCR had already filed a second appeal.

Răzvan Temeşan: Yes, it did and it is being tried.

Had I collected the money from BCR, I would have invested it in something, I would have done economic activity. Now, BCR is forced to set up provisions, because it has lost the trial and it is keeping the money .

What is the point of declaring a court ruling enforceable if you're going to have a provision which stipulates that its enforcement can be suspended?

Reporter: It could take another year, couldn't it?

Răzvan Temeşan: A year, a year and a half, no matter how long it takes. It's better than the propaganda in the newspaper that I've gone rich.

The relationship with the Romanian Foreign Intelligence Service (SIE)

Reporter: You said that you were an undercover agent and that you have outed yourself.

Răzvan Temeşan: No, it was the "România Liberă" newspaper that outed me in 2002 by publishing my recruitment record, which wasn't signed, however.

At the time, I responded like an undercover agent, and said that I was unable to disclose whether I was an undercover agent or not, because that would have meant disclosing state secrets.

About three years later, Mr. Ioan Talpeş went on TV and confirmed that the information published by România Liberă was accurate and that he had signed the recruitment order himself.

Thus, given that Ioan Talpeş was the former head of the Foreign Intelligence Service (SIE), I couldn't deny say that I was an undercover agent because I would have looked ridiculous.

Somebody who wanted to compromise me not in Romania, but abroad, because I had, and still have, a reputation that no one else in Romania has.

Reporter: You recently said that you have recouped some of the money of Ceauşescu.

Răzvan Temeşan: It's not about the money of Ceauşescu. And this is proof of the influence that the criminal factions have on the public and on opinion-making in Romania.

This matter is different.

Before 89, Nicolae Ceauşescu was the head of state and he imposed a law which stipulated that no one could spend public money without his personal approval, through a decree of the president's state council.

When the Minister of Foreign Trade or the National Bank of Romania had expenses to make, and nothing else was included in their plan, since there was a very strict discipline in place, they had to go with special requests in hand to comrade Nicolae Ceauşescu and get his signature before they could take out some money. And, when speaking colloquially amongst themselves, Ceauşescu's subordinates would say: "Let's write a request so the comrade can give us some of his money"!

And this is how the myth that Ceauşescu had his own money got started. It was actually the money of the state.

What I actually said was that I have recouped money from the trade, commercial and financial management operations that the Securitate used to conduct through special operations.

It is obvious that any intelligence service in the world uses dummy corporations and launders money to conduct its operations. A secret service can't pay its agents through a payment order. They usually use poultry companies.

This money laundering is tolerated by the authorities because otherwise, that would mean bringing all of their operations and networks to light.

In other words, nobody is allowed to launder money because they would go to jail, with the exception of the government, which gets to do it in order to successfully hide its secret operations.

Absolutely everybody is doing this.

The current regime is doing it on a scale ten times greater than the Ceauşescu regime.

At the time there were a few divisions of the Securitate and economic entities that were infiltrated, now, there are entities that operate directly, in other words companies that apparently conduct business, but in actuality have no activity. This is one of the weaknesses of the secret services, because when there is no activity, the authorities will notice that you are collecting money without exporting or selling anything.

During communism, they would infiltrate companies that did business and a small part of those operations was fictitious, money laundering or collecting fees for non-existent transactions. In other words a foreign trade company would go and negotiate with one of its partners, an officer of the Securitate would be present at the negotiations and later, when collecting the money, the officer would get his cut. After 1989, those who conducted that kind of operations in the state's interest, stopped putting that money in the accounts that Ceauşescu had control over, and instead started putting it in their own pockets.

It is true that I have recouped part of that money.

The "Albumul" dossier

Reporter: They say you have a good relationship with Ion Iliescu.

Răzvan Temeşan: The press has purported that I gave Ion Iliescu money for the electoral campaign, which is not true.

In fact, I gave money to Adrian Costea to produce the graphic album < Romania - Fascinating and Eternal >, which still is the most valuable work that portrays Romania's realities.

The famous dossier "Albumul" (ed. note: in 1995, the Romanian government concluded a contract with French company Groupe Saintonge Editions to publish the album < Romania - Fascinating and Eternal >. Immediately after the signing of a sponsorship contract with Bancorex, the French company received a downpayment of 1.5 million dollars in an account opened with a foreign bank, and the amount later increased to almost 6 million dollars). The case was tried at the request of the "Ziua" newspaper in 1997, and the court decided not to prosecute me.

In 2000, when it was ruled that I would not be indicted in any of the other cases I was involved in, the prosecutors picked up the "Albumul" case and decided to indict me.

When they tried to arrest me, I gave them the papers I had and told them that they couldn't have two different resolutions in the same case: in one case the decision to indict me, and in one case the opposite.

The prosecutor was very surprised, he went to his boss and got a decision from him which annulled both resolutions, because they couldn't just annul one of them, because he didn't have any argument, and he also decided to indict me for fraud.

But he never wrote what the fraud actually consisted of.

Two weeks later, the prosecutor annulled the fraud charge, because he had no justification for it. He didn't even claim that the fraud was real, he just wrote "art. 215 - Fraud" in the document to avoid letting me off the hook.

Two weeks later, he withdrew the fraud charge of fraud and charged me with abuse, because meanwhile, the case with the decision that I would not be prosecuted had been annulled.

This procedure lasted two weeks, but it yielded no concrete result. Other than the claim that I didn't comply with the decision of the General Shareholder Meeting of Bancorex which approved the sponsorship of the Government, through the participation of the Ministry of Foreign Affairs with the amounts they had allocated from the state budget for sponsorships, they charged me with having signed a sponsorship contract.

It is true that I signed together with Mihai Ungheanu, who was a deputy secretary of the Secretariat of the Government, but subject to the General Shareholder Meeting approving the operation.

At the time of the signing, the specialized department was supposed to check whether all the obligations were honored, it wasn't my job to check whether the Ministry of Foreign Affairs was still participating or not. This is another made up charge, as it was eventually proven.

More than that, in the arrest warrant, the prosecutor stated, when the case of abuse in office started again, that it was I who had perfected and conducted the publishing contract concluded between the General Secretariat of the Government and Groupe Saintonge Editions of France, represented by Mr. Adrian Costea.

Even in a country that is "not quite right in the head", even if some government officials had been charged with abuse in office, I could be at most, charged with complicity or abetting.

When no government official gets accused of anything, and yet I get charged with having drafted and conducted the publishing contract, then that means we are living in a country of lunatics, because I wasn't the one who had the right to sign on behalf of the government.

The contract was signed by somebody else. How could I perfect that contract without the Government official being guilty? Had I negotiated the contract with Costea and the employee of the government signed it, then the employee in question would be guilty at least of negligence in office.

Reporter: Another name that appears in the "Albumul" case is that of Viorel Hrebenciuc.

Răzvan Temeşan: It is mentioned in the prosecutors' documents, because they couldn't have me be the only one indicted in this case, even though they had received political orders to finish me.

They had to find someone to blame for the publishing contract as well.

In fact, it was the publishing contract that wasn't done, not the sponsorship contract.

The sponsorship contract was performed just fine, without any kinds of problems.

Instead of making 90,000 copies, Costea only printed 45,000 copies. Of those, 11,000 got in the hands of the world's elite, from the emperor of Japan all the way to the secretaries of the Brazilian or Argentinean parliament.

When they hear about Romania, political decision makers look at this album and see a different image of Romania than the one featured in the news. Seeing the way Cristea was mocked in Romania and what everything has come to tells you much about the way things have deteriorated and how much this nation is struggling.

I don't know the flaws of Adrian Costea, but he has accomplished something absolutely tremendous which has benefited Romania. Mocking that achievement and diminishing its significance, is an inexplicable flaw and which still produces poisonous effects for Romania.

In fact, it was just a commercial operation.

Reporter: Who did you upset so much?

Răzvan Temeşan: Why do you think the former head of the secret services has felt the need to go on TV and confirm that he was the one who signed the recruitment record?

I think I have answered your question.

The fact that somebody published my recruitment record and that somebody wanted it confirmed to be true, proves that there is something very bad going on in the foreign intelligence services. How can they behave like this against somebody that has brought them tens of millions of dollars and who has wholeheartedly done his job to God and country? I am now speaking about my undercover agent activity, when I used to draw up general analyses about Romania's economic situation in the international context and when I got them their money back. I did not have any other activities, I did not report on other people and other kinds of operations.

Anybody who is lucid enough has to realize that the foreign intelligence service was supposed to check the privatization partners who have turned many valuable Romanian companies into scrap. Most of these companies came from Southern Italy and I think their intentions should have been discovered when they came to Romania.

How those services did their job can be judged based on the results that we currently have. In doing my job, I was seriously out of place in my environment.

Reporter: Do you know anything about the accounts that Crescent had in Cyprus?

Răzvan Temeşan: I have personally checked the payment of all the invoices issued by ICE Dunărea and other ICEs (ed. note: ICE - Foreign Trade Company) that were the responsibility of Crescent and I have found that absolutely all of them have been paid. As for the accounts of Crescent in Cyprus I have no information about those, as they have been protected by banking secrecy and by the legal regime in Cyprus.

The Canadians that have been hired by the government to make an audit entered the archives of Bancorex after I personally granted them access, I brought them all the papers. They have seen that the result was zero, that all of the accounts of Ceauşescu were actually the accounts of the state and that all the payments were done according to regulations.

Reporter: Have you ever received death threats?

Răzvan Temeşan: Yes, several times. In 1997-98-99.

Reporter: From whom?

Răzvan Temeşan: My conscience won't allow me to bring up this subject again.

Reporter: As far as you know, are there any undercover agents among the top managers of banking institutions?

Răzvan Temeşan: There is no such thing.

Reporter: So you are saying that there aren't any in the banking system ...

Răzvan Temeşan: It's not allowed. It depends on the letter their name starts with.

If it starts with letters that aren't part of the Romanian alphabet, then they could be agents of the secret services from their countries of origins. And if it starts with letters from the Romanian alphabet, of course there is no alternative.

If you were a head of an intelligence service, what would you do?

Reporter: If I was smart, I obviously wouldn't admit that there any.

Răzvan Temeşan: To the intelligence services, two categories of people are important: the executives of the institutions or those who are close to the leaders of the institution (including lovers) and the drivers, generally.

In Romania's embassies abroad the drivers were the heads of networks.

The banking market in the transition period

Reporter: What is your assessment of the policy of the NBR in this period of transition?

Răzvan Temeşan: The National Bank of Romania does not actually have the position that many people think it does. The NBR has to check the compliance with certain parameters and regulations that the banks are required to apply. The NBR has no way to directly intervene in the decisions of the shareholders and in the actual activity of the banks. All the Central Bank can do through its macroeconomic decisions which it makes and it has available, according to the law, is to cause banks to behave a certain way.

The moment that legislation, in general, and the overall attitude allow certain kinds of operations and certain excesses, the NBR doesn't have the ability to intervene directly.

For example, the NBR can't interfere in the lending norms, because every bank is directly responsible for its patrimony. If the NBR were to intervene and tell one bank how to set the terms for lending money, the bank in question, which has applied the rules of the NBR, would hold the NBR liable and ask for damages.

Reporter: The press has reported that the NBR is forcing commercial banks to sell non-performing loans this autumn worth 1 billion Euros.

Răzvan Temeşan: It's not the Central Bank that is making them sell them, rather it is in the banks' interest to do that.

The NBR has only one possibility to intervene. It goes like this: "You have a ratio of non-performing loans of 29%, then that means you also set up 29% in provisions. If the profit isn't enough, then you are going to report a loss, if you don't have enough cash, then go to your foreign parent bank and tell it to send you money".

The commercial bank sets up provisions for exactly the volume of non-performing loans it has. This is what the NBR can impose.

Setting up provisions for 29% of the balance sheet actually turning no profit on 60% of the balance sheet, because the bank is not getting any interest on the non-performing loan, and the amounts set up as provisions don't generate interest either.

As a result, the bank has 60% of the balance sheet that doesn't generate revenue. We need to think of how much revenue they would have to collect from the 40% remaining loans that are performing, to make up 100% of the bank's activity, as well as the refinancing. Because when it granted the loan, which later became non-performing, the bank used the depositors' money, to whom it needs to pay interest as well.

So, the bank, out of the 40% of its portfolio that is performing, needs to also cover the revenues for 60%, because the money that it used to set up provisions is also coming from its depositors, and it isn't getting any yield on it. And depositors expect to be paid that interest. That is why the spread between the deposits and loans exists.

Right now, the potential debtors that do business are not going to borrow money, because right now, with an inflation of zero, borrowing at an interest rate of 11-12% they'd have to be really cuckoo.

Lending can not be restarted at the current interest rate level, because normally, companies, with the exception of those that plan on not repaying the loans and are devising all kinds of tricks to get loans, are skeptical they can make any profits when prices aren't going to increase by more than the average inflation rate of 2%, of which the loans alone will cost them 10%. And what's more, they have other costs or debts to bear and repay.

So how can they finance their operations in the future?

Investments in Romania are heavily undercapitalized, and future operations and expansion are financed through resources raised that the companies have to pay for. Even if they only have outstanding loans for 50% of their operations, companies have other kinds of loans - private, from abroad, trade credit, from partners - which they still have to pay interest on.

Where are they going to get that money when the accelerated price increase has been blocked through the drop in inflation, to the levels it is currently at.

And obviously, they will stop borrowing.

And, when lending does not resume, the ongoing loans get infested with all kinds of tricks - hidden commissions, variable interest rates that increase from one week to the next, terms written in such a fine print that you couldn't even read them with a magnifying glass, which, when you get to actually read, will tell you that you have to pay an additional 12%.

Romanian banks have behaviors that are inappropriate for this sector.

In the West, the morality of the banking sector is beyond reproach. In Romania, every bank has thousands and thousands of ongoing lawsuits.

Abroad, major banks have one, two, three lawsuits, because any kind of litigation ends up being resolved amicably. Being featured on any list of lawsuits is devastating for the perception of a bank.

In Romania, the opposite is true.

Banks insist on foreclosing on the debtors, in spite the evidence that they won't be able to do anything with those assets.

One of the philosophies that I have applied is that, to the extent where debtors are acting in good faith, a bank should be their partner and constantly help them, both in times of the market circumstances and the management. In an emerging economy, many people aren't that good at conducting their business and they make various mistakes.

Banks overdo it with the foreclosures, which causes enormous suffering for many people.

They foreclose on individuals who bought homes, they throw them into the street and what do they do with the homes? As you can see, there are ads of whole neighborhoods that are uninhabited, empty.

Western banks have gone through this process after the boom in the 50-60s, when they financed the reconstruction of the major cities and they have applied the same policy. But they didn't have what to do with the homes that they have foreclosed on, which led to additional expenses because the mayoralties would fine them if they didn't clean the windows or didn't sanitize the area.

In the end, the banks gave them away for free to various debt collection agencies, and the companies in question massively discounted those assets and subleased them to those who had become unable to meet their payments at a certain time. In other words, the owners and tenants at the time.

This is a philosophy that the banks in the West are quite familiar with and it is very surprising that they have not applied it and are not currently applying it in Romania, because they already have this prior experience.

If they don't, it is because the management that comes from the West is polluted by the conceptions and the attitudes promoted by Romanian managers.

Reporter: Will we have a new banking model?

Răzvan Temeşan: This is just empty talk. From the times of Luca Paciolo, since 1680, there isn't much happening in the banking system.

In Romania, there has been a lot of noise made about the payment instruments that could have eliminated the deadlock in the economy back when it was seized up to a significant degree, had they been used correctly.

Bancorex has applied the method of increasing the liquidity and speeding up the settlements by accepting, the guarantee and operation of promissory notes, forfaiting (ed. note: an operation which involves the sale/buying of receivables purchase of receivables from exporters by a forfaiter and in which the buyer waives the right to a recursory action against the previous creditor).

At the time when I was replaced and the entire settlement system was gridlocked under various claims, the Romanian economy seized up and a phenomenon never before seen happened: in 1997, Romania's economy fell 16.7% in just one year, whereas after it joined World War 2, it fell 15.2% in three years.

The effects of applied policies and first of all, of the lack of involvement of Bancorex in the financing of the nation's economy have been more catastrophic then Romania's joining WW2.

Reporter: The banking system is now full of foreign banks. We understand that the National Bank of Romania would like to have Romanian banks.

Răzvan Temeşan: The National Bank of Romania shared my opinion, - Bancorex should have been left alone.

With me at the helm, Bancorex should have been privatized through the mass privatization program, like the Western banks are.

For example, there are no strategic investors in Erste Bank, it is the state that is an investor to a certain degree and the rest - the millions of Austrians that have bought shares. Bancorex had shares in Deutsche Bank.

In doing so, the interests of the shareholders, are in fact, the general interests of the economy and of the country in question. the interests of 5 million Austrians that are shareholders in Erste Bank are Austria's interests.

Erste Bank would shoot itself in the foot if it were to disregard the interests of the Austrian economy, because the lack of performance of the Austrian economy would quickly turn into a lack of performance of the bank and also, the management of the bank would get accused of disregarding the interests of the 6 million shareholders.

This is how BCR should have been privatized after the merger with Bancorex. At the time of the merger, in 1997, 70% of Romania's international business was conducted and financed through Bancorex. The political influence was so powerful at the time that I can tell you that the liquidity crisis that Bancorex suffered immediately after I was replaced was absolutely deliberate, intended to create a state of uncertainty that would allow the undervaluation of the assets, and their subsequent sale at bargain basement prices, including the sale of the collaterals of the loans granted by the bank.