RUMORS, GOSSIP, AND BACKDOOR INTRIGUE The Bermuda's square of Raiffeisen Bank

All sorts of rumors have been going through and around Raiffeisen Bank Romania. A newspaper which claims to specialize in finance cherry-picked what it liked from among those rumors and last week published something which was supposed to be a piece of news:

"Dutchman Steven van Groningen, 53 years old, who has been the CEO of Raiffeisen Romania since 2002, has negotiated a new term with the Austrians of Raiffeisen Bank International in Vienna, which would make him one of the most enduring heads of banks on the local market."

That piece of news is false.

It looks nice, it's dressed up like a Christmas tree, but it is inaccurate.

At any rate, Michael Palzer, the Viennese spokesperson of Raiffeisen Bank International AG, contacted by the "BURSA" newspaper, has denied the information.

The newspaper in question, which had made it a habit to serve such pieces of news, wrote the following with conviction:

"According to some banking sources, the term of the vice-president in charge of the financial markets, American James Stewart, was also renewed."

But Michael Palzer says:

"I have found that these media reports are wrong. The contracts of both these gentlemen are ongoing and have not recently been extended."

Who should we believe?

The financial publication in question or Michael Palzer?

• Hesitations, denials, and stammering

Since we already should give more credit to the Raiffeisen spokesperson in Vienna, he should nevertheless be put "on watch" (like a ratings firm would say), because his answer concerning the falsehood of the piece of news in question and to our questions concerning any potential decisions to replace the members of the management of Raiffeisen Bank Romania, follows another, in which he avoided a direct answer:

"The terms of the board members start and end at different moments. Obviously, the terms of Mr. van Groningen and Mr. Stewart were supposed to expire in the next two months, whereas the term of Mr. Burduja continues until the end of June, meaning that any negotiations on the future conditions of his term will only begin in the coming months".

"In the case of Mr. Kalinov, the term was extended last year and expires in 2015."

Two days later, Michael Palzer goes back on what he said and says that, not only did the company not negotiate the extension of the contract with Burduja, it didn't negotiate with van Groningen and Stewart either.

In Bucharest, Anca Haşegan, the PR manager of Raiffeisen Bank România, expressed her surprise at the questions concerning the accuracy of the bank's financial statements, which we have addressed to Steven Cornelis van Groningen: "I haven't seen anything like that in twelve years of media!"

We can infer that Anca Hasegan has become accustomed to reading in the media that the term of van Groningen has been extended.

So, Mrs. Haşegan, would you nevertheless be so kind as to forward our questions to Mr. van Groningen?!

Perhaps he will understand them better...

After a while, we did get a reply, which we suspect she drafted herself:

"The bank's financial statements are audited - both those drawn up according to the Romanian Accounting Standards, as well as those which follow the international accounting standards, both those reported by the bank (in Bucharest), as well as those published by the group (Vienna). Had the majority shareholder had the slightest doubts over the accuracy of the reported data, it would have sent in its own team, which hasn't happened."

That's interesting.

I had no idea.

After twenty one years of working in the financial media, I had never heard of banks getting audited.

We know nothing about Enron and Arthur Andersen, we've never heard about the number and scale of manipulations of data that banks and huge companies engage in, we know nothing about the thefts and bribery which happened at huge, prestigious banks, which happened with the auditors looking over the perpetrators' shoulders.

This is 1990 and thus we know nothing of anything of the kind.

Yes, that was a time when a line like this - "Gosh, how can you even ask such a thing?!" would have worked.

That time is over...

• Embellished financial statements?

There are rumors, whispers, call them what you want (because what comes next is not information per se in any way, but rather information on what is being rumored), that, at the top of Raiffeisen Bank Romania, there is a fight between two rival groups, which nevertheless cooperate when it comes to embellishing the bank's financial results, but fight over bribes: on one side, we have the bigger group of van Groningen (Steven Cornelis, CEO), Stewart (James Daniel, vice-president, head of Treasury and Capital markets), Rossey (Carl, vice-president, head of the IT and Operations Division) and Puha (Mugur, head of acquisitions and properties), and on the other hand, Burduja (Marinel, first vice-president, head of the Corporate Division) and Kalinov (Vladimir, vice-president, head of the Retail Division).

The gossip says that no matter how much they hate each other, they did cooperate to defraud the central office of Raiffeisen in Vienna, by reporting that they had actually managed to stay within last year's budget, when in fact, in the first three quarters of the year of 2011, the bank's operating expenses in Romania, were actually double, or even more than that, compared to the published figures.

The trick is allegedly accomplished with the involvement of Heinz Wiedner, the head of the Audit Commission, who is also the head of Raiffeisen Hungary (where, in December, it was found that it needs an "injection" of 350 million Euros - to plug a loss of 320 million in 2011 which it incurred last year- , as well as lay off 350 employees, - one for each million lost - and close 10 out of 144 branches).

It is also rumored that the tricks in the Romanian accounting are known to Karl Sevelda, the vice-president of the Council in Vienna and to Peter Lennkh, the Vienna head of the Corporate Segment, who allegedly are friends with van Groningen (in exchange for kickbacks), who are concealing the true state of things to Herbert Stepic - the Chairman of the Board of Management of Raiffeisen Bank International AG - , whom the aforementioned people don't get along very well (what? you really thought something like that only happens here?!).

• Loans to the select few?

Rumors - some very nasty rumors, though - say that the deal between the van Groningen group and his buddies in Vienna is financed by the consistent bribes that the managers get in exchange for granting loans to certain people and entities.

This is where the notorious cable TV company RCS & RDS, comes on stage. The company in question seems to be more interested in financial engineering than in cable TV and its customers, with its credit line of 50 million Euros (with a five year maturity, on which, in the first three years, it will only pay the current interest, and which is expected to be added to the other 900 million it owes to various banks), claiming that it needed the money to acquire UPC România SRL Bucureşti, their main competitor, but this claim is false, because the operation would not be approved by the Competition Council, because that acquisition would result in RCS & RDS owning 55% of the telecom market in Romania, which is not allowed by the law (although, let's get real, what is thing called "LAW", anyway?)

It is alleged that the negotiations have also been supported by Mihai Ionescu (vice-president for the Investment segment at the UK Branch of Credit Suisse Group AG Switzerland), in exchange for a million or two, which it allegedly shared with the management of Raiffeisen.

• Inflated rent?

At the end of last year, in October in Vienna, Marinel Burduja allegedly ratted out Mugur Puha and James Daniel Stewart as bearing the blame for the bank's losses resulting from the rental fees for its offices. He claimed that, starting with 2007, Raiffeisen has been overpaying on rent on its new branches, by about 50%, with the difference being split between the owners of the locations and their tenants (through their legal representatives, as private individuals - you understand what the rumors mean, don't you ...)

It is rumored that Mugur Puha got himself a private jet.

It is also rumored that van Groningen is getting "fat".

That is obviously a lie.

Despite his age, he hasn't put on any weight.

• Is Marinel Burduja available?

The world is saying that van Groningen wants to get rid of Burduja and that he actually wants to replace him first with the friend of the latter - Mr. Vladimir Kalinov -, to sow discord between them, and then get rid of Kalinov and replace him with his loyal buddy Carl Rossey.

That's a medium term strategy.

The rumors say that Marinel Burduja isn't just waiting around quietly to be sacked, instead he is actively seeking a new job, trying to replace Dominic Bruynseels at BCR, betting on the fact that the CEO of BCR is going to get fired due to the poor performance of BCR in the retail sector.

The rumors about the dream of Marinel Burduja of becoming the CEO of BCR, mention his ties to Ionuţ Dumitru, the chief-economist of Raiffeisen Bank SA, (who in turn has ties to the boys at the NBR, who, in turn, have their ties to the boys in the management of Erste Bank in Vienna - ah!, Vienna!, once again Vienna!) and to Florin Pogonaru (a member on the Board of the Supervisory Board of BCR, the same Florin Pogonaru, who is so well known on the stock market). Last week it was said about him that he was the "mastermind" behind the group of bank-owned brokerage firms, which successfully overthrew Stere Farmache from his position of CEO of the Bucharest Stock Exchange and replaced him with the Chief Economist of BCR Lucian Anghel - so, Pogonaru isn't just anybody, he is a very successful "mastermind").

All in all, ties or no ties, "Plan A" looks more like a pipe dream, and seems to be more than Marinel Burduja could handle anyway, so he actually made backup plans all the way from B to Z, the rumors say, so he provided consulting to some Saudis and Qataris, including National Bank of Qatar (which is involved in Alpha Bank, where Stere Farmache is a vice-president), to allow the Arab world to enter our banking market.

We wish Burduja good luck with that.

• The downgrade of Austria's rating - a certain piece of news

If all of the above were true (and it most certainly isn't, judging by the reaction of Anca Haşegan, and the overseers of the National Bank of Romania said that they not know anything about any of this and it is not in their job description to know, so don't believe a iota of these rumors), so, once again, if they were true, than it is obvious that the bankers at the top of Raiffeisen Bank would only have time left for their personal affairs and they wouldn't pay any attention to those of their own bank.

This would be reflected in their customers' dissatisfaction, but all of their customers are happy, aren't they? (with the exception of some small fry like Vodafone Romania and Romtelecom SA - ah!, did I say small fry?, well, after all, there are just two of them).

This is reflected in the performance numbers of Raiffeisen Bank, because after all, it has an auditor and if the people in Vienna had any suspicions, they would have conducted an additional audit.

But they didn't.

This means that they have no suspicions at all.

So all of this dirt isn't true.

Phew, that's a relief!

Among so many false rumors, having something certain is very comforting.

Standard & Poor's cut Austria's rating, worried about the weakness of the Austrian banking system, which has exposure to Hungary and Italy.

It is certain that Austria wasn't lowered from AAA to AA+, because S&P was concerned over van Groningen.

No, Austria was downgraded in bulk, together with eight more European countries, including France.

No, van Groningen isn't responsible for Europe's state.

It's the other way around.