THE COTTON SCAM: Going bankrupt and keeping the state"s money

And it"s not exactly chump change - it"s ten million dollars.

In the story that follows, the impressive thing is not the amount of money that is lost in itself, but rather the idea behind the scam: take away the money of the state and then file for bankruptcy.

Everybody wins, aside from the taxpayers.

A lousy deal for the state, which was made eighteen years ago, in which we borrowed ten million dollars from the US government, to import cotton for our cotton mills, now has the Romanian state liable for compensatory damages until 2022.

In 1992, the Romanian government took out a commercial loan of ten billion dollars, from the American government, for the acquisition of fiber cotton from the US.

The agreement had very advantageous terms for Romania: the loan would be paid back in 30 years, with a grace period of six years (until 1998), with an annual interest rate of 3%.

After the signing of the agreement, the Romanian government held a call for bids following which it appointed five companies to import the cotton: "Românoexport SA", "Tricorom SA", "Textilcotton SA", "Impex Overseas Corp SRL" and "Tuvic Impex SRL".

Based on the mandate, the companies had the duty to import the fiber cotton from the USA and to deliver it to the Romanian cotton mills. At the same time, the companies in question pledged to reimburse the American loan, the principal and the interest, by October 15th of each year.

• How it all went to hell

Everything was hunky dory until 1998 - the year when the loan payments were supposed to begin.

"The cotton importers paid the interest on the contracted loans until 1998 included, and then, after the maturity of the first installments and then, with the first principal and loan interest payments coming due, they ceased payment claiming that the companies that they sold the cotton to did not pay for it", the government says in an official document.

Since the deal fell through, the Romanian government suddenly found itself indebted to the American government, and "in order to avoid deteriorating the trade and diplomatic relations with the USA", between 1998 and 2005, the loan was paid back with money from the state budget. The AVAB (the Authority for the Recovery of Bank Assets) and the Ministry of the Economy were appointed to recoup the money.

Last year, the Boc government has prepared a draft law for the 2006-2022 period, (ed. note: the draft law is now up for debate in the Parliament) which provides the making of compensatory payments of 5.4 million dollars.

1.57 million dollars were allocated to the Ministry of the Economy from the state budget for the payment of the arrears of the 2006-2009 period.

The Ministry of the Economy was empowered to begin the legal proceedings to recoup the money. According to the latest information from the Trade Registry, the status of the companies that the Ministry of the Economy wants to get the money back from is as follows:

-Tricorom SA - stricken off;

-Textilcotton SA - bankrupt;

-Impex Overseas Corp - stricken off;

-Tuvic Impex SRL - liquidation-bankruptcy.

Too little too late...