The Nordis Group scandal: background, legal, political and economic implications

With the opening by the Bucharest Court, on October 7, 2024, of the insolvency procedure for the Nordis Management SRL company, following the disclosures published two days before by the Recorder publication, the biggest scandal of recent years in the real estate sector and real estate in our country. The scandal was sparked by more than 750 criminal complaints filed by individuals and legal entities, who, although they paid in advance the full cost of the apartments to be built by the company now known as Nordis Group, found that the residential premises those were resold to other people, in some cases there was even a resale to resale, as emerged from the material published by the Recorder. Following the revelations, the prosecutors also got involved in the onerous business, especially since one of the main shareholders of the company is Vladimir Ciorbă, who has 46% of the shares, none other than the husband of deputy Laura Vicol, who resigned once the scandal started from the position of president of the Legal Commission in the Chamber of Deputies, but also from the PSD. In the current shareholding structure of Nordis Management SRL, Vladimir Ciorbă and Mapp Development SRL each own 46%, and Mihai Alexandru has 8% of the shares, while Gheorghe Emanuel Poştoacă appears as the company's administrator.

But what is the history of the Nordis company? Nordis Group was founded in 2008, by Emanuel Poştoacă, but it really expanded in the field of luxury real estate development in Romania, after Vladimir Ciorbă joined the company, when he started to focus only on the construction of residential complexes and premium hotels in luxury tourist locations in our country: Mamaia, Sinaia, Poiana Braşov.

• Out of three large projects, Nordis has not fully completed any of them

The Nordis Group owns several companies involved in various residential and hotel projects, which have been centralized under several legal entities. Among them, some of the most relevant are:

- Nordis Management SRL - This is the main entity involved in the insolvency scandal, with numerous open lawsuits and managed by the judicial administrator CITR in the insolvency procedure.

- Nordis Mamaia SRL - Responsible for the Mamaia project, where the case of multiple sales for the same apartments was also registered.

- Nordis Herăstrău SRL - Focused on projects in the Herăstrău area of Bucharest.

- Nordis Property Services SRL - Specialized in the administration and management of properties within the group.

- Nordis View SRL and Lampp Building Project SRL - Auxiliary companies involved in other developments and smaller projects within the group.

Regarding residential projects, we note that:

- Nordis Mamaia envisaged the construction of 750 luxury apartments, distributed in several buildings and equipped with hotel facilities and premium services.

- Nordis Sinaia envisioned the construction of approximately 350 apartments integrated into a resort-type concept.

- Nordis Braşov was designed to include 200 apartments in the mountain area.

Of the three luxury residential projects above, none are fully completed. More precisely, so far only one building out of the three designed in the Mamaia resort has been put into use, none in Sinaia, and the project in Braşov, as it emerges from the Recorder investigation, seems simply abandoned. Although initially the Nordis group seemed like a stable investment, it could be said that its projects were affected by an unprecedented legal and financial crisis. The injured persons in this case and the DNA prosecutors believe that in the middle it would be a scheme, which would have been based on the gaps in the legislation in force regarding the maximum amounts that they can collect, in advance, from the future owners, the developers real estate, in our country it is allowed to pay the entire purchase price in advance.

• The Financial Situation of Nordis Management SRL

The financial problems of Nordis Management SRL, the main company of the Nordis group, became evident in 2023, when the company reported debts of over 447 million lei. At that time, the turnover was 165 million lei, and the net profit was a modest 1.1 million lei. These debts were fueled by advances paid by customers for promised but unfinished apartments. We note that at the end of 2023, the cumulative debts of Nordis Group were significant, amounting to approximately 751 million lei. Most of these debts came from advances paid by customers for apartments in various stages of construction. This reliance on customer funds has created a vulnerable financial structure with negative equity and a high leverage ratio on long term.

According to a material published by the financial analyst Iancu Guda, on its own website, Nordis Management SRL (the largest company within the group), continuously recorded a debt level of over 95% in the period 2019-2023, in the last two years the company's debt level is close to 100%.

The cited source shows: "Analyzing the average of the 2019-2023 interval, NORDIS relied on 3 lei of own funds plus 97 lei of loans to finance assets and construction activity. Of the total registered debts, approximately 80-90% came from advances paid by customers on account of orders, respectively promises for the purchase of homes in various stages of construction. The company registered 4 payment incidents in 2021, respectively 12 payment incidents in 2022, these increasing significantly to 40 payment delays in 2024, the total amount being around 20 million. These are payment instruments (promissory notes or cheques) refused for collection due to insufficient resources, when introduced into the banking circuit by creditors. Many creditors have opened court cases against this company, respectively 150 in the year 2022, respectively 250 in 2023. The financial problem is much more serious at Nordis, the entire group of companies being over-indebted and with negative equity. Thus, the 10 largest companies related through shareholders and/or joint administrators in the Nordis group register cumulative debts of 751 million lei, with a cumulative level of equity of -8.8 million lei".

The above information was probably the basis of the decision of the Bucharest Court, which, on October 7, 2024, approved the opening of the insolvency procedure for Nordis Management SRL, and the creditors had to submit their claims until November 2024 in order to be able to recover the amounts invested. Following the initiation of this proceeding, legal actions against the company and enforcement proceedings were suspended.

In the context of this scandal, more than 750 lawsuits were filed against Nordis Management SRL for non-fulfillment of the obligations from the preliminary sales-purchase contracts. Numerous clients have accused the company of selling the same apartments to several buyers, and the criminal complaints against the company's management are being analyzed in rem (on the facts) by the prosecutors, as it would involve damages exceeding tens of millions of euros.

• Nordis Group contests insolvency

Nordis Group contested the opening of the insolvency procedure, claiming that it was initiated under the pressure of creditors who would not have the necessary capacity to participate in the credit table. The management emphasized that the Nordis Mamaia project is viable and that the insolvency procedure would represent a temporary stage in the reorganization of the business, with a clear plan for recovery and completion of the projects.

A press release issued by the company stated: "Nordis Group did not sell the units twice, as is being speculated. This is impossible. The basis of any sales-purchase contract is a land deed extract. This extract is always free of encumbrances, otherwise the sale cannot take place. Up to this point, Nordis Group has paid terminations and damages worth 115,000,000 lei and thus returned significant sums of money to customers or partners who, although initially appearing in good faith, later resorted to pressure and blackmail to obtain additional benefits. Despite this considerable effort and the financial reparations offered, these individuals continued to attack the company's image in the media, presenting truncated or false versions of the situation."

However, contesting the inclusion of some creditors was perceived as a defensive strategy, and the effects on public image were severe.

The opening of the insolvency procedure limited the options of the creditors, who were obliged to register in the preliminary table of claims in order to capitalize on their rights.

Regarding the rights of creditors, Victor Buju, a partner at Buju, Stanciu y Asociaţii, presents in a material sent to BURSA Newspaper a series of recommendations for the protection of investors:

- Correct and prompt registration at the credit table in order to recognize their claims in the insolvency procedure.

- Monitoring the process in court: creditors must be attentive to the evolution of the insolvency procedure, including the publication of the preliminary table of claims and the possibility of filing appeals.

- Requesting the execution of contractual obligations: those who have pre-contracts can request the delivery of the promised properties if they have not been sold to other buyers.

Your Lordship also proposes some legislative measures:

- Limiting the advances requested by developers to 10% of the value of the home;

- Sanctioning the multiple sale of the same property;

- Registration in the land register of promises of sale for unfinished properties, to prevent fraud.

Regarding the insolvency of Nordis Management SRL, CITR - the court-appointed receiver - has the authority to cancel certain contracts in order to maximize the value of the company's assets, but these measures may complicate the chances of creditors to fully recover their investments. The deadline for the filing of debt statements has been set for November 21, 2024, with the first Creditors' Meeting scheduled for December 16, 2024. CITR will assess Nordis' assets and explore options for raising capital to continue viable projects, with the hope of the company's financial recovery, leading to the recovery of some amounts for creditors. These measures assume maximum transparency in the management of the case and respond to the concerns of the many creditors affected by the Nordis situation.

• Beneficiaries and injured persons in the Nordis scandal

The scandal also revealed possible political connections between Nordis and influential figures, such as Laura Vicol, PSD deputy and the wife of Vladimir Ciorbă, Nordis' main associate. Vicol, former president of the Legal Commission in the Chamber of Deputies, was accused of opposition to the measures to regulate the real estate sector, being suspected of "political protection" of the developer. The Nordis complex in Mamaia has attracted a diverse spectrum of investors and owners, including public figures from Romania, top businessmen, politicians, but also people involved in controversial cases. Among the holders are doctors, lawyers, former and current footballers, civil servants, entrepreneurs, but also people accused of tax evasion or involved in dubious business.

Nordis projects have benefited from promotion by stars and influencers from various fields, including Selly, Alina Ceuşan and sportswoman Camelia Potec. After the scandal broke, the stars were criticized for their silence on the clients' problems.

Among the injured persons are the footballers Florin Gardoş and Cristian Bărbută, who consider themselves deceived, saying that they invested large sums in Nordis projects that were not completed or were involved in multiple sales of the same properties.

The scandal also touched the Romanian Football Federation, which had a partnership contract, signed in 2020, with Nordis Group for the sponsorship of the Central Commission of Referees and the national youth teams. Following the scandal surrounding allegations of real estate fraud against the company, FRF decided to terminate this contract before its completion - December 2024 - and stated that it will look for another sponsor and emphasize integrity and transparency in its selection.

A remarkable case is that of the prefect of Vrancea, Nicuşor Halici, who was rumored to be interested in purchasing an apartment in the Nordis Mamaia complex. According to the wealth declaration, Halici sold an Audi A8 car to Nordis Management for 90,000 euros, in a transaction that later turned out to be an exchange for a duplex. Halici stated that the exchange was not linked to influential people, stating that he dealt directly with the construction company. Despite the rumors, Halici is not officially listed as the owner of an apartment in the complex.

According to the Recorder investigation, among those who own apartments in are the notary Ioana Băsescu (ed. - daughter of former president Traian Băsescu) and her husband Radu Petre Pricop, who purchased three apartments through the notary Ciobanu Alin Constantin. Ştefan Alexandru Nanu, co-owner of the Nuba club, also owns an apartment in the complex, his property deed being issued by Andreea Cosma, notary and daughter of the former president of the Prahova County Council. Other owners include Alexion SRL (which benefited from PNRR financing for the establishment of photovoltaic parks), Steluţei Cîrligea, the wife of a county councilor from Brăila, and De Silva Intermed, owned by millionaire Virgil Călina, also known for other investments in seaside hotels.

According to the information published on the Recorder and PressHub websites, the Nordis Mamaia Complex also attracted controversial businessmen, such as an investor from Mărăcineni, sent to court for tax evasion, but released due to the statute of limitations. Also, a lawyer known for winning compensation for accident victims owns an apartment, and among the owners is a famous accountant from Bucharest. Moreover, among the owners of apartments at Nordis Mamaia would be a chief of service from a military unit in Otopeni, a military prosecutor from Bucharest and a judge of the Bucharest Court. The quoted sources state that Nordis Mamaia has also attracted cryptocurrency investors, including the son of a former SRI officer from Gorj.

Following this scandal, several legislative initiatives regarding the management of real estate projects in our country were submitted to the Parliament, initiatives that provide for the payment of a maximum 10% advance, but also drastic sanctions for companies in the field in case of non-fulfillment of contractual obligations. Unfortunately, during this period senators and deputies are more engaged in the electoral campaign for the presidential and parliamentary elections, so it remains to be seen whether any of these legislative projects will be passed before the end of the current parliamentary session.