THE ŢEPEŞ AFFAIR BLOWS UP The BSE: Who's replacing who?

Valentin Ionescu has come to the end of his term as a general manager of the Bucharest Stock Exchange (BSE), following yesterday's decision of the Board of the Exchange, which, unusually, met for the second time in a week, just three days after Monday's meeting, when, according to the Communiqué, a review of the "financial and operating results for the first ten months" and of certain aspects of the activities of the Executive had been conducted.

The decision to dismiss Valentin Ionescu shows that the Board of the Exchange was not happy with the findings of its Monday review, and so ended the extension of his term, which had been renewed on September 27th.

The Board of the BSE continued to blame Valentin Ionescu for his part in the failure of the secondary public offering of "Petrom" of July (even though, just as much of the blame lies with the members of the Board, and especially with the president of the BSE, who disappeared in a condemnable manner, at the time the offering was taking place).

Yesterday's press release of the BSE records the opinion of the Council that the General Manager only reached 10% of his "main contractual target", which of course, hints at the disappointing financial performance of the BSE, as well as the low level of restructuring of the institution.

The thing which weighed heavily in yesterday's meeting was the fact that Valentin Ionescu did not downsize the team of the BSE, as he hired new people on the positions which were left vacant, and that the employees who were hired had credible reasons to go to court over their dismissals.

At the end of July, the management of the Exchange had announced that it was eyeing a 10 to 20% reduction in operating costs across the group, and that those reductions would be performed by outsourcing some operations, renegotiating contracts, increasing the efficiency of the staff, and eliminating staff redundancies.

But, following most of the decisions of the Courts, the BSE was not only forced to hire back the employees it laid off, but to also compensate them with the amount of the increased, inflation adjusted and updated wages, as well as with any other rights which they would have been entitled between their layoff and the time of their effective reintegration, while also being required to pay the lawyers and the court expenses.

The entire conflict harmed the image of the Exchange, because of the scandal which accompanied it (which concerned topics such as the carpet acquisition, the spokeswoman, the purchase of furniture, the tennis tournament, etc.) and because of the fact that the BSE became the subject of an investigation started by the CNCD (National Council for Fighting Discrimination), which incidentally, had also fined the BSE in 2010.

But the worst accusation, seems to be implied by the most inconspicuous words of the press release issued by the BSE yesterday: "He did not allocate time coordinating the resources of the BSE in order to reach the set targets on which he did not place enough weight".

These words suggest that some of the members of the Board suspect the lack of loyalty of the General Manager to the Bucharest Stock Exchange, leaving the impression of whispered suspicions that, starting with the moment when the vice-president of "Franklin Templeton - Romania" Grzegorz Konieczny made his strange entry on the Board of the Exchange, a furtive plan to move the Proprietatea Fund to the Warsaw Stock Exchange began developing.

What is interesting is, that Grzegorz Konieczny is not actually a newcomer in Romania, but has being doing business here since 1996-97 and, his name was insistently tied to that of Matei Păun, who returned to Romania at about the same time, being a member of a "trinity" which also involves Daniel Ţepeş.

But, of course, the words used, being so inexpressive, could also mean that he simply "did not do his job".

The talks which were held yesterday and those that were held four days ago, by the members of the Board, have led to the conclusion that the activity of Valentin Ionescu showed his lack of concern for the welfare of the Bucharest Stock Exchange, which he replaced with his interest in consolidating his position, by other ways than increasing the performance of the BSE.

The term of Valentin Ionescu was ended yesterday, four months prior to the expiration of the six months extension which he had been granted.

This abrupt decision comes as, one week ago, seven shareholders of the Exchange - the pension fund managed by ING, the ING International Romanian Equity investment fund, SSIF Intercapital Invest, Ifond Financial, Unicredit CAIB, BCR and Erste Bank, which own 9.41% of the exchange together - maintaining that they want to be represented on the Board of Directors according to their weight in the shareholder structure.

Apparently, most of the members of the Board viewed the request as a threat made by ... Valentin Ionescu, whom they assumed brought together this group of shareholders once he saw his position was shaking (in the history of the BSE, this would be the second time that somebody tries to overthrow Stere Farmache. 14 years ago, Mircea Ilie, who was the general deputy manager of the BSE at the time, was fired on suspicion that he had attempted to start a "rebellion", in order to replace Farmache).

It is said that this time, the suspicions of a coup attempt were confirmed by an alleged shift in the attitude of Valentin Ionescu, in his relations with the president of the BSE Stere Farmache, whom he yesterday indicated as the main obstacle towards the restructuring of the BSE.

Valentin Ionescu became the general manager of the BSE in August 2010 (and came into office on September 27th), after a serious scandal, when Daniel Ţepeş, who was considered the leader of the majority of the Council of the Exchange, resigned in order to force the Board to appoint Ionescu (this is the time when Ţepeş lied that he hadn't resigned, but that he had merely intended to do so and then actually changed his mind, but BURSA contradicted him, and published a facsimile of his resignation).

Meanwhile, Daniel Ţepeş resigned for the second time, being replaced by Grzegorz Konieczny, about whom the CNVM recently found that ha was incompatible with his position on the Board of the Exchange, and that he had to choose between his position in the management of Proprietatea Fund and his seat on the Board of the Exchange (as BURSA had announced about two weeks ago).

Yesterday's decision seems to be a bit of a surprise, showing that the members of the Council have realigned "under the banner" of those who were previously in the minority - Siminel and Botta.

The current Board of the Exchange was elected on February 2010 and has nine members: Stere Farmache, Ciprian Zah, Mircea Botta, Siminel - Cristian Andrei, Octavian Molnar, Grzegorz Konieczny, Lucian Isac, Ionel Uleia and Cosmin Gheorghiu.

It would appear that the only ones who supported Valentin Ionescu yesterday, were Grzegorz Konieczny and Ciprian Zah (who is loyal to Ţepeş).

But since he was incompatible, Konieczny's vote carried no weight anymore.

The Ţepeş affair which began about one year ago, has only blown up now.

Who's replacing who?

Yesterday, the Board of Directors replaced Ionescu.

But there is another General Shareholder Meeting coming, when the dismissal of the Board will be discussed ...

It is possible that one month from now, depending on the outcome of the General Shareholder Meeting, Ionescu will return.