FNI investors – the Romanian State 1:0

Sebastian Vlădescu

Sebastian Vlădescu

Bucharest – Jubilating leadership of the recently set up National Association of FNI Investors (President Ovidiu Mazilescu, and VPs Dana Coman and Stefan Marian) told reporters at a press conference that took place in Bucharest yesterday that the verdict given the other day by a Bucharest court in their case against the Savings Bank (CEC) opens the way for investors to recover their money.

At stake are some 6.7 trillion lei (over $300 million) claimed by the roughly 220,000 small investors who saw their investments vanishing when the largest Romanian open-ended fund, the National Investment Fund (FNI) crashed two months ago. The association includes about 100,000 investors from 37 counties plus Bucharest, „but our membership increases every day,” Coman said. The association holds CEC accountable for the reimbursement of investors’ money, based on a contract CEC’s former President Camenco Petrovici had signed in December 1999 with SOV Invest, FNI’s management company. The contract says that CEC guarantees investors’ money „as in the day when the withdrawal application is being submitted.”

CEC claimed the contract was void, since SOV Invest in March-April this year failed to pay CEC the five billion monthly fee provided for by the contract. However, Bucharest Court ruled out CEC’s claim and declared the contract is valid, as CEC did not take legal action against SOV Invest in due time. CEC said it would appeal the decision, and eventually take the case to the Supreme Court of Justice.”

There are already more than 60 days since CEC should have paid the money,” Mazilescu said. „The money should be provided of CEC’s profits, or from other sources, that’s not our business. We just want our money back, we don’t care who will pay, or from what sources, or what will happen with the fund afterwards,” Marian added.

Despite the first victory scored by the investors’ association, there are little chances that the issue will be solved anytime soon. After the scandal broke loose, investigations carried on SOV Invest’s books had showed that the assets still held by the fund were worth 200-300 billion lei, at best. That would leave CEC in a position where it has to reimburse in excess of six trillion lei.

CEC’s President Ion Ghica acknowledged that the bank would observe the court ruling. However, CEC’s profits (standing at some 522 billion lei gross profit after the first half of the year) and even the bank’s own funds (1,358 billion lei as of the end of 1999) are a far cry from what the investors claim – let alone that money is earmarked as budget revenues.

Although Deputy Finance Minister Sebastian Vladescu said that the state budget would provide the money according to the final court decision, that is highly unlikely to actually happen. By and large the amount due equals some 1% of the Gross Domestic Product (GDP), an additional deficit that Romania simply cannot afford given the tensed relations with the International Monetary Fund. Along with the disastruous drought that will probably cost Romania some 1.3-1.5% of the GDP, the new expense would ruin all government’s targets for this year (budget deficit, inflation, economic growth).