Tag Archives: Kroll report Moldova

High-Level Corruption Threatens Moldova’s European Aspirations

Every April 7, Moldovans take stock of the progress the country has made since the youth protests of April 2009, which popularly became known as the “Twitter Revolution.” Nine years ago, this civil unrest led to the demise of Communist Party rule and ushered in a coalition of pro-European parties into power. However, hopes for a more democratic and accountable government not only failed to materialize, and many perpetrators of the brutal police crackdown in April 2009 have since been promoted to key state positions by the now ruling Democratic Party (Anticoruptie.md, April 7, 2017). This sense of impunity, coupled with poor economic conditions domestically, discourages young Moldovans from investing any hope in their country’s future. According to the latest poll by the International Republican Institute, 76 percent of respondents do not think that young people have a “good future in Moldova,” while 96 percent said “corruption is a big or very big issue” in the country (Iri.org, March 29, 2018). A recent joint report by the European External Action Service and the European Commission stated that “corruption still remains widespread, and independence of justice, law enforcement as well as national anti-corruption authorities need substantial improvement” (Europa.eu, April 5). Thus, endemic corruption and democratic backsliding not only undermine Moldova’s European aspirations, but also create fertile ground for political instability and civil unrest, this time against a nominally pro-European government.

The same European Union report on Moldova’s record of implementing the Association Agreement with the EU recalls that the change of the electoral system in July 2017 went against the recommendation of the Council of Europe’s Venice Commission and the Office for Democratic Institutions and Human Rights of the Organization for Security and Cooperation in Europe (OSCE). European democracy watchdogs have repeatedly warned Moldova not to introduce the mixed electoral system, because it is likely to exacerbate the country’s corruption problem by allowing wealthy businesspeople to influence elections in single-member districts (Venice.coe.int, March 19; see EDM, January 10). This concern is a major reason why the EU is withholding 100 million euros ($124 million) in macro-financial assistance, earmarked for Moldova last year. According to Vice Chair of the European Parliament Committee on Budgets Siegfried Muresan, EU funds would have arrived already had it not been for the controversial change to the electoral system (Europalibera.org, February 1). On a recent visit to Moldova, Muresan emphasized that at least three or four of the ten EU conditions for the first tranche (30 million euros) have not been met (Adevarul.roCotidianul.md, April 6). Indeed the EU-Moldova Memorandum of Understanding sets clear deliverables in terms of public-sector governance, the fight against corruption and money laundering, energy-sector reforms, etc., but it also demands respect for effective democratic mechanisms, including a multi-party parliamentary system and the rule of law (Europa.eu, November 23, 2017). The latter is much more difficult to achieve, and given how the investigation into the billion dollar bank fraud is going (see below), the government appears to be barely trying.

One billion dollars (12 percent of GDP) was siphoned off from three Moldovan banks prior to the 2014 parliamentary elections. “The theft of the century,” as it has come to be known, is a litmus test for the Moldovan justice system. Moldova’s National Bank hired the New York City–based investigative consultancy Kroll to conduct a financial forensic investigation. Already in its first report, presented in April 2015, Kroll identified controversial businessman Ilan Shor, who controlled the three embattled banks, as the main figure behind the fraud. The consultancy firm’s second report, from December 2017, pointed to 77 companies linked to Shor, who is identified as one of, “if not the only beneficiary” of this highly coordinated fraud (Candu.md, May 4, 2015; Bnm.md, December 21, 2017). Yet, despite being convicted by a lower court to seven and a half years in prison in June 2017, Shor appealed the ruling, and the case has been stalled (Deschide.md, April 2, 2018). Shor remains at large, and in the meantime, he became mayor of a large town, took over the leadership of a political party and is gearing up to enter the parliament. Keen observers of Moldovan politics know that this would be impossible without the protection from the head of Moldova’s ruling Democratic Party, oligarch Vlad Plahotniuc, who used Shor’s depositions to imprison Plahotniuc’s political and business rivals (former prime minister Vlad Filat, oligarch Veaceslav Platon and mogul Chiril Lucinschi) in swift closed trials. The symbiotic relationship between Vlad Plahotniuc and Ilan Shor is the embodiment of high-level corruption that makes the EU increasingly frustrated with Moldova.

Endemic corruption, exacerbated by changes to the electoral system, led to Moldova’s demotion from flawed democracy to a hybrid regime, according to the Economist Intelligence Unit’s Democracy Index (The Economist, February 4). The risks of Moldova becoming synonymous with corruption are manifold, yet two main threats stand out. First, if it continues to only pay lip service to fighting corruption, Moldova will fail to advance its European integration efforts. Second, if the highly disputed mixed electoral system indeed produces a rather unrepresentative outcome in the parliamentary elections scheduled for the end of 2018, the country could plunge into another cycle of political instability, which could be exploited by foreign actors such as Russia. With all that in mind, it is nonetheless becoming apparent that the main fault-line in the Moldovan political debate is less of an East-West divide, but rather rivalry between those defending democracy and good governance and those content with clientelism and corruption. Both the nominally pro-EU oligarch Vlad Plahotniuc and the drudgingly pro-Russian President Igor Dodon are, in fact, progenies of Communist Party leader Vladimir Voronin’s regime, which Moldova’s millennial generation rose up against in April 2009, only to grow disheartened a decade later.


Note: This article was written for the Washington based Jamestown Foundation and the original can be accessed here.


Chisinau Mayoral Election – A Race to Nowhere


Old image of current mayor’s office and city council building. Photo: Adevarul.ro

National local elections are less than a month away. Yet, if not for the numerous campaign posters, very few would probably notice. This is not to say that there is no campaign, rather that several other developments have hijacked the public debate. The Gaburici Cabinet attracts the most media attention as it meddles through the first 100 days in office amid speculations that the new prime minister forged his way into college, lacking a valid high school diploma.  On the more substantial front, the new Cabinet is struggling to put down the fire sparked by the billion dollar bank heist.  Yet, the more the government pretends to be doing, the less credibility it has. It is one of those odd situations, when everyone knows what needs to be done, but no one dares to actually lift a finger. Cynics have ruled that indeed it is hard to imagine a more succinct anecdote of Moldova’s irrelevance and ineptitude, but who can really dispute that.  The frustration brought several thousand people into the main square demanding answers, butt o no avail. To add insult to injury, a parliamentary inquiry and a private financial investigation report pointed fingers at a well-connected local businessman – Ilan Shor, who is now under house arrest after being a mere witness in the case.  In a defiant and preposterous move, a pro-Russian party nominated Shor to run for mayor of the sixth largest town in Moldova, not counting Transnitria, all while the candidate is under home arrest.  These and other developments make this election a joke.


Mayoral elections in Chisinau are not very inspiring either.  There are 17 candidates in then run for the most powerful directly elected position in the country. One could argue that a Chisinau mayor has more popular legitimacy than the president, who is elected following backdoor horse-trading in parliament.   With less than 2% of the country’s territory, Chisinau has over a fifth of all voters, almost half of the country’s GDP and over 60% of total contributions to the national budget. Politically, Chisinau mayor is also bolstered by the fact that the capital has the most informed and engaged citizens. It should come as no surprise that Chisinau is somewhat more progressive than the rest of the country. It may be one of the reasons why voters in the capital tend to elect mayors form the opposition, sending a warning message to the ruling parties. Hence, economic and political discrepancy between the capital and much of the country has been growing.

This election will only strengthen the trend, as five out of six candidates who have some chances of winning are from the opposition, if you count the communists as opposition (sic). The sixth – former mayor and PLDM nominee, Serafim Urechean, is fighting internal sabotage as many PLDM members are not happy with his nomination, since he is not even a member of the party.  The two main contenders are incumbent mayor Dorin Chirtoaca and Socialist nominee (not member of the party), former Prime Minister  and Minister of Finance, Zinaida Grecianii. She actually won the Chisinau mayoral race in the first round back in the summer of 2005, but those elections were invalidated due to low turnout. Chirtoaca cut his political teeth in that race, coming in third with just over 7%. Repeated elections, which Grecianii carried with 88% of the vote, had an even lower turnout as many candidates, including Chirtoaca, staged a boycott. Communists outdid themselves this time, nominating business tycoon Vasili Chirtoca (notice last name similarity with incumbent mayor Chirtoaca).  As communists suffered important losses to a clone party in the parliamentary elections, employing a ‘clone’ of their own seems petty, but it may also be a genuine coincidence, though unlikely. Ilian Casu is a newcomer to national political stage, propelled by the Renato Usatii phenomenon. Usatii and his team are running a guerrilla campaign as they can be expelled from the race as was the case in the parliamentary elections, though it is less likely to happen again. They are less of a threat now. Still, if successful in his bid for mayor of the second largest city – Balti, Usatii would gain a major regional platform, which he can use as a springboard to national politics.    Ironically, the only more or less inspirational candidate happens to be a 67 year old veteran politician and think tanker, who still enjoys skydiving as a hobby. Too bad Oazu Nantoi cannot parachute himself into office, democracy obliges…

The main reason is that, local elections have always been considered second-order elections, largely because, in the absence or real local autonomy and fiscal decentralization,  locally elected officials are largely powerless and can do very little to better the lives of their constituents. All of the 898 mayors, 1,120 regional council and 10,630 local council members in Moldova elected in the previous election have very little say about what matters – money. It is up to the ruling party bosses in Chisinau to decide who gets what, when and how much. Hopefully, the law on fiscal decentralization that should enter into force this year will shift the power back where it belongs – at the grass-roots. Finally, Moldova would benefit a lot from going the extra mile and implementing the council-manager form of local movement, where the council hires a city manager, who becomes a chief administrative officer of the city, while the mayor chairs the council meetings and, otherwise, plays a largely ceremonial role.  Why would voters have to bother if a mayoral candidate is pro-Romanian or pro-Russian, particularly when he or she has no power to take the country or even the town into either direction? Would not a professionally trained public manager serve the community better? Well, let us first see how fiscal decentralization plays out. One reform at a time.

PS: Here is a fun project put together by local media and IT wizards. It allows voters from four largest cities to match their own local public policy preferences with answer provided by candidates, thus seeing which candidate best fits a voter’s policy preferences. Sadly, most front-runners backed down in a clear display of cowardice and lack of appreciation for such innovative tools. Though, funded by European Endowment for Democracy, there is no English version, so enjoy Romanian and Russian versions.