Local IT sector rocked by corruption scandals

The recent Microsoft and Siveco corruption cases reveal a Lernean Hydra, each of its heads being a high-profile official. The scandal risks besmirching the image of the local IT industry, one the most prolific sectors in Romania. The question is: will it put investors off or, on the contrary, will this purging of the sinners prove beneficial for the industry?

By Otilia Haraga

Recently, corruption in Central European states has drawn reprimands from American officials such as Victoria Nuland, assistant secretary of state for European and Eurasian affairs.

“Across the region, the twin cancers of democratic backsliding and corruption are threatening the dream so many have worked for since 1989. And even as they reap the benefits of NATO and EU membership, we find leaders in the region who seem to have forgotten the values on which these institutions are based,” she said in a speech.

The American official starkly asked leaders in these countries: “How can you sleep under your NATO Article 5 blanket at night while pushing ‘illiberal democracy’ by day, whipping up nationalism, restricting free press or demonizing civil society! I ask the same of those who shield crooked officials from prosecution, bypass Parliament when convenient or cut dirty deals that increase their countries’ dependence on one source of energy despite their stated policy of diversification?”
Romanian officials were split in their reactions to Nuland’s statements.

Prime Minister Victor Ponta said the tough words of the American official were directed at neighbor Hungary. “I believe both President Barack Obama and Assistant Secretary Nuland have an extremely critical public opinion regarding what is happening in our neighboring country, Hungary, and I believe that since Mr Orban is today in Romania, and in Bucharest even, you have the opportunity to ask him. As prime minister of Romania, I do not wish to and cannot comment in public when looking across the border at others,” said Ponta.

On the other hand, President Traian Basescu said Nuland’s statements should be taken seriously, because they also targeted Romania.

“I can see an extremely dishonest approach that harms politicians, from Ponta to regular parliamentarians and the public. Mrs. Nuland’s remark also includes Romania. Corruption is a threat to national security. I should remind those who do not recognize themselves in the statement that Mrs. Nuland is speaking about parliaments that are setting obstacles in the way of justice,” said Basescu.

In an official statement sent to Business Review, the Employers’ Association of Software and IT Services (ANIS), said these investigations “prove that Romania is a country where justice is working and this is an encouraging sign both for investors as well as for those who wish to start and grow healthy businesses locally.”

ANIS went on, “Over the past years, Romanian IT has been proven to be one of the factors that supports the growth in national competitiveness at global level. This year, Romania has climbed from 79th to 59th position in the Global Competitiveness Index as well as improving its position in the Global Innovation Index. Moreover, until now, Romanian IT has proven that there are numerous talents and people with vision who can develop successful companies regionally and globally. This is the field that has contributed a great deal in recent years to the growth of Romania’s global exports. According to the Romanian National Bank, the software and IT services industry has managed to bring over EUR 1.4 billion into the country, making it the sector with the second most exports in 2013.”

ANIS, as an association that represents the software and IT services industry, says it encourages the development of all companies in this sector in a clean environment in which innovation and competition come first.

But the scandal that is staining Romanian IT is hard to sweep under the rug.

Nine local ex-ministers – Ecaterina Andronescu, Valerian Vreme, Serban Mihailescu, Dan Nica, Adriana Ticau, Gabriel Sandu, Daniel Funeriu, Alexandru Athanasiu and Mihai Tanasescu – face prosecution following a Microsoft investigation into the lease of its licenses to schools. The former government officials are charged with a series of offences, including abuse of office and money laundering. The contract under investigation ran between 2004 and 2009.

Anti-corruption prosecutors started to investigate following a request by the Control Body of Prime Minister Victor Ponta, which claimed that educational licenses had been used without any legal or contractual base since December 2009, during the mandate of Daniel Funeriu, former minister of education, and Valerian Vreme, former minister of communication.
In July, the DNA started an investigation in rem into influence peddling related to corrupt practices, bribery and abuse of office regarding the licenses investigation. At that time, Sorin Eftene, former interim general manager of Microsoft Romania, was called to testify in the case.

Prosecutors said that some of the former ministers had helped facilitate the signing of a licensing contract in 2004, which allowed a 47 percent discount granted by Microsoft to the government to be embezzled, and distributed in bungs to the individuals involved, according to news portal hotnews.ro

The DNA added that it had evidence that the ministers had asked for money to favor Fujitsu Siemens Computers in operating the contract, at a price that was inflated by 40 percent.

The investigation found that out of the USD 54 million paid by the government under the licensing contract and its extension, bungs paid to public officials amounted to USD 20 million.

In addition, the signing and operation of leasing contracts for Microsoft Enterprise Agreement Subscription licenses with the D-CON.NET consortium was carried out in violation of the public acquisitions law by Funeriu and Vreme. Prosecutors said this was done to favor certain companies.

In addition, prosecutors are claiming that a USD 200 million government program (SEI) to develop IT labs in public schools was also tainted by corruption. Both the software and equipment for the labs were overpriced and the public acquisition procedure favored Romanian IT firm Siveco, which is implicated in the other high corruption scandal shaking the sector.

Siveco is suspected of creating a criminal network that robbed the state of an estimated EUR 10 million by supplying fake IT services through various companies created especially for the purpose.

Currently, Irina Socol, former president of the scandal-mired firm, remains in detention.

In an official statement sent to Business Review, Siveco officials say that “All projects we develop and are developing respect the law. We have placed at the disposal of the authorities all the information regarding our participation in any project, anytime it was requested. We also wish to re-emphasize once more our availability to cooperate in order to clarify all aspects that we have knowledge about. We have not participated in any way in the project related to then lease of Microsoft licenses.”

In the Microsoft case, the latest developments are that the plenum of the Chamber of Deputies will meet on October 13 to decide whether to allow the prosecution of deputy Valerian Vreme, announced the president of the chamber, Valeriu Zgonea.

He said the short ten-day term in which the deputies will pronounce a decision shows they are not shielding any deputy from justice, in response to recent criticism.

The DNA has asked the Chamber of Deputies and the Senate to start prosecution procedures against former ministers Ecaterina Andronescu, Serban Mihailescu and Valerian Vreme.

The Permanent Bureau ordered the Juridical Commission to present a report on the DNA solicitation within 15 days in the case of senators Ecaterina Andronescu and Serban Mihailescu and 10 days in the case of deputy and former IT&C minister Valerian Vreme.

The terms were slammed by opponents, who urged the process to be expedited. One of the most vocal opponents was former minister of justice Catalin Predoiu. “I condemn all of Parliament’s ways to slow down the investigation. The fact that the Senate president has granted a 15-day term for approving the prosecution of two senators under the pretext that the Legal Commission of the Senate must study the 13 volumes of the file shows a hostile approach to the justice system,” said the former minister.

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