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Secret Audit Report Links Missing $1 Billion To Moldovan Businessman

Ilan Shor is one of the richest people in Moldova.
Ilan Shor is one of the richest people in Moldova.

CHISINAU -- Moldovan parliament speaker Andrian Candu has published the complete text of a controversial audit report into the disappearance of some $1 billion from three banks.

The confidential report by the independent U.S. investigative consultancy Kroll documents in detail how companies and individuals tied to 28-year-old businessman Ilan Shor took control of three Moldovan banks during 2012-14 and then allegedly issued massive loans to Shor-connected companies during a three-day period in November.

Moldova has been rocked by the apparent theft of nearly one-fifth of its annual gross domestic product, based on current exchange rates. The central bank was forced to issue the three banks some 16 billion lei ($870 million) in emergency loans to keep the economy from collapsing.

Adrian Lupusor, executive director of the Expert-Grup think tank in Chisinau, says the report describes a sweeping network of illicit financial transactions. "It seems to be a money-laundering scheme with a transnational character, a cross-border character, because it involved several banks and companies from different countries and it definitely involved a large number of people," he says.

On May 3, tens of thousands of protesters took to the streets of the capital, Chisinau, calling for the release of the audit report and for the resignations of the prosecutor-general, several Supreme Court justices, and several political figures they hold accountable for the disappearance of the money.

Does The Report Matter?

Kroll had resisted the release of the confidential report, but Candu wrote on Facebook on May 5 that he decided to make the complete 83-page document public because the government had "a responsibility to be transparent with our citizens."

In comments to RFE/RL's Moldovan Service, Eduard Harunjen, head of the anticorruption division of the Prosecutor-General's Office, noted that the report did not have legal standing.

"We do not doubt the objectivity of the report and we are not criticizing it," Harunjen said. "But the Kroll experts don't represent an investigating authority." He added that the authorities did not feel they have grounds at present to arrest Shor.

The Kroll report was commissioned by the Moldovan central bank and sought to establish exactly what happened to the missing money. The auditors reviewed transactions at the three banks -- Unibank, Banca de Economii, and Banca Sociala -- in November 2014. It concluded the three banks transferred at least 13.5 billion lei to five Moldovan companies affiliated with the Shor group, controlled by Ilan Shor, between November 24 and 26.

A spokeswoman for the Shor Group said a statement will be issued on May 6. The website of the Moldovan edition of the Russian newspaper Komsomolskaya Pravda posted a brief statement by Shor denying earlier Moldovan media reports that he had left the country.

"We are studying the report and in many respects it confirms what we said earlier about what occurred before the arrival of the private investor and how we were forced to cover it," Shor said, suggesting that he had worked to save the banks from earlier mismanagement.

He asserted that he is in Chisinau and is cooperating with the investigation.

Coordinated Moves

Funding for the massive increase in lending was, according to the report, "enabled by deposits from external financial institutions, including [three Russian banks] Gazprombank, Interprombank, and Alef Bank."

The Moldovan companies allegedly then immediately sent the money on to accounts controlled by offshore companies based in Latvia and registered in the United Kingdom and Hong Kong.

The Kroll report indicates a plan to steal the money was likely initiated as early as 2012, when ownership of Unibank was transferred to 21 new shareholders, including "political figures and individuals which appear closely connected to Ilan Shor." Each of the individuals concerned allegedly acquired Unibank stakes of between 4.58 percent and 4.97 percent. Several of the individuals allegedly involved were Ukrainian or Russian citizens working through Latvia's Latvijas Pasta Banka.

During 2013, companies and individuals associated with Shor also acquired stakes in the other two banks. In all three cases, groups of companies and individuals each acquired small stakes, "which had the effect of transferring ownership to a series of apparently unconnected individuals and entities."

"The structure of the share acquisitions appears to be a deliberate attempt within both banks to conceal the true identity of the beneficiaries," the report states about the takeovers of Banca de Economii and Banca Sociala. It concludes that the "significant level of interrelated lending within three, apparently independent banks would have required a significant level of coordination and control of each of them."

"A preliminary review of the transactions undertaken in each bank suggest [sic] a deliberate intention to extract as much benefit as possible for entities connected to Mr. Shor and to the detriment of the banks," the report states.

No Single Actor

The report also states it is undetermined whether Shor acted alone "or in concert with other as yet unidentified parties."

Analyst Lupusor says it is likely more people will be implicated as the investigation continues. "The level of transactions is too complicated to be conducted simply by some businessman," he says. "They definitely involved a large number of financial and legal consultants."

Shor is one of the richest people in Moldova. The Kroll report includes a profile of the Shor Group, which has grown from 10 companies at the end of 2011 to 39 by late 2014. It controls the Dufremol duty-free company.

Over the course of 2013-14, the Shor companies increased their total debt from about 2 billion lei to nearly 14 billion, with the loans coming "almost exclusively" from the three banks under investigation.

Shor was questioned by Moldovan authorities for about eight hours in March in connection with the money transfers.

According to Moldovan media, his private plane left Chisinau on April 30 in the direction of Moscow.

The scandal has rocked Moldova's fragile ruling coalition as the country tries to pursue closer ties with the European Union.

At the May 3 demonstration in Chisinau, blogger Alexandru Cozer called on the authorities to answer for the disappearance of a fortune he said rightfully belonged to Moldovans who work in the poor country or labor beyond its borders and send money home.

"Why has the money earned by the calloused hands of our farmers been stolen?" Cozer asked. "Why has the money that was earned abroad through the tears of our mothers, sisters, and parents been stolen? I am asking you criminals who are in power -- why?"

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