Moldovan businesses have found a way to buy up public land by paying several times less money than the market price of the land. The scheme is simple: they lease in the land on which they have set their eyes from the local authorities, they build economic objects on them, and then they request to buy the land at its normative price as being adjacent to private constructions. Although the Court of Account has been signaling for years in a row that this practice drastically reduces the budget revenues and can be qualified as “fraud risk”, nobody has been taking a stand.

The most desired ones are the land plots from Chișinău for which a business would normally pay millions of lei. The Chișinău Municipal Council (CMC) in nearly each of its meetings approves decisions on the privatization of land plots. The record figure was reached on 19 May inst., at the last CMC meeting in its previous composition. Back then, the councilors voted 480 land projects related to 36 hectares of public land.

Price reduced four times

One of the scandalous projects approved by CMC referred to the sale of a land plot of 51 ares locates at 19/2 Mihai Viteazul Street to the company “Diuran,” specialized in constructions. The company leased in the land from the Mayor’s Office in 2002 and build a warehouse on it. According to the Cadaster Agency documents, in March 2006, the two buildings were put into use and shortly afterwards set as bank mortgage for a loan of 6.5 million lei. On 8 December 2010, the company renewed its lease contract for the following five years and the annual lease calculated amounted to only 26 thousand lei. In two months, the company filed a request for the sale and purchase of the land. On 19 May inst., CMC accepted that 51 ares of land, located near the city center, be sold at the normative price of 800,600 lei for being ‘adjacent to a private object,” The latest appraisal made by the Cadaster Agency in 2009 shows that the price of this land was 3.7 million lei, i.e. four times more than the municipality asked for and real estate experts are appraising it at present at double price.

Assigned without tender

Several former municipal councilors have claimed that the Division for Architecture, Urbanism and Land Relations commit infringements in establishing the borders of the land plots put out for sale and in calculating their price; however these allegations have been rejected. “The area of the necessary land is established in the technological process of the business company and the price is calculated using a formula that cannot be influenced. No land sale tender is needed because it had been leased out before. Only the land that has not been assigned to anyone or where the holders have not formalized their land relations with the Mayor’s Office is tendered,” explains Igor Cristal, head of section within the Land Division of Chișinău Mayor’s Office.

The company involved in the BEM scandal

Sources from the Mayor’s Office have claimed that “Diuran” SRL was backed up by influential people who could “easily acquire not only a municipal land plot.” The name of this company also appears in the Banca de Economii scandal, in the case started against the former president of BEM Grigore Gacichevici. The press has written before that in July 2009, “Tomaili Argo” allegedly received 40 million lei from BEM with Gacichevici’s agreement, although it had other 42 million lei to return from an older credit. In several days, the money was transferred to the accounts of intermediary companies. “Diuran” SRL, administered by Alexei Buzenco, is said to have received 20 million lei. The money was transferred back to the account of Tomaili Argo on the same day and used to pay the old credit. Thus, the company replaced a credit that was reaching maturity and had an interest rate of 20% with a new credit with an interest rate of 12.5%.

Four hectares of land for “Metalferos”

On 19May inst., the CMC also approved the request of the company “Metalferos”, which is said to be in the sphere of influence of the oligarch Vlad Plahotniuc, to buy 4.3 ha of land in the industrial zone Vatra at the normative price of 5.6 million lei, i.e. at only 13 thousand lei for an are. In 2009, the land was estimated at 9.4 million lei by the Cadaster Agency and its current market price is said to be at least 15 million lei. According to the documents, the land is adjacent to the production and storage base located at 1/3 Feroviarilor Str. and is leased in by “Metalferos” for 155 thousand lei per year. Although the lease agreement is valid until 2017, the Land Division hurried to propose to the CMC the land for sale.

“In 2013, we took this draft decision out of the meeting agendas several times. There are doubts about the size of the land plot offered for the production process. We must check if the limits are within the lease agreement or whether it has been increased by any hectares and how the sale coefficient was calculated. Different tricks can be used. On 19 May, there was a combination vote between PL (Liberal Party) and PCRM (Communists Party of Moldova) and they quickly put this draft decision on the agenda,” the former municipal councilor Oleg Cernei says.

Investigation at the National Anticorruption Center

He notified the law enforcement in regard to the 480 land draft decisions approved in a big hurry by the CMC on 19 May and the National Anticorruption Center (NAC) started investigating and seized the draft decisions from the Mayor’s Office right on the same day. After five months, the investigation is pacing the step. The NAC press officer Angela Starinschi specified that no criminal case had been opened and refused to tell us what kind of verifications were made on this case. Due to the NAC investigation, the business companies that in May acquired the right to privatize municipal land have not concluded the transactions with the Mayor’s Office. Exception is “Diuran” SRL that in one month became legal owner of the land plot located on Mihai Viteazul. The company manager could not be found to explain how that was possible. The telephone number indicated in the company’s legal address was answered by a woman who suggested calling on the following day. But nobody answered the phone afterwards.

Nor did the management of “Metalferos” want to comment the accusations brought to it i.e. that there was an understanding to buy up four hectares of land for a knock-out price. The secretary told us days in a row that the PR person was on vacation and that the managers of the company could not be put through directly.

Decision suspended in court

The Chișinău Territorial Office of State Chancery also reported a number of infringements by the CMC in passing the land draft decisions on 19 May and sued it. “Until the examination of the case, we filed an action security request. On 28 Sept, the Centru District Court ex officio suspended a number of CMC decisions. Until the court issues a final judgment, “Metalferos” cannot register its right on the plot,” the State Chancery lawyer Arcadie Grama confirms.

A district councilor’s transaction

Public land is sold at derisory prices not only in the capital city. During its audits, the Court of Accounts identifies such cases in all the districts. For instance, last year, the Dondușeni District Council sold two constructions amounting to 216 thousand lei to “Cvacons-Lux”. The law stipulates that “the land on which constructions and engineering sites are located shall be sold at the same time with the sale of the real estate.” The business operator infringed upon this provision by not buying the 15 are land plot. In seven months, the CMC sold the land at the normative price of 27 thousand lei, qualifying it as adjacent to the constructions previously privatized. The appraisal by the Cadaster Agency shows that the land costs ten times more and should have been sent at least for 279 thousand lei.

According to the data of the State Registration Chamber, the company “Cvacons-Lux” was founded in 2012 by Vasile Curmei who is district councilor in Dondușeni. He denies having influenced the CMC decision on privatization of constructions. “It had been put up for sale for two years and no one was interested. I purchased it in the tender absolutely legally. Another business operator participated but I raised the price twice and won the tender. I didn’t even know that I had to buy the land separately. I later found out that I paid as much as the City Council had decided. I couldn’t influence anything there. I’m really not in good relations with those from the Mayor’s Office,” Vasile Curmei argued.

The man says he is not too happy with the transactions because “the buildings were in deplorable state and there was unimaginable misery on that plot.” “I took a loan and invested about 300 thousand lei to clean it up. I built some garages and a warehouse for construction materials. I created jobs. If I had pursued a mingy goal I would have sold the buildings to someone else a long time ago. But I make investments and would like to leave the business to my children,” the district councilor adds.

No competitors

Public land in the total amount of eight million lei was sold last year in the district of Criuleni and many of the plots were sold at the normative price. The latest audit conducted in Bălți found that the municipality sold 135 land plots amounting to 14 million lei in one year through tenders but the legality of the transactions was doubted. A review of the minutes found that in 123 cases (91%) only one participant signed up for the tender and was awarded the contract.

Fraud risk

Court of Account representatives say that “the leasing of public land for construction for its subsequent sale is a method of evasion from the legislation and reduction of land cost.”

“This mode of land trade not only reduces budget revenues but can also be qualified as fraud risk,” experts notice.

This investigation has been produced as part of the campaign “Journalists for Transparency in Public Fund Management,” carried out by the Center for Investigative Journalism with the support of the US Embassy to the Republic of Moldova.