Public procurement

Unprofitable business of the capital

Lands and buildings in Chisinau City Hall, leased or privatized for nothing

Clădirea Primăriei Chişinău. Foto: CIJM
Author: Mariana Raţă, Anastasia Nani
09/08/2016 19637

Lands and nonresidential spaces owned by Chisinau Citi Hall  is a real godsend for different economic units or people close to local public authorities. Some of them rented spaces with a surface of hundreds of square meters at a price of just seven lei per square meter; others privatized entire buildings at the price required for a dorm room. Although the law requires organizing public tenders for leasing and privatization of lands and buildings in the capital, the authorities avoid this procedure. Thus, public property management, especially of non-residential spaces and lands, is the most damaging activity of the municipality, with a high corruption risk. An investigation of the Center for Investigative Journalism shows how municipal  property is leased and then  becomes private property at ridiculous prices.

Space at low price for liberals

Leaders of the Liberal Party in front of the faction’s office. Photo: Facebook/Mihai Ghimpu

The Liberal Party moved in August 2013 into a building of the municipality with a surface of about 300 square meters on str. Nicolae Iorga, 15. This building, included in the Register of monuments protected by the state, was renovated from public budget before the liberals had changed their office.  The faction received this new office, after on June 27, the Municipal Council Chisinau (CMC) adopted a decision to  lease property for 10 years with annual payment worth 109.277  lei, about 9.000  lei per month  (30 lei per one square meter– n.r.). By then, the building on str. Nicolae Iorga hosted the Direction of Housing Privatization within the General Division of economy, reforms and patrimonial relations of Chisinau City Hall.  Thus, 33 officials, mainly liberals and communists decided to terminate the bailment contract signed between CMC and the Division signed in 2007 for a period of ten years and accepted the request registered in February, 2013 by the chairman of the Liberal Party by which he requested to local authorities a space with a surface of about 200 square meters. The politician said that the office which the faction used was not enough for the activity of the party. A year later, Realitatea.md reported that the former office of the Liberal Party, on str. București, 88,  had a surface of 500 square meters and the party paid about 5.000 euros monthly, as much as the liberals pay now annually for the office rented from Chisinau City Hall. Currently, real estate agencies  propose for rent the office on str. Bucuresti, with a total capacity of 1,300 square meters against the sum of 7,000 euros a month.

In the same meeting of  CMC, liberals and communists voted with the decision by which  Party of Communists (PCRM) had the right to privatize the land afferent to the office of the faction, on str. Nicolae Iorga. Liberal-Democrat councilor Ghenadie Dumanschi accused his liberal and communist colleagues of  "raider attack over municipal properties" and hidden understandings "on mutual support for seizure of very important property for Chisinau". "We noticed some hidden agreements which culminated today. PCRM claims that the Liberals will get a very important building in the historic center of Chisinau, a building that underwent capital repair using the money of the municipality", said Ghenadie Dumanschi in the meeting of CMC.

„It is about change of office. Nothing out of the ordinary”, said mayor Dorin Chirtoaca then.

Court decisions  favor the Liberal Party

Once the Liberals moved to the new office, representatives of Chisinau Territorial Office of the State Chancellery  appealed the decision of CMC in court seeking annulment of the document. Lawyers argued that the  local authorities  leased the building  in the absence of a public tender, as required by law. "The organization and development of the tender is subject to the priority of the proposed maximum price. The process requires free access and equality of all people wishing to obtain the right to leasing of real estate located in the street Nicolae Iorga, 15", said lawyers in the court.

Office which the Liberal Party received in 2008 from the local public authorities in Chisinau. Photo: CIJM

Also, in 2008, the Liberal Party (PL) has obtained  in the absence of a public tender, an office with a surface of 53 square meters from the municipality on str. Bucharest, 87. Although the Liberals said that they did not use that office, the Council’s decision had not been abrogated. "Since they benefited from an area of the municipality without organizing a tender, they had not the right to ask for a new office. Theoretically, all parties have equal rights and if all of them ask for offices, there would be no municipal heritage... they reasoned that it was an exchange of rooms, but what kind of exchange: a space of 50 square meters for a space of 300 square meters. The decision has not been abrogated and as long as this has not happened, it could produce legal effects", explains Maria Arhir, jurist of Chisinau Territorial Office of the State Chancellery.

Meanwhile, legal addresses of some companies of business partners of the liberal chairman Mihai Ghimpu were registered in the building on the str. Bucuresti, 87, writes Ziarul de Garda in an investigation carried out together with the Center for Investigative Journalism.

Representatives of CMC grounded at court that the local public authorities received just the request of the Liberal Party on renting the office on str. Nicolae Iorga  and the law did not ban them to rent this office based on direct negotiations. Lawyers of the Council presented at court the copies of some decisions by which local councilors leased offices to other factions: Christian People’s Party, Party Union of Labor, Cristian Democratic People’s Party, Democratic-Agrarian Party, Communist Party, Alliance „Moldova Noastra” (“Our Moldova”), Social-Political Movement for a Democratic and Prosperous Moldova. The majority of these parties disappeared some years ago before Dorin Chirtoaca was elected mayor of the capital.

In turn, lawyers of PL said that by adopting this decision, local officials have just backed the party. Both the Centru District Court on 9 March 2016 and the Court of Appeal on 25 June 2016 rejected arguments of the Territorial Office of the State Chancellery and agreed with CMC. "Chisinau Municipal Council, aimed to support the development of political parties, including the Liberal Party, and  to favor  best exercise of the act of leadership, leased  non-residential offices on Nicolae Iorga Street, 15",  said magistrates  of the court.

Inconsistent contract, path to privatization?

Lawyers of the Chancellor’s Office drew attention to the fact that the contract did not include provision "without the right to privatization". "Failure to include this phrase in the content of the decision shows the agreement of the CMC to the alienation of the immovable property. (...) Afterwards, there are not legal mechanisms of preventing and halting the privatization process", argued representatives of the Chancellor’s Office. Thus, lawyers have asked the court to apply an insurance measure to prohibit PL to privatize or sub-lease the space which  they have received from the municipality. In May 2014, the court  carried forward the request and imposed a lien on property. Party representatives demanded quashing of  the decision, but the claims were rejected by the Court of Appeal Chisinau.

The case of the office of the Liberal Party will be examined at the Supreme Court of Justice. If magistrates of the Council  agree, then the seizure will be removed, and the beneficiary will manage the property. Although the law prohibits privatization of buildings with status of monument, experts believe that this building  will be seized by liberals. "There is this risk, although two laws prohibit the privatization of such buildings. This might be ruled by a government decision. We have two precedents in October 2010: building of the German Embassy in Chisinau and another property sold to the Hebrew community", said local councilor Ion Stefanita, director of the Agency for Inspection and Restoration of Monuments of Moldova.

A year ago, the CMC decision on Liberal Party’s office was targeted by members of the National Integrity Commission (NIC) to determine whether the mayor or the first deputy chairman of the party admitted a conflict of interest. NIC decided to close this case. "Dorin Chirtoaca did not take the decision to lease offices on str. Nicolae Iorga, 15, to the Liberal Party and did not participate in taking or execution of the decision of Chisinau Municipal Council, as the execution was entrusted to the deputy mayor Nistor Grozavu", read the findings of the institution.

Historic building for Golovin’s association

Also, in the absence of any tender, in the same meeting of the CMC dated 27 June 2013, local officials voted for leasing a surface of 230 square meters on the first and second floor of the building on the street Vlaicu Parcalab, 55 to the Public Association Society of Diabetes "Prodiab". The spaces were ceded to the association founded and led by the then leader of the communist faction in CMC Boris Golovin, later Communist MP, at a symbolic price of 12 lei per month per square meter, or 34,000 lei per year for all rented space. At the last moment, local officials decided to postpone consideration of the draft for another meeting.

Three months later, "Prodiab" has tried again its luck at CMC requesting right of tenancy of some space in the building on str. V.Alecsandri, 103. At the meeting held on September 5, 2013, when they adopted several scandalous decisions of land and space lease and privatization, liberal and communist councilors voted a decision and Golovin’s association gained the right to lease the building located at the intersection of str. Vasile Alecsandri and 31 August str.

The lease contract was signed for five years and "Prodiab" paid 45,000 lei per year, or 20 lei per month per square meter for the rent of 179.1 square meters of basement and ground floor. Coincidentally or not, as in the case of PL, the lease agreement did not contain restrictions on the privatization of the offices after the expiry of five years of rent.

Thus, in just a year and a half, "Prodiab" bought the entire building on str. V.Alecsandri, 103. According to data from the Cadaster, the sale - purchase agreement was signed on June 11, 2015, three days before local elections on 14 June 2015. Golovin was MP in the Communist faction. Today, the building is uninhabited and the front door has the broken seal of Chisinau City Hall. Association "Prodiab" for years now has had its office on str. Ion and Doina Aldea-Teodorovici, 8.

Contacted by the Center for Investigative Journalism, Boris Golovin confirmed that "Prodiab" privatized the building on str. V.Alecsandri. "I have followed legal procedures. City Hall assessed the building and set the price. We bought it  at the price of 860 000 lei. Now, we  need the help of some international organizations to help us make repairs in the building. So far, we have failed doing it as  the Territorial Office Chisinau of the State Chancellor’s office sued us. We  won the case in all courts", said Golovin. According to the evaluation performed by Cadastre, the building bought by "Prodiab" would cost 1.4 million lei. Golovin denies the fact that "Prodiab" had ever requested the right to lease the building on str. V. Parcalab, 55. "We requested a place for the office of the association, without saying any address. Currently, we rent an office from private people. We had no connection with the building on str. V. Parcalab, 55", said Golovin.

Verdict of judges wasn’t executed

Other councilor, other property. A large commercial center is being built at the intersection of str.  N. Testemiteanu and C. Varnav, Centru sector of the capital, near the Republican Clinical Hospital by D&D company about which Anticoruptie.md wrote previously that it was affiliated to the liberal MP Iurie Dirda (municipal councilor in the period 2011-2015). Future commercial spaces were sold or rented. This, in spite of a decision of Centru district Court dated May 30, 3016 that ruled this construction illegal.

In full swing of lawsuit  pertaining the plot, company D&D finalized the construction of the future mall. Photo: CIJM

Magistrates were informed by Chisinau Territorial Office of the State Chancellery and they examined the decision of Chisinau Municipal Council (CMC) dated  March 17, 2015 by which CMC ruled land-use change for the construction company. Initially, the plot with a surface of 8 acres of the shopping center  was leased for a period of 5 years to D & D Companie for "complex development and maintenance of the building". The "construction" which the local officials spoke about, is a mega-multi-storey car park with 836 spaces and commercial spaces which the same company built there on adjacent land. This land was bought in a public competition organized by the City Hall in 2014. The company has paid 1.350 million lei, or about 28,000 lei for another 48 acres of land in one of the busiest places in the capital. The price was below the market price in this zone and was justified by the fact that the company aims to build a social facilities construction. In fact, D & D Companie has built a mall with several parking spaces. The building is opposite a large residential complex built by sister- company of D & D Companie, Dansicons.

Huge profits following a „technical amendment”

In the request submitted to the CMC in October 2014, D & D Companie asked City Hall for eight acres of land near the future mega-park "for its servicing and adjacent territory arrangement". Once the lease agreement was signed, in the absence of a tender or public contest, as required by law, D & D Companie came up with another request of land-use-change in one "for the construction of a commercial, social and cultural place with parking". CMC accepted the request without objection, under the pretext that it is just about "technical changes".

"This land-use-change is illegal because in this way, City Hall will no longer have this land for other utilities, as there will be a construction," concluded the judges who examined the case and ordered the cancellation of the decision on land-use-change. The judgment was challenged at the Court of Appeal. Meanwhile, future stores in new shopping center are sold like hot cakes. Sales Manager of D & D Companie, whom we contacted as alleged potential customers,  said that the commercial spaces are rented at a price of 15 - 18 euros per square meter per month. Thus, the monthly rent of commercial  spaces measuring 70 square meters on average would cost at least 1,000 euros, as much as the company pays annual rent for the land where the construction is built.

Curiously, the decision of CMC by which the eight acres of land were leased to  D & D Companie  was not published on the website of the Chisinau City Hall. Lawyers argue that, most likely, in the near future D & D Companie will file an application to purchase land and CMC will have to accept it.

Contacted by the Center for Investigative Journalism, the representative of D & D Companie, who introduced himself as Ion  said that he did not know anything about the decision of the court that ruled the land-use-change decision,  as illegal. 'Lawyer of the company is on leave, but we do not know about it. Construction works are in full swing. We have already signed pre-contracts for renting spaces in this building", he said.

„Business with the kindergarten”

Experts’ fears are justified. In 2009, by a decision of CMC, kindergarten no. 178 on str. N. Costin 48 was let to an unknown, new company, Novaeurolux. The educational institution was closed in 1992, due to risks of landslides. The company, founded and headed by Svetlana Cojuhari, promised to open there a new kindergarten and under this pretext,  in the absence of a tender, she rented the building for a period of ten years, with no payment for lease until January 1, 2012 . On 12 April 2012,  Novaeurolux  went to City Hall again with a court order by which the local authority was obliged to sell to the company the  building  with over 3,000 square meters against the sum of 1.8 million lei. As City Hall's lawyers have not contested in set term the decision of the Court of Appeal Chisinau, that ruled the alienation of the kindergarten at the price set by the company, the decision of the judges was final and irrevocable.

In 2010, Chisinau Territorial Office of the State Chancellery challenged at court the decision of CMC to lease the kindergarten because a tender  was not organized in this regard. The Court of Appeal then ordered the termination of the tenancy, but CMC appealed the decision to the Supreme Court of Justice that ruled that the organization of a tender to this effect was not compulsory.

New owner with legal papers

In 2013, Novaeurolux specialized in the sale of food, alcohol and tobacco products, has come up with a decision of Centru District Court by which Chisinau City Hall was obliged to sell the plot in the yard of the kindergarten. A recent report of the Court of Auditors showed that in the title of authentication rights of land owner, the surface area of the kindergarten is one hectare but in the Register of land and property, the plot was registered with the surface of 1.65 hectares. Former education institution is located in a picturesque area, near Buiucani Park of the capital.

In September 2015, Novaeurolux has obtained a license from the  City Hall to demolish the building of the former kindergarten and the land was sold this spring to foreigners (Arssan Necmettin and Kocabuk Nedim Ihsan). In February 2016, they founded the construction company M.N.K. United. Data from the Cadaster show  a pre-contract confirming the transaction.

Before kindergarten 178 was leased by the company Novaeurolux,  this building hosted a technical  service and a service of National Scientific and Practical Centre of Emergency Medicine, but the employees of these 2 services were forced to leave. Our attempts to find Novaeurolux company representatives have failed. The company had its office in this kindergarten demolished and the  founder of the company changed domicile.

Representatives of the company M.N.K. United said that they intended to build a new kindergarten, a commercial center and housing on that land. „We filed the documents at the City Hall. We hope that our draft proposals will be accepted. If they are not accepted, we will not sign the land-purchase agreement of plot. We want to make sure that everything is OK and we will not have trials in future. We do not know what was before with this land, but now we want to carry out construction works in line with the Urban Plan", said lawyer of the company but he refused to give details about the price  of the land.

Last audit of the Court of Auditors on compliance of public patrimony management within the public entities in municipality Chisinau for the period 2014-2015 has determined that  over that period of time, the Chisinau City Hall was forced to rent land and housing for  which paid 5.2 million lei.

See photos of other cases of lease or privatization for nothing

Economists of the Analytical Center "Expert-Grup" have calculated that in the period 2010-2014, losses from privatization lease of goods owned by local public administration in Chisinau amounted to 300 million lei. 234 buildings were privatized in that period. As for lease, in 2014-2015, in 56 cases, the municipality has given in rent space at a lower price  than required by law and the damage amounted to at least 19 million lei, shows the last audit of the Court of Auditors.

Boxes with unexecuted decisions stored at Territorial Office Chisinau of the State Chancellery. Photo: CIJM

Appeals on the line

The representatives of Chisinau Territorial Office of the State Chancellery, the institution mandated to verify documents of the mayor and of CMC said  that they signaled the problem of housing and lands  lease and of unprofitable privatizations each time when the local public authorities took such decisions in the absence of tenders. For example,  in 2015 and in the first semester of 2016, lawyers of Chisinau Territorial  Office found 176 violations in acts on leasing nonresidential spaces and 117 decisions by which land was leased or privatized” . Land relations and housing lease are the largest fields within the CMC. The main problem is the failure to hold public tenders. All we can do is to notify and contest for violating procedure. We cannot compel the Council, a local autonomy to conduct tenders", explains Maria Arhire, jurist in Chisinau Territorial Office of the State Chancellery.

In fact, local authorities have renounced on the organization of tenders in 2013 and one of the explanations is that  when a property was tendered, prosecutors, judges, police officers who claimed  the space from the state, managed by law to seize it. Heads of Territorial Office Chisinau of the State Chancellery argue that such cases are not so common since the law was amended.

Hundreds of irrevocable unexecuted decisions

Thus, lawyers  of Chisinau Territorial Office of the State Chancellery have been challenging on the line the decisions of the CMC and of the mayor of the capital. Hundreds of irrevocable decisions obliging Chisinau City Hall to respect the  procedure remain unexecuted. "Almost all the documents which we notify, and then we challenge them in court relate to land relations and lease of nonresidential space. For example, as for lease, we have 200-300 irrevocable decisions, almost all of them are not executed. We inform the local public authorities, Prosecutor, Court of Auditors etc., but we do not have other levers", says Ghenadie Iurco, head of Chisinau Territorial Office of the State Chancellery.

Commission instead of tenders

Local authorities have established a special commission made up of 14 members in charge with the privatization and lease of non-residential space. The members are: deputy-mayor Nistor Grozavu (chairman of the Commission), Aliona Berdila, head of the General Division, economy, reforms and patrimonial relations, Diana Gurschi, head of Direction legal assistance, Veronica Herta, head of Division finance, Radu Blaj, deputy-head of the Division of architecture, urbanism and land relations, some local councilors - Ghenadie Dumanschi, Mihail Ceban, Ion Stefanita, Liviu Oboroc etc. 

Thus, people who want space, they first conclude a tenancy agreement, and  then - no later than 30 days before the expiration date of the document - can submit the package of documents for the privatization of space. According to the Regulation of the Commission functioning, the sessions are deliberate if 2/3 of members attend the meetings and the decisions are taken with the majority of votes. The document does not specify when and how often members of the Committee meet to examine applications for privatization.

„I am not the chairman of any of the privatization commissions. When I do it, I will inform you. I have been chairman of just one tender commission on lands which are not used for 4-5 years. There are regulations but they are not implemented...”,  said deputy-mayor Nistor Grozavu, irritated by questions of reporters of the Center for Investigative Journalism.  

Ion Stefanita, member of this Commission says that he was not invited to any meeting. „I have never been informed about a meeting. At least, I was not invited”, says the official.

Aliona Berdila, head of General Direction, economy, reforms and patrimonial relations contradicts him and tells him that the members of the Commission convened several times. „Mr. Nistor Grozavu knows about this commission and he is the chairman of this commission. Stefanita, is he a member..? I do not know, actually, I am not the secretary of the Commission » said Aliona Berdila, deputy- chairperson of the Commission.

Offers at ridiculous price

The activity of the Commission was investigated by the employees of the National Anticorruption Center (NAC), that in a report showed that its members allow privatization of non-residential space at ridiculous price, though the legal framework stipulates a privatization price lower than that set by a skilled appraiser. "The privatized property is under-estimated, assessment prices are much lower than market prices. However, prices are lower in comparison with the assessments of other appraisers (State Enterprise Cadastru). This happens because the tenancy agreement excludes the tender procedure and the Regulation of the Committee for the privatization of rented non-residential space, municipal property, and the Government Decision on privatization  of non-residential space leased  does not stipulate organization of tenders for privatizing leased non-residential spaces ", reads the report of NAC.

According to the authors, in most cases, commission members are the ones who determine the price at which a property to be privatized. Also, employees  of NAC draw attention on the fact that people with particular interests under the guise of  activity of some association, public organization and union of creation, privatize at cheap prices space from public property and then sell it by ten times more expensive. Most spaces privatized like this, are  in the center of the city, on the segment of str. Ismail, Columna, Lazo, Kogalniceanu or in popular residential areas of Botanica, Riscani or Telecentru.

NAC wants to find out if City Hall’s employees took bribes

Investigative officers of NAC have not started a criminal case following the report, but will determine violations of law detected in the analysis. "We agreed that  there are contradictory judgements on the same issue. For example, when a space is leased and then the beneficiary privatizes it, we have some ruling when in one case privatization is allowed, in another- not. If we  start a criminal case prematurely, we might face the situation that the person presents contradictory decisions of the courts. We have established a disparity in various acts. Thus, the investigative officers will determine whether in particular cases there was a conflict of interests and family ties or other signs demonstrating that the lease was bribed. Depending on the results, we will decide  on our further steps", said Bogdan Zumbreanu, head of the criminal investigation under the National Anti-Corruption Center.

Earlier, the NAC announced about detention of deputy mayor  of capital Vlad Cotet and Radu Blaj, Deputy Head of Architecture and Urban Planning Directorate. They are suspected of passive corruption, abuse of power and forgery of public documents. Anti-corruption officers have filed several criminal cases in which the two officials are suspected of favoring speeding up release of documents against payment for space and land leasing. "In fact, there are cases and it is about decision makers.  It might be about the involvement of the same officials, but in other cases”, said Bogdan Zumbreanu.

Heads of City Hall Chisinau doubt the findings of the NAC and of the Court of Auditors

Both the deputy-mayor Nistor Grozavu and Aliona Berdila insist that the reports of NAC and of the Court of Auditors contain erroneous data. "As long as they did not show any violations, it means that the tenders were properly organized. NAC must say what was right and what was wrong. We looked though NAC reports and we did not see any concrete violation “, said the deputy-mayor who did not want to listen to us and to answer our questions.  

Head of the general Direction economy, reforms and patrimonial relations argues that the prices are too high. "In privatization, we set the prices established by licensed assessors. Who told you prices are ridiculous? Actually, prices are higher  than on market. What made NAC... I do not know wherefrom they got those data. These are aberrations. We actually have complaints that we ask too high prices and people demand reduction. We have thousands of requests of this kind. Also, the Court of Auditors has made mistakes in their reports concerning us and does not know how to fix them", said Aliona Berdila.

Mayor of the capital was not found to comment on the findings of the National Anti-Corruption Center and of the Court of Accounts, he was gone on vacation. In a response that Dorin Chirtoaca has addressed to NAC in December 2015, the mayor argues that the  statement  about the fact that privatized immovable assets were underestimated, the prices are much lower than the market, is unfounded. "Calculation method for determining the minimum amount of rent for public property in the Law on State Budget does not provide facilities for rent payment for the disabled pensioners and other socially vulnerable groups, organizations representing participants in the military actions in Transnistria and Afghanistan, in liquidation of consequences of the Chernobyl accident,  for residents of multi- storey blocks who have a storage closet in the basement and for municipal enterprises. Given the powers conferred to CMC,  by its decisions it grants facilities for rent payment to  categories of persons listed above, which we believe is legal",  wrote Dorin Chirtoaca.

Earlier this year, out of the total area of 8.373 million square meters of space managed by the local public administration of municipality Chisinau, 135 900 square meters were leased. In 2015, the amount of lease contracts for these space was estimated at 25 million lei, but only 8.7 million lei reached the local budget;

The most expensive space given for rent by Chisinau City Hall on bd. Stefan cel Mare și Sfânt is 125 lei per one square meter per month (jewelry and watch shop „Paradis” - n.r.). commercial price of space in this area is 800 lei per square meter per month;

In the period 2014-2015,  14 hectares of land were passed based on court orders from public to  private ownership. Court established that the main reason was continuous appealing of decisions, absence of City Hall representatives  from trials or other actions related to term of appealing.

The investigation was accomplished under the Campaign „Public Money Is My Money Too”, carried out by the Centre for Investigative Journalism (CIJM) and the Association for Efficient and Responsible Governance (AGER), within a project funded by the European Union and the National Endowment for Democracy.

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