In August, Ion Tiriac, a former professional tennis and hockey player-turned-businessman, summoned reporters to tell them he was shelving plans to donate €2 million ($2.2 million) to build a new ice rink in Bucharest. Tiriac told journalists he had spent more than two years trying to line up the necessary government approvals, but a sweeping crackdown on corruption has made civil servants reluctant to sign even routine documents. “They are afraid to even breathe because it may lead to the anticorruption prosecutors’ office,” the businessman says he was told.

                                 Ion Tiriac, a former professional tennis and hockey player-turned-businessman

Romania’s anticorruption agency is reviewing more than 10,000 cases, and hundreds of public officials are facing criminal trials, the result of a campaign spearheaded by Laura Codruta Kovesi, an aggressive prosecutor who was appointed to lead the department in 2013. The operation, reminiscent of Italy’s nationwide Clean Hands campaign in the 1990s, has brought down several high-ranking politicians, including former Prime Minister Victor Ponta, who resigned in November after being charged with money laundering and complicity in tax fraud; former Bucharest Mayor Sorin Oprescu, who was arrested in September and charged with bribe-taking; and former Finance Minister Darius Valcov, who resigned last March amid allegations that he used funds obtained through influence-peddling to amass a hidden cache of gold bars and paintings by Picasso and Andy Warhol. All three have denied the charges against them.

As the investigations continue, long-planned public works projects are stalling. Dietmar Dumlich, the European Investment Bank’s representative for Romania, says the bank has approved €1.7 billion in loans for infrastructure projects but can’t get anyone to sign the loan documents. “We find ourselves in limbo,” he says. The country badly needs the funds: The World Economic Forum ranks Romania 85th of 144 countries for the quality of its infrastructure—the worst of any European Union member state. Its roads are deemed to be in worse shape than those in Bangladesh or Cameroon.

10K the number of cases under review at Romania’s anticorruption agency

One reason for the sorry state of Romanian roads is that money allocated for improvements has often ended up in the pockets of politicians and their cronies, says Victor Alistar, who heads the local chapter of anticorruption group Transparency International. “Public investment related to infrastructure has been a huge area of corruption,” he says.

Romania’s Finance Ministry reported in November that only half the public funds budgeted for capital investment last year had been spent, because of what it called “inefficiency.” Lia Olguta Vasilescu, mayor of Craiova, a city in the country’s southwest, put it more bluntly in a speech last year, saying Romania’s mayors had gone on a “signature strike” for fear they’d be accused of violating procurement laws. Justice Minister Raluca Pruna, however, told Bloomberg Businessweek: “Any state worker who correctly applies the law has nothing to fear in doing his job.”

The story of Tiriac’s skating rink illustrates the problem. In an October interview on Realitatea TV, the former sports star who coached Wimbledon champions Boris Becker and Goran Ivanisevic said he had approached Oprescu, the former Bucharest mayor, in 2013 with an offer to replace the city’s existing ice rink. More than half a century old, the rink has been closed for several years because of unpaid utility bills. Tiriac said he pledged the €2 million on the condition that the city would provide the land and seek EU funding to cover some of the costs.

The mayor was enthusiastic and helped identify “a superb site near the city hall,” said Tiriac, who has interests in banking, real estate, and auto dealerships. But the businessman later learned that a prefect appointed by the national government had balked at approving the plan. It took six months to obtain the necessary signatures and secure approval from the city council. Yet several weeks after the vote, the mayor informed him that the council secretary “forgot to publish” the decision, rendering it invalid. Tiriac is now planning to build the rink himself on land he already owns about 10 miles outside Bucharest.

BLOOMBERG BUSSINES

21 January 2016