Time wasted
Since 2008, the EU has sent billions to Moldova in exchange for a promise to fight corruption. But that never happened. Instead, oligarchs like Ilan Shor robbed the country blind. The new government has distanced itself from the old, corrupt guard, but people like Shor still pull the strings from exile in Israel. That is, until now.
The war in Ukraine seems to have made Western politicians acutely aware of the existence of oligarchs: A large, powerful group of men in Eastern Europe. They became obscenely wealthy through political influence, backroom deals, and a knack for moving money around.
No one now wonders why rich people suddenly fall from balconies in Spain, England or Russia. We now realize that we are dealing with a network of businessmen and politicians who use mafia style methods to achieve their aims. But until very recently, the oligarchs have gone under the public’s radar. Many of them were even viewed as serious politicians that the EU could work with.
“Right now, the EU is undergoing a deep, complex soul-searching, where its understanding of the oligarchs, Russia, and its own relationship to kleptocratic capital hidden away and re-invested in the West, is being challenged,” explains Vadim Pistrinciuc over the phone from Moldova’s capital of Chișinău.
Vadim Pistrinciuc was a member of Moldova’s parliament from 2014-2019 and former Deputy Minister of Labor and Social Welfare from 2009-2012. He also served as senior advisor to former Prime Minister Vlad Filat from 2012-2013 and worked as project manager and consultant for UNDP and UNICEF.
He thoroughly regrets that countries like Moldova, Ukraine and Georgia have wasted the opportunity to eliminate the oligarchic corruption running politics, the media, and the energy sector. This has been ongoing despite the billions these countries have been receiving for years from the EU Commission with a promise to combat corruption.
“A lot of European countries have previously ignored the power of the oligarchs. Fortunately, that’s changing. Moldova’s former politicians have been sanctioned by the US government. One has fled to Israel, and another is allegedly hiding out in Northern Cyprus. They used to have an audience in Brussels. So did the Ukrainian oligarch-connected politicians. And so did the Russians. But after the war, the prism that the EU views them through has sharpened. Let’s see if it continues,” says Vadim Pistrinciuc.
The biggest scandal in Moldovan history
The exiled oligarch Ilan Shor masterminded the largest corruption scandal in Moldovan history. He siphoned over €1 billion out of the country in 2014 via three of the country’s largest banks. From there, the money was moved to shell companies in Hong Kong and Great Britain.
The Moldovan state subsequently chose to cover the vast hole in its banking sector, which equaled 12 percent of the GDP in the small country of 2,6 million inhabitants. By comparison, a similar theft in Germany would amount to € 432 billion. Prime Minister Iurie Leancă decided to bail out the banks with the public funds.
“The consequences were so drastic for Moldova, that it became eligible for receiving development aid,” explains Frederikke Thorning from the NGO New Democracy Fund, which has offices in Chișinău.
Ilan Shor managed the scam through 39 companies connected to The Shor Group that were given huge loans. A lot of the details have gone missing in the meantime. In 2018, the American forensic accounting firm Kroll published a report on the bank theft. They note that a large number of documents pertaining to the banks’ extraordinary loan willingness were “mysteriously destroyed in a fire in November 2014.”
Kroll is one of the world’s top investigative bureaus when it comes to financial crimes. But the company’s reports are often classified, and though the investigation of the theft was commissioned by the Moldovan government itself, it only became public knowledge thanks to a leak by populist politician Renato Usatîi. An anonymous spokesperson for the EU delegation to Moldova has confirmed that the EU Commission fully backed the report’s conclusions.
According to Kroll, Moldovan officials would normally be present during the approval of loans of that magnitude. But they were absent from the board meetings in question. The report also highlights that board members of the three participating banks ignored all the warning signs. In total, loans of up to € 3 billion were awarded to the Shor Group from 2012–2014.
How could the banks be that naive? It’s simple, really: Because their boards had been filled by Ilan Shor’s own people. In the years leading up to the scam, several Russian and Latvian banks, among them Gazprombank, Russia’s third largest bank, lent the Shor Group money to buy up enough stock to gain a controlling interest in both Unibank and Banca Sociala. The money was later paid back to the Russian oligarchs by obtaining additional loans from Moldovan banks. This also meant that the banks would have gone bankrupt had the Moldovan state had not bailed them out. All three banks later had their licenses revoked.
The banking scandal implicated many other Moldovan elites. Among them was the oligarch Vladimir Plohatinuc, who later became president of the social democratic PSDE party. According to the Moldovan prosecutor general, Plohatinuc’s companies received loans for more than € 100 million through the scheme. Like Ilan Shor, Plohatinuc left Moldova and is likely residing in North Cyprus. Though his exact whereabouts are unknown. According to his business rival, Veaceslav Platon, he was the real mastermind behind the theft.
Other politicians were involved, like conservative former Prime Minister, Vlad Filat, who Leancă succeeded. For his role in the theft, Filat was convicted to nine years in prison in 2016. Vadim Pistrinciuc was an advisor to Filat from 2012–2013 but denies knowledge of the scandal.
“I worked for the government but not to commit crimes. Just the opposite in fact. I can’t take responsibility for the misdeeds back then. Now, I’m focused on changing things from a civil society perspective,” he tells us.
Political parties ensure the continued power of oligarchs
Though the scandal is past, its consequences are still felt. Ilan Shor continues to pull on the strings of Moldovan society from exile in Israel thanks in part to his deep ties to the Russian power brokers. This has earned him the moniker The Young One within Russia’s security agencies, which according to US intelligence have poured millions into running a political network in Moldova. The goal is to turn the country away from the EU and back towards Moscow’s sphere of influence.
In the year following the banking scandal, Shor overtook the populist Ravnopravie party, which was immediately rebranded as “the Shor Party.” This gave Russian interests a steady platform in the Moldovan parliament. The party received 7 of the chamber’s 101 seats in the 2019 elections.
Shor was recently sentenced to 15 years in prison in absentia and assets worth an estimated €300 million confiscated. He was placed on the American and British sanction lists in 2022. The EU followed suit on May 30th, 2023. In the document, officials accuse Shor of fraud, subverting Moldovan democracy, and plotting and staging violent demonstrations to bolster pro-Kremlin political activities. The document also names Vladimir Plahotniuc as a ‘serious threat to democracy’.
Shor continues to exert his influence through the party, which Marina Tauber runs in his absence. She was also prominently featured in the Kroll report as one of the masterminds in the purchase of Unibank. According to an investigation by Moldovan journalists, Tauber bought an estimated 5 percent of the bank’s shares. She is currently under investigation for having received funds from a criminal enterprise as well as forging documents. Tauber also landed on the EU sanctions list in May. Recently, Moldovan police confiscated several suitcases with money allegedly from the Shor party to pay protesters to attend a pro-Russian demonstration in the capital of Chișinău on March 12th, 2023.
“Kleptocrats like Ilan Shor and [Vladimir] Plohatniuc represent the systemic corruption we are fighting in Moldova,” explains Iulian Groza, executive director of the Institute for European Policies and Reforms, an EU funded think tank.
“But it’s not enough to investigate and prosecute these individuals. We need to pull their corruption out by the roots,” he adds.
EU funding may have been used in the scandal
Just five months after the banking scandal blew wide open, the EU and Moldova signed an association agreement to pave the way for accession to the free trade community. But in 2015 the EU suspended the budgeted support of €40 million for Moldova’s state finances.
In a report, the European Court of Auditors harshly criticized the EU Commission’s decision to release funds despite a lack of oversight. The report also details how Moldova only fulfilled 2 of the 22 criteria for EU funds to reform the financial sector. ECA calls it likely — but impossible to prove — that EU funds were “specifically used” in the corruption scheme.
Just before that, the European Investment Bank gave Moldova loans of €150 million to improve the country’s roads.
In a written reply, the EU’s Moldovan delegation in Moldova denied that any EU funds were used to cover the massive deficit in the national budget: “No EU funds were misused, and the Commission backs the internal conclusions fully,” says a press officer on the condition of anonymity.
What the delegation fails to explain is how it is so certain that EU funds were not used since they are part of the state’s budget.
But the following years show that the banking scandal didn’t prevent Moldova from receiving continued funding. In July 2017, the EU Commission again withheld funding, but only briefly. It resumed in December 2017.
The European Court of Auditors later criticized the Commission’s decision citing the Moldovan government’s inability to document improvements in the rule of law. According to the ECA, the decision to resume funding was “not supported by an assessment that clearly showed improvements of the democratic mechanisms and human rights in Moldova, which was the very reason funding was withheld in the first place.”
Systemic corruption was also on display during another scandal that concurrently unfolded with the “Theft of the Century.”
In 2014, the journalist collective OCCRP revealed that Russian shell companies connected to the Russian state had laundered an estimated $20.8 billion through the Moldovan bank Moldindconbank.
To skim the money, money launderers created fake debts in several shell companies. A Moldovan judge subsequently ordered the Russian shell company to pay the debt to a court controlled account. The companies with fictitious debt to the shell companies also had accounts with Moldindconbank that allowed them to siphon $8 billion from the bank. The remaining $13 billion was sent to Trasta Komercbanka in Latvia. In 2017, the Danish newspaper Berlingske teamed up with OCCRP to reveal that large amounts of this money was later laundered through the Danske Bank’s Estonian branch. Journalists revelations triggered a massive scandal for the bank.
Today, Moldova has a new government led by Maia Sandu. But corruption continues, explains Vadim Pistriniuc.
“I am grateful that the current government has taken an active stance in combating corruption, even in light of the war next door. I wouldn’t say major changes have been effected, the degree of corruption has lessened. At least our leaders no longer have hidden agendas.”
Pistriniuc stresses the importance of the EU remaining vigilant toward the country. He also thinks the EU Commission should stop being so diplomatic.
“They need to understand that our problems are a chronic illness within our judicial system,” he says, adding:
“If the EU genuinely wants us to become part of the Union, they need to have a much larger presence in Moldova – not just provide technical support. The EU has been afraid of interfering with our sovereignty. But that’s the whole point of the European Union – giving up sovereignty. They need to take a more paternalistic stance towards both Moldova, Ukraine and Georgia. We’ve seen Russia exploit the weaknesses of our institutions and the corruption of the judiciary to further their own agenda and create dissatisfaction with Europe among the people.”
After Moldova officially became a candidate country in March 2022, Vadim Pistriniuc feels that the demands have also increased. The question remains whether the current government can live up to these new expectations.
EU and Russia battle for public opinion through Moldovan media
Nowhere is the weakness of Moldovan institutions clearer than in the stories of Ilan Shor, Vladimir Plohatniuc and the theft of 2014. Its presence continues to be felt while its masterminds still shape Moldovan society.
The oligarchs that almost ruined Moldova and later took control with the country’s politics still enjoy support from large segments of the population. Using their large fortunes, they took over large parts of the country’s media.
According to Nadine Gogu, an employee with the Centre for Independent Journalism, Plahotniuc used to control close to 60 percent of the Moldovan news flow. Ilan Shor also took over many TV stations where the news is strongly manipulated. This has been on full display after the Russian invasion of Ukraine through the extremely negative portrayal of Ukrainian refugees.
“Their [Shor’s stations] coverage focused on a couple of people who came to Moldova in Porsches which created a public image of a sort of luxury refugees. Needless to say, this is wildly misleading,” explains Viorica Zaharia, the President of the Press Council of Moldova.
For Aneta Gonta, who is the Vice Chair of the Audiovisual Council, the government branch tasked with administering broadcast licenses, the challenge also lies in the way Russian propaganda seamlessly mixes with popular Russian entertainment shows. They have a much higher production value than anything Moldovans can produce locally.
Six of these pro-Russian networks have now been shut down. But this drastic measure has also generated criticism from ordinary Moldovans who miss their daily shows.
“I probably receive ten calls a day from Moldovans who are angry that their favorite shows are no longer on air. They don’t care about politics and propaganda – they just want entertainment,” Ms. Gonta explains.
A November 2022 report emphasizes that Russian propaganda is still strong in Moldova. Two of Ilan Shor’s stations, NTV and RTR, which primarily retransmits Russian content, are seen as the most credible media by 12 and 11 percent of the population, respectively.
“Their lies are like a kind of Chinese water torture, corroding the public’s trust drip by drip,” says Aneta Gonta.
Andrei Curararu, of the independent Moldovan media Watchdog, shares this sentiment.
“Shor is using the Moldovan state’s own money against our people. And it’s worked really well for him — until now. But the Russian state made a huge mistake with the invasion of Ukraine, and now people have started waking up to the real situation,” he says.
After years of corruption, inertia, and complicity, the Russian invasion may indeed have woken up both Moldovan society and the EU to reality. The Moldovan government now seems to share Mr. Curararu’s assessment. It banned the Shor Party on June 19. It’s a drastic measure but a fitting conclusion to the story of Ilan Shor.
