Big Israeli group fined in the US for possible corruption acts in Romania

Israeli group Elbit, an important investor in Romania’s real estate sector, agreed to pay a USD 500,000 fine in the US to settle a case related to unjustified payments worth some USD 27 million it made to offshore consultancy firms. Some of the money may have reached the pockets of corrupt politicians in Romania, where Elbit wanted to develop a big real estate project in Bucharest, in partnership with the state. The Israeli group apparently hired an offshore consultancy firm in 2006 to help it in “procuring an invitation from the Romanian government to participate in the Casa Radio Project” and then in acquiring the governmental approvals needed to perform the development work. In February 2007, with the Romanian government’s consent, Elbit’s subsidiary Plaza Centers purchased a 75% interest in the Casa Radio Project for about USD 40 million in cash and agreed to develop a Romanian public authority building onsite at its own expense. In 2011, the group hired another offshore consultancy firm to help it get other governmental approvals needed to develop the project and buy another 15% in the project from the Romanian state. “Between 2007 and 2012, Plaza, directly and indirectly, paid the consultants approximately USD 14 million. Plaza’s top officers authorized making these payments, even though the documentation supporting the payments did not identify the services that the consultants provided pursuant to the contracts. Plaza characterized the payments to the consultants in its books and records as legitimate business expenses for services rendered, when some or all of the funds may have been used to make corrupt payments to Romanian government officials or were embezzled,” reads a report of the US Securities and Exchange Commission (SEC). The SEC also looked into dubious payments worth USD 12.75 million that Elbit made to real estate consultants for the sale of a portfolio of properties in the US. In both cases, the payments were ordered by the group’s former CEO and owner Mordechai Zisser, who lost control of the group in 2014 after accumulating large debt. The payments were uncovered by the group’s new owners, who notified the US and Romanian authorities and cooperated with the investigation. editor@romania-insider.com