INVESTIGATION. How the Boss of City Insurance Justified in Court That He Collected Almost 20 Million Euros in Interest on a Fake Loan. The Judges Decided To Return The Money

  • The bankruptcy of City Insurance caused huge expenses from the Policyholder Guarantee Fund (FGA). 1.2 billion lei (over 240 million euros) were paid to the insurance company’s creditors until December of last year, and more than 130,000 other payment requests were waiting to be analyzed at that time, according to FGA data, communicated to .
  • To finance bankruptcies, people and businesses are already paying much more expensive insurance policies.
  • An investigation showed how City Insurance paid real interest on fictitious loans.
  • Almost three years after the collapse of City Insurance, DIICOT has not sued anyone. No one was arrested.

, on March 10, 2023, for Vivendi International, the company through which businessman Dan Odobescu controlled City Insurance, to return 17,372,043.32 euros, interest collected for a fictitious loan of 75 million euros. The decision is not final.

The process was opened by the Transilvania Insolvency Court (CITR), as the judicial liquidator of the City.

The reasoning of the judge in the case, recently communicated to the parties, shows how the lawyers of Vivendi International tried to justify the collection of the money. They claimed that the company controlled by Odobescu at that time was only an intermediary that had to help the company find sources of financing and that it fulfilled all its contractual obligations.

INVESTIGATION.  How the owner of City Insurance justified in court that he collected almost 20 million euros in interest on a fake loan.  The judges decided to return the money
Dan Odobescu Photo Agerpres

Vivendi’s lawyers also invoked the statute of limitations by which the money paid for a loan that never reached City’s accounts could be requested to be returned.

Where did the problems start?

In 2017, the Financial Supervisory Authority (ASF) found that City Insurance has solvency problems. The company was put into a recovery plan.

City then brought documents to the ASF by which it wanted to prove that it had borrowed 50 million euros from its main shareholder.

ASF did not verify the origin of the money, but removed City from the recovery procedure.

The pocket company that, on paper, gave loans worth tens of millions of euros

The Libertatea investigation showed that the amount of 50 million euros that Vivendi claimed to have obtained in the form of a loan for City came from the Portuguese company Planar Lda, a company whose business was the rental of TV equipment.

that it was based in a warehouse, and in the year in which it appeared that it gave the money to the City, 2017, it reported a profit of 80,000 euros. The total net earnings calculated by the tax authorities in Portugal were, in the period 2017-2021, only 186,377 euros.

In addition to the 50 million euros that it said it had obtained from the obscure Portuguese company, Vivendi later supplemented the credit with another 25 million euros, on which occasion it increased the interest, from 8.5% to 10%, money that belonged to him.

Fake account from Switzerland

Account statements from Axion Swiss Bank were presented to claim that the Portuguese firm’s money was transferred to City Insurance. Following the checks made by the ASF, the Swiss bank reported that that account does not exist, and the bank has never had business relations with City.

“The supervisor from the country of origin informed the ASF that in the records of the banking company the account mentioned in the documents presented by the insurer was not identified, an account that appears on the account statements that the City made available to the ASF and that between the banking company and the City there are no contractual relations”, the motivation states.

250,000

of euros is the only amount City paid directly to the so-called creditor in Portugal, according to the court’s reasoning

City paid approximately 18 million euros in interest for a loan to which it never had access.

The Transilvania Bankruptcy House argued that, since the loans did not exist, then the interest was collected without grounds and demanded the recovery of the money.

INVESTIGATION.  How the owner of City Insurance justified in court that he collected almost 20 million euros in interest on a fake loan.  The judges decided to return the money
City Insurance officially entered insolvency in September 2021 Photo Inquam Photos Octav Ganea

Vivendi claims it has “fulfilled all its obligations”

But Vivendi’s lawyers argued in court that the situation was different: in fact, its obligations were “to identify these sources or these financiers” for City Insurance.

“In reality, the purpose of his performance as a majority shareholder was to help the company obtain all the financial and monetary means it needed to comply with the regulations of the market in which it operated and to meet the authorization criteria. Therefore, each time and on the basis of each contract and additional act concluded, it has fulfilled all its assumed obligations”, argued Vivendi International, according to the motivation.

The court is demanding the money back from Vivendi

However, the court rejected Vivendi’s argument. “Neither the original contract nor the additional documents served this purpose,” say the judges.

At the same time, the amount representing the loan was supposed to credit the company’s account to cover the solvency problems, “however, the administered evidence reveals that the plaintiff did not receive the loan she needed”, according to the reasoning.

“The payment of the interest does not certify the fulfillment of the obligations by the defendant”, the Bucharest Court also states.

Thus, the court found the absolute nullity of the contract and obliged Vivendi to return the money paid as interest.

What the Bucharest Court did not agree with

The Bucharest Court, however, rejected another request of the judicial liquidator, through which he requested the return of the sum of 50,000 euros, paid by the City to Odobescu’s company under the title of “restitution”.

“The payment was made voluntarily, with the title of restitution, there being no indications of a payment by mistake,” the motivation states.

Also, the trial judge did not agree that the payment of court costs should fall to Vivendi, as the judicial liquidator had requested.

Another file with important stakes, suspended

To recover the money from City Insurance, the liquidator opened a separate court action demanding that those responsible for the bankruptcy of the company’s management be held financially accountable.

The list is opened by Dan Odobescu and contains 12 names, mostly of foreign origin, who held management positions in the insurance company.

Registered, the file was suspended in November, after it was not possible to identify the address of one of the complained persons – Epameinondas Papanikolaou, former president of City Insurance.

The court accused the judicial liquidator of not taking sufficient steps to obtain the information for the subpoena and suspended the process until June of this year.

The judge of the case invoked a provision of the Code of Civil Procedure, according to which “when he finds that the normal course of the process is prevented due to the fault of the plaintiff, by not fulfilling the obligations established during the trial, according to the law, the judge can suspend the trial, indicating in the conclusion which specific obligations were not respected”.

Criminal files

The Directorate for the Investigation of Organized Crime and Terrorism Crimes (DIICOT) said last year, in an answer for Libertatea, that for “committing the crimes of constituting an organized criminal group, fraud, intellectual forgery, forgery in documents under private signature, use of forgery, computer forgery and fraudulent bankruptcy”.

Libertatea also asked now what their status is and whether people have been officially charged.

DIICOT replied that one file concerns the crimes of organized criminal group and fraud, and another has all the respective crimes, to which are added falsification of documents, embezzlement, use of forgery, computer forgery and fraudulent bankruptcy.

Investigations are carried out in rem, that is, facts are investigated, not persons.

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