Romanian Prosecutors Investigate Alleged Embezzlement at Liberty Galați
Romanian prosecutors have launched a major investigation into the steel mill Liberty Galați, conducting searches on November 7 at its headquarters and in multiple counties. The probe centers around allegations of embezzlement and tax evasion involving the Russian energy giant Gazprom.
The case involves two members of the board of directors of Liberty Galați, who are accused of transferring emission certificates to and from Gazprom Russia. These transactions allegedly served as tools for embezzlement and illegal tax optimization. Additionally, the company is said to have taken out loans that were redirected as payments to legal entities without any operational justification. Fictitious service contracts were also used to siphon off assets.
This investigation is part of the broader Jupiter 4 operation led by the Romanian police. Prosecutors conducted seven home searches in the counties of Galați, Ilfov, and Bucharest, as well as at the headquarters of a company and the residences of individuals involved.
Prosecutors stated that based on the evidence collected so far, it has been established that individuals in management positions within the company acted to embezzle it through affiliated entities registered in other jurisdictions. They were also involved in creating circuits for tax evasion. To achieve this, they used purchase or service contracts that lacked real underlying operations, as well as fictitious loan contracts.
Between 2019 and 2023, the financial and material resources of the company, estimated at approximately EUR 300 million, were subject to multiple intra-group transactions based on fictitious justifications. These actions caused damage both to the legal entity and to the consolidated state budget.
According to prosecutors, the company was embezzled through three main types of illegal behavior:
- Trading a large volume of greenhouse gas CO2 emission certificates with companies from the same group and with the Russian company Gazprom. These transactions effectively transferred money out of the Romanian company and moved it to other companies owned by Indian businessman Sanjeev Gupta.
- Money was also withdrawn from the steel mill and sent to other companies in Sanjeev Gupta’s group through loans, assignment of receivables, and guarantees.
- Fictitious management and consultancy contracts were signed, leading to the embezzlement of Liberty Galați’s assets. One example given by prosecutors concerns a consultancy contract worth EUR 40 million with a company in Singapore, where the payments had no real economic substance.
Financial Struggles and Potential Buyers
The steel plant in Galați is on the brink of insolvency. It currently has 1,197 creditors, with the largest being the Romanian state through Eximbank and ANAF. Output has dropped significantly in recent years. In 1988, 7.8 million tons of steel were produced on the steel platform. In the last two years, only 457,000 tons of steel have been produced.
Several potential buyers have reportedly submitted offers to take over the ailing integrated steel mill. Dorinel Umbrărescu, known for his road construction business, and the richest Ukrainian Rinat Ahmetov, owner of the Metinvest group, are among those interested. Both are seeking full acquisition of the steel plant. Two other companies are also interested but prefer to operate tolling contracts rather than acquire the entire plant.
The government of Romania, the main creditor of the integrated steel mill Liberty Galati, has agreed to the sale of the company’s core assets separately. The value of these core assets is estimated between EUR 800 million at market price and EUR 400 million at liquidation price.