Wikileaks - CCIII

35315 6/24/2005 11:45 05BUCHAREST1430 Embassy Bucharest CONFIDENTIAL 05BUCHAREST1304 This record is a partial extract of the original cable. The full text of the original cable is not available. C O N F I D E N T I A L SECTION 01 OF 02 BUCHAREST 001430

SIPDIS

STATE FOR EUR/NCE - WSILKWORTH COMMERCE FOR JBURGESS AND JKIMBALL LONDON ALSO FOR US EBRD REP GBIERY

E.O. 12958: DECL: 06/24/2015 TAGS: ECON, EFIN, AA, RO, EBRD, Loan, corruption SUBJECT: ECON, EBRD, EFIN, RO

REF: BUCHAREST 1304

Classified By: ECONOMIC SECTION CHIEF JOHN RODGERS FOR REASONS 1.4 B AN D D

1. (C) Summary: A meeting with the EBRD Director in Romania failed to change the Embassy's stance that a proposed loan to a local company of dubious business ethics is a good use of the American taxpayers' money. An attempt at fencemending on EBRD's part does not make up for the EBRD Director's lack of clarity on the chronology events linked to the loan and seeming intent to carry on with the project despite our strong protests. END SUMMARY.

2. (C) Charge and Econoffs met with EBRD Romania Country Director Gacek at her request on June 23, following earlier meetings between local EBRD representatives and the Economic Section regarding Embassy's strong opposition to the EBRD's proposed loan to European Drinks Group (EDG). Embassy assumed that the purpose of the meeting was to discuss the EDG loan and intended to reinforce the message that post does not support the USG's EBRD contributions flowing to Romanian companies that operate with a disrespect for the rule of law and an even, competitive playing field (see REFTEL). However, much to our surprise, Ms. Gacek claimed that she wanted only to discuss the impending visit to Romania of the President of the EBRD and to find out if post would be getting a new ambassador soon. She only raised the loan issue seemingly out of hand at the end of the discussion.

3. (C) Despite Gacek's disinclination to discuss the EDG problem, Charge reiterated post's disappointment at not being included in the EBRD's deliberations and research regarding the company, since the Embassy has a long history of observing EDG's dishonest and corrupt business practices in Romania. He emphasized the importance of including the USG early in the due diligence process.

4. (C) In her reply, Gacek sought to deflect the Charge's concerns with the company's past bad practices by countering that the EBRD,s goals contain, in part at U.S. insistence, "building corporate good-governance," and that this would be a part of any activities conducted with EDG. She stated that the EBRD is "forward-looking" and concerned with future behavior more than past. Objectives of the bank do not always correspond with the objectives of its contributing partners, she said, but each contributor,s views would have to be taken into account in the final Board decision. The Charge in turn emphasized our strong opposition to rewarding bad corporate governance with very large loans that, in ED's instance, could see a bad company through difficult times.

5. (C) On the issue of the proper time to inform the Embassy about the proposed loan, Gacek's replies were unclear: At one point she stated that the Bank was "finishing up the job," then later implied that the loan was nowhere near final. When pressed on the issue of including the Embassy in due diligence, she stated that the EBRD was just now conducting the "credibility" stage of its investigations, and as such was approaching the US Embassy at the appropriate time. She apologized for any misunderstandings regarding timing.

6. (C) In addition, on the question of Coca-Cola's stance on this loan, Gacek's understanding differed from the Embassy's. She stated that, while Coca-Cola shared negative press information, it had no hard evidence of improper activities, and had not conveyed to the EBRD a strong opposition or even interest in the loan. According to Gacek, Coca-Cola even indicated that EDG,s non-transparent activities would be corrected with Romania,s entrance into the EU.

7. (C) The Charge conveyed our conflicting understanding of Coca-Cola,s strong opposition to the loan, and moreover, even stronger Embassy opposition based on our desire not to reward Romanian companies whose asset acquisition and business practices do not comply with standard Western business ethics. For this reason, and as a principle Bank contributor, he re-emphasized the importance of consulting with the USG, through the Embassy, early in the due diligence process, to which Gacek agreed.

8. (C) Comment: While Gacek may be making an effort to mend fences here, her comments lead us to believe that she is also trying to practice damage control for lapses in due diligence on this particular loan. We also have the sense that she is still very much behind the project, although she did concede that it could be put off if major opposition to the project were still evident.

9. (C) Comment, cont'd: This post continues to believe strongly that a loan approval for EDG would send entirely the wrong message to the GOR and the Romanian business community, and would serve to reward a company and its owners for what has been described as mafia-like business practices. We urge strong opposition to the loan in London, and will continue to share our knowledge with EBRD's Bucharest office. End Comment. DELARE