05BUCHAREST1430 / 2005-06-24 11:45:00
Embassy Bucharest
                C O N F I D E N T I A L SECTION 01 OF 02 BUCHAREST 001430 
E.O. 12958: DECL: 06/24/2015 
TAGS: ECON, EFIN, AA, RO, EBRD, Loan, corruption 
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 

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