 | This article needs to be updated.(April 2010) |
Caritas was a Ponzi scheme in Romania that was active between April 1992 and August 1994. It attracted millions of depositors from all over the country, who invested more than a trillion old lei (between US$1 billion and $5 billion) before it finally went bankrupt on 14 August 1994, having a debt of US$450 million ($925 million in current terms).
The Caritas company, which organized the scheme, was founded by Ioan Stoica in April 1992 in Brașov as a limited liability company with just 100,000 lei (US$500, or $1086 in current terms) in capital. Caritas moved to Cluj-Napoca two months later. The deposits were initially small (2,000–10,000 lei), but later, the minimum initial deposit was 20,000 lei, while the maximum was 160,000 lei. At the beginning, only residents of Cluj were allowed to make a deposit, but starting summer 1993, all Romanian citizens were allowed to participate. [1]
It labeled itself a "mutual-aid game" (hence the name "Caritas", meaning charity in Latin) which had the purpose of helping impoverished Romanians during the transition to capitalism and promised eight times the money invested in six months. [1]
Caritas prospered with the help of the connection it had with the nationalist Romanian National Unity Party (PUNR) and the mayor of Cluj-Napoca, Gheorghe Funar, who welcomed this scheme and even helped it build credibility by renting them space in the Cluj town hall, appearing with Stoica in public and on television, and defending Caritas from attacks. [2] Funar paid for space in the local newspaper to publish a list of the "winners" who would see their money multiply eightfold; the list was 44 pages per day less than a month before the scheme collapsed. [3]
The size of the scheme is under debate. Estimates vary between two and eight million depositors. The number most commonly quoted in the Romanian newspapers is four million, while the international newspapers tended to estimate their number to two or three million. In Autumn 1993, the list of names to be paid on a certain day as published in a Transylvanian newspaper included 22,000 names, which suggests that there were 660,000 depositors at one time. [4]
Dan Pascariu, a banker and the chairman of Bancorex, estimated that between 35% and 50% of Romanian households were involved in the scheme. Mugur Isărescu, the president of the National Bank of Romania, estimated that it held a third of Romania's banknotes at one point. [5]
An estimate of Romanian newspaper România Liberă gives the amount of money involved as 1.4 trillion lei or about 20% of the 1993 expenditures of the Romanian government of 6.6 trillion. [5] The New York Times estimated the scheme attracted between $1 billion and $5 billion. [3]
The Romanian government banned pyramid schemes only after Caritas went bankrupt. The government received warnings about the scheme from several sources, including the Romanian Intelligence Service, which wrote a report in early 1993 (leaked to the press) and from Daniel Dăianu, the chief economist at the National Bank, who called it a fraud. [3]
As president Ion Iliescu commented on the issue, the main reason why the government allowed the game to go on was the fear of being ousted by riots and protests, [6] or being afraid that such a measure would make it more unpopular. [3]
The first signs of the downfall were in autumn 1993, when several western newspapers ran articles on Caritas predicting its failure. At the same time, more and more Romanian newspapers published stories on it. In a press conference in September 1993, president Iliescu predicted its demise, noting that anyone with an elementary education could predict that anything which gives eightfold returns in three months cannot last. [7]
There were discussions in parliament on banning such schemes. The state-controlled Romanian Television ran a negative report on Caritas, which indicated that it might have problems with the state. [7]
After this, the operations stopped for two days, initially explained as a computer error. Stoica tried to show that everything was fine by opening a large supermarket in Cluj-Napoca. Although Caritas opened new branches in more cities, it failed to gather enough money to continue its activity and it was not able to pay back money for those who deposited after July 5. [7]
In February 1994, Stoica claimed Caritas was not dead, just reorganizing itself. Soon it again announced a temporary cessation of activities, blaming the government. Stoica announced the termination of activities on May 19, 1994, saying his staff was trying to find a way to return the money to some of the depositors. [7]
Stoica was sentenced in 1995 by the Cluj Courthouse to seven years in prison for fraud, but he appealed and it was reduced to two years; then he went on to the Supreme Court of Justice and the sentence was reduced to one and a half years. He has been free since June 14, 1996. The trials between the depositors and the Caritas company were still under way as of 2004 [update] . [8]
Cluj-Napoca, or simply Cluj, is a city in northwestern Romania. It is the second-most populous city in the country and the seat of Cluj County. Geographically, it is roughly equidistant from Bucharest, Budapest and Belgrade. Located in the Someșul Mic river valley, the city is considered the unofficial capital of the historical province of Transylvania. For some decades prior to the Austro-Hungarian Compromise of 1867, it was the official capital of the Grand Principality of Transylvania.
Cluj County is a county of Romania, in Transylvania. Its seat is Cluj-Napoca.
An offshore bank is a bank that is operated and regulated under international banking license, which usually prohibits the bank from establishing any business activities in the jurisdiction of establishment. Due to less regulation and transparency, accounts with offshore banks were often used to hide undeclared income. Since the 1980s, jurisdictions that provide financial services to nonresidents on a big scale can be referred to as offshore financial centres. OFCs often also levy little or no corporation tax and/or personal income and high direct taxes such as duty, making the cost of living high.
Banca Transilvania S.A. is a banking institution with headquarters in Cluj-Napoca, Romania. The bank was founded in 1993 in Cluj-Napoca with a capital of 2 billion RON, of which 79% was Romanian and 21% foreign.
Avram Iancu Cluj International Airport is an airport serving the city of Cluj-Napoca, Romania. Initially known as Someșeni Airport, it is located 9 km (5.6 mi) east of the city centre, in the Someșeni area, which is now within the Cluj-Napoca city limits. The airport is named in honour of Romanian revolutionary Avram Iancu.
МММ was a Russian company that perpetrated one of the world's largest Ponzi schemes of all time, in the 1990s. By different estimates from 5 to 10 million people lost their savings. According to contemporary Western press reports, most investors were aware of the fraudulent nature of the scheme, but still hoped to profit from it by withdrawing money before it collapsed.
Gheorghe Funar is a nationalist Romanian politician, who rose to fame as a controversial mayor of Cluj-Napoca between 1992 and 2004.
Deposit insurance or deposit protection is a measure implemented in many countries to protect bank depositors, in full or in part, from losses caused by a bank's inability to pay its debts when due. Deposit insurance systems are one component of a financial system safety net that promotes financial stability.
The Pyramid Building Society, the Geelong Building Society and the Countrywide Building Society together made up the Farrow Group of building societies, based in Geelong, Australia. The group collapsed in 1990 with debts in excess of $2 billion. The cost of the collapse to Victoria taxpayers was estimated at over $900 million. A fuel levy of 3c-per-litre was introduced by the Victorian Government to recompense depositors.
The history of Cluj-Napoca covers the time from the Roman conquest of Dacia, when a Roman settlement named Napoca existed on the location of the later city, through the founding of Cluj and its flourishing as the main cultural and religious center in the historical province of Transylvania, until its modern existence as a city, the seat of Cluj County in north-western Romania.
Jolidon is a Romanian lingerie and swimsuit manufacturer, founded in 1993 in Cluj-Napoca.
Virgil Ardelean is a Romanian police chief, head of Direcţia Generală de Informaţii şi Protecţie Internă (DGIPI) between 1998 and 2007.
The A3 motorway is a partially built motorway in Romania, planned to connect Bucharest with the Transylvania region and the north-western part of the country. It will be 596 km long and will run along the route: Ploiești, Brașov, Făgăraș, Sighișoara, Târgu Mureș, Cluj-Napoca, Zalău and Oradea, connecting with Hungary's M4 motorway near Borș.
The Șaroș gas field is a natural gas field located in Dumbrăveni, Sibiu County, Romania. Discovered in 1915, it was developed by Romgaz, beginning production of natural gas and condensates in 1930. By 2010 the total proven reserves of the Șaroș gas field were around 2.84 trillion ft3 (80 km3), with a production rate of around 70 million ft3/day (2×105 m3).
The Academic College is an Art Deco building in Cluj-Napoca, Romania, belonging to Babeș-Bolyai University and located at 1 Emmanuel de Martonne Street.
The Romania–IMF relations span for more than 40 years, during which Romania had two economic systems: Soviet-type economic planning of the 1970s and 1980s and capitalism since the 1990s. The IMF had a strong role in shaping the Romanian economy of the 1990s towards neoliberalism.
The Uganda Deposit Protection Fund (UDPF), whose legal name is Deposit Protection Fund of Uganda, is a Ugandan government agency that provides deposit insurance to depositors in Ugandan banks and deposit-taking microfinance institutions. The UDPF was created in July 1994. The law was amended in 2004 to create an independent agency, separate from the Bank of Uganda.
Dacia Felix Bank was the second private bank established in Romania after the Romanian Revolution. It was founded in Cluj-Napoca in March 1991.
The Cluj-Napoca Metro is an underground rapid-transit system under construction in Cluj-Napoca, Romania. When opened, it will become Romania's second mass transit network after the Bucharest Metro. The system is of light metro type with a transport capacity of around 15,200–21,600 passengers per hour per direction.