Commentary: How the Billions Were Mined

The Swiss have finished their investigation into Mostecká uhelná; now it's the Czechs' turn

If the authorities here take their lead from the Swiss authorities trying to uncover one of the great Czech scandals, we could soon learn a lot more about the corrupt practices of Czech politicians, which are on a scale that still has the capacity to surprise us. We're talking here of the Czech energy company Mostecká uhelná (MUS).

The information is still shocking. In 1999, former Czech Ambassador Jaroslav Šedivý sent an important diplomatic cable to the government of then Prime Minister Miloš Zeman. It said that the Swiss companies seeking to buy the state-owned company were just an empty “shell” with minimal assets, all based in the apartment of the same man. Alexander Vondra, at that time the Czech ambassador to the United States, sent a similar message to Zeman's government. The company, Appian Group, which bid for MUS along with the Swiss firms, cannot be found at its registered US address and is totally unknown in local business circles. Despite these warnings, Zeman's government approved the sale of the coal mines to Appian Group for around one-fifteenth of its true value.

The Czech police dropped their investigation into the privatization in 2005. But now, thanks to a six-year-long investigation by the Swiss prosecutor's office, it has become  clear that MUS's managers were behind the privatization. The managers privatized the mines in two rounds with the help of Czech politicians. It is worth pointing out that  MUS's own money was used to finance the deal – the state's money, in other words, which belonged to all of us. The unpleasant detail is that the 10 billion crowns that the managers forwarded to hundreds of their private companies' bank accounts was being collected for many years and was intended as a reserve fund to cover the cost of restoring land damaged by surface mining. The Czech police weren't even capable of investigating this somewhat clearcut issue.

Last week, Swiss prosecutors accused MUS's managers of, to put it simply, money laundering, and thus violating Swiss law. The case will now be handed over to the Swiss courts, before which the accused are obliged to appear in person. If they don't, they can be sentenced in absentia. Bilateral agreements between the Czech Republic and Switzerland guarantee that the managers, if convicted, would have to serve their sentence either in a Czech or Swiss prison.

The work by the Swiss should also inspire the Czech legislature, which has reopened its investigation into the case, albeit rather hesitantly. Of course, the managers cannot be prosecuted on the same charges as they were in Switzerland. The Czech judiciary should instead try to investigate the connection between the MUS managers and corrupt politicians. They should also try to find out whether or not Jan Kavan and other ministers in Zeman's government approved the privatization in return for a bribe. There is also the question of what happened to an unaccounted-for five million dollars. This money was sent to a bank account belonging to one of former Prime Minister Stanislav Gross's friends shortly after the privatization was approved. The Czech judiciary and the state should make the Swiss return the 12 billion crowns seized from the managers’ foreign accounts, which should go back into the Czech state's coffers. The discredited Czech police and state representatives face a major task now – to reopen a case that is closely linked to the upper echelons of the power structure.

No limits?
The case has another dimension. MUS's current owners have a huge amount of wealth potentially within their grasp – coal worth hundreds of billions of crowns, which currently lies beyond the legal restrictions placed on mining. The chances of getting to this coal at some point in the future are, however, relatively high. The battle to reach it is, in fact, the battle for the future make-up of the domestic energy policy and of Czech politics. Government and opposition politicians are all equally aware of the strength of the energy sector and especially aware of the money it could channel into party coffers.

Even if we ignore the issue's environmental dimensions, it seems totally unacceptable to break the legal limits on mining in order to allow MUS to access the coal and money that were, as the Swiss investigation indicates, stolen from the Czech state. The limits cannot be broken before the entire case is thoroughly investigated by the Czech authorities and clear conclusions are drawn from it.

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