Swiss court begins hearing major Czech privatization case

A Swiss court on Monday began hearing a major Czech privatization case. Six former managers of the Czech coal company MUS face accusations of money laundering and other crimes they allegedly committed during the privatization of the firm in the 1990s. The complicated case has been running for years, and is also prosecuted in the Czech Republic.

Illustrative photo: Filip Jandourek

Six Czechs and one Belgian face charges of money laundering, fraud, forgery of documents and other crimes related to the privatization of the second Czech largest coal mining firm Mostecká uhelná, or MUS. Swiss prosecutors believe that the company’s former managers and their associates used MUS’ own assets in their 1999 takeover of the firm.

The privatization of MUS got underway in the early 1990s when the state sold its shares to investors and municipalities in northern Bohemia where the company’s lignite mines are located. However, the government kept a 46-percent stake in the firm.

By 1999, MUS managers had acquired a majority in the firm through a complex network of fronts but never revealed this. Instead, they used another front – a US-based firm Appian Group – to buy the remaining shares from the government, led by then prime minister Miloš Zeman. In the process, the managers and their associates allegedly diverted the company’s assets worth billions of crowns to pay for the shares.

The Czech police began investigating the case in 2003 but dropped it five years later citing lack of evidence. The authorities in Switzerland however intercepted some of the diverted funds, and seized around 14 billion crowns in Swiss bank accounts. In 2011, Swiss prosecutors filed charges against seven people who now stand accused at the Swiss Criminal Court in Bellizona. Reporter Zuzana Kubátová from the news website aktualne.cz has been following the case.

The Swiss Criminal Court in Bellizona, photo: CTK

“The decisive factor in the case will be whether the financial transactions with the company’s own funds will be recognized as legal in the Czech Republic or whether the court will determine they constituted criminal acts. If that is the case, it will greatly facilitate the trial in Switzerland, too. But if it turns out the transactions were legal, which is what the defendants are saying, it will be difficult to prove any money laundering charges.”

Acting on information from Swiss investigators, the Czech anti-corruption police have meanwhile reopened the case, and raised charges of fraud related to the 1999 sale of the state’s minority stake. In February, the police also questioned president elect Miloš Zeman over his role in the deal.

The case of Mostecká uhelná is in many ways illustrative of what has been called the “wild privatization” of the Czech industry in the 1990s. Zuzana Kubátová says that if the court finds that the law was breached in this particular case, it could have consequences for other privatization deals of the time.

One of the accused – Jiří Diviš, photo: CTK

“The crucial thing here is whether or not the so-called wild privatization in the 1990s was carried out in a criminal way or not. Many other companies were privatized in ways similar to that of MUS, for example the OKD coal firm but the case today is not considered problematic at all.”

One of the accused – Luboš Měkota, died earlier this year but his lawyer came to the court in Switzerland on Monday. However, three other defendants including the alleged mastermind of the entire operation Antonín Koláček, failed to turn up, and their attorneys asked the court to postpone the hearing. The trial is expected to last until July.