Swiss court sentences five Czechs over massive 'wild privatisation' fraud

A court in Switzerland has handed down prison sentences to five Czech businessmen after finding them guilty of fraud and money-laundering. The five were sentenced after a long criminal case investigating the illegal takeover of the Czech coal company Mostecká uhelná společnost, or MUS. The verdict is being seen as a damning indictment of both the ‘wild privatisation’ of the 1990s and also the Czech criminal justice system, which failed to prosecute the case successfully.

Antonín Koláček, photo: CTK

Five Czechs - Antonín Koláček, Petr Kraus, Oldřich Klimecký, Marek Čmejla and Jiří Diviš - as well as an elderly Belgian named Jacques de Groote were found guilty on Thursday in a highly complex case involving fraud, money laundering and breach of trust. The five former managers of MUS received prison sentences ranging from just over a year to more than four years. The 86-year-old de Groote was the only one to escape prison and received a fine.

Only two of the Czechs accused – Koláček and Kraus – were present in court in the Swiss city of Bellinzona. They were initially remanded in custody immediately after the verdict, but a judge later ruled they could return to the Czech Republic pending an appeal, much to the dismay of Swiss prosecutors. All six deny any wrongdoing.

Klimecký, Čmejla and Diviš were represented by lawyers; even they, however, can’t be arrested in the Czech Republic because while Switzerland is party to the Schengen Agreement, it hasn’t fully ratified the European Arrest Warrant. A sixth Czech, Luboš Měkota – once described as one of the richest men in the country – died earlier this year.

Jacques de Groote, photo: CTK

The former managers of MUS – a huge, formerly state-owned mining company in North Bohemia that was privatised in the 1990s - are accused of siphoning off company cash through a series of illegal transactions. Using a Swiss-registered front called the Appian Group, they then used the stolen assets to acquire shares in the company they were supposed to be managing. Paperwork was falsified and money moved around the world through a series of shell companies. Some 100 Swiss bank accounts were used to launder the cash.

Jacques de Groote – a former executive director of the International Monetary Fund and the World Bank – was the president of the Appian Group. Indeed Swiss prosecutors began their investigation with him; only later was the involvement of a huge fraud involving a Czech coal mine revealed. In the words of the Swiss prosecutor, the men’s core business was money-laundering. Everything else, it seems, was secondary.

Petr Kraus, photo: CTK

The Swiss authorities have seized a total of 660 million Swiss franks – some 725 million US dollars, some of which the Czech state hopes to recoup. MUS is now the Czech Coal Group, currently owned by controversial businessman Pavel Tykač, a billionaire who’s reported to be the third richest man in the country. He too claims some of the money in damages.

But the verdict is a damning indictment not just of the six businessmen, but also of the Czech Republic’s politicians and legal system. The Swiss prosecutor began the case against de Groote and Appian in June 2005, gradually widening it to MUS and its six former managers, and bringing it to a conclusion with Thursday’s guilty verdicts.

That might seem like long time, but a parallel case in the Czech Republic has barely got anywhere, although the case has now been reopened in the Czech courts. Swiss officials complained their Czech counterparts showed glacial slowness in providing information and a frustrating lack of cooperation.

The verdict will be uncomfortable reading too for many Czech politicians. The current president, Miloš Zeman, was prime minister when the privatisation of MUS was completed. Czech media have reported accusations that his government was alerted to potential wrongdoing but did nothing. He says his government only oversaw the sale of a minority stake – the damage, in other words, had already been done.

Federal Criminal Court of Switzerland in Bellinzona, photo: CTK

And on a wider scale, for many the privatisation – and wholesale theft from within – of MUS is emblematic of the so-called ‘wild privatisation’ of the 1990s. The man who presided over that process, the former president Václav Klaus, famously said he knew no effective way of differentiating between ‘clean’ money and ‘dirty’ money. The prosecutors in Bellinzona would beg to differ.