Battle over Czech coal miner MUS lost during Tošovský’s caretaker administration

The key battle over miner MUS was lost under Josef Tošovský when state holding company bosses failed to remove the managment

HOT TOP|Companies|Society
István Léko | 05.12.2011
Last-ditch attempts by National Property Fund (FNM) managers to block the hostile takeover of mining company MUS collapsed during the caretaker administration of Josef Tošovský

While much of the focus about Mostecké uhelné společnost (MUS) has been on the privatization of the Czech mining company in 1999, the key events that led to that step came a year earlier during an extraordinary general meeting of the company on April 25, 1998 on the outskirts of the northern Bohemian mining town of Most.

At that crucial meeting the Czech state lost control of MUS, paving the way for everything that followed and the main events probed by the Swiss authorities.

To recap on the situation at the time, an expert government headed by the then Czech National Bank (ČNB) governor Josef Tošovský was coming to the end of its term in power at the head of a caretaker administration following an internal revolt which had unseated Vacláv Klaus (Civic Democrat, ODS) in November 1997.

The Cabinet was composed of five members of the ODS, three from the Christian Democrats (KDU-ČSL) and three from the Civic Democratic Alliance (ODA), which has since ceased to exist. The main role of the left-of-center Social Democrats (ČSSD) only began a year later.

Czech Position has obtained documents from the state holding company, the National Property Fund (FNM), from the period immediately preceding the crucial MUS extraordinary meeting. The then FNM chairman, Roman Češka, and a member of the holding company’s executive committee, Jaroslav Borák, described the situation surrounding MUS quite clearly and the manner in which the state mining company was being tunneled and the subject to a hostile takeover.

Češka and Borák informed the Ministry of Finance, headed by Ivan Pilip, one of the main rebels who had brought about Klaus’ fall, and Minister of Industry and Trade, Karel Kühnl [currently Czech ambassador in Croatia] and state bodies responsible for dealing with criminal proceedings.

Proposals were “to change the company and supervisory board, in which the position of shareholders would have been strengthened against the management.”

In the crucial MUS meeting, important FNM proposals were outvoted by other shareholders. Documents from the time show the proposals were “to change the company and supervisory board, in which the position of shareholders would have been strengthened against the management.”

Soon after, Jiří Valtr, the lawyer who was supposed to represent the FNM’s interests within MUS, was sacked. “The problem was that he voted against the instructions of the FNM, and we dismissed him for that. Apparently that dismissal did not bother him that much,” Češka told Czech Position.

Češka never gave any testimony to Czech Police since the scandals concerning MUS erupted after he left his post with the state holding company. His comments have surfaced now following the Swiss investigations.

The main architect of the financial machinations which the FNM managers drew attention to in 1998 were those by MUS’ then strategic director of development, Antonín Koláček, now thanks to developments at the mining company one of the Czech Republic’s top billionaires. In the days and weeks preceding the general meeting, at least Kč 3.5 billion was siphoned from MUS, mostly in the form of loans, to a series of private companies created by Koláček. The money was then used to buy shares in MUS, mostly from local councils, under the second wave of the famed Czech coupon privatization program.

Thanks to these moves, the former union leader and member of the MUS board, Luboš Měkota, also became a billionaire in the same fashion as Koláček, eventually obtaining a 40 percent stake in the mining company. The FNM proposal at the April general meeting was supposed to block these ongoing moves by the management to usurp the state’s control, but it failed to succeed.

It was thus possible that just a little over a year later, in 1999, the Swiss company Investenergy, representing Koláček, had more than a 50 percent stake in MUS. Prime Minister Miloš Zeman (ČSSD) that autumn sold off the rest of the state’s shareholding of 46.29 percent for the relatively low price of Kč 650 million. According to the then ongoing “Opposition Agreement,” under which the ODS agreed to tolerate a minority ČSSD government, the sale had to be approved by the main leaders of the ODS, i.e. Klaus [the current Czech president].

All these were criminal acts focused on moves with regard to “the tunneling of MUS” and “the hostile takeover” of MUS.

In a series of moves, MUS later came under the control of financier Pavel Tykač, who, according to various sources, paid Kč 20 billion for the company (which he had never confirmed this figure and shows no intention of doing so). The loans granted by MUS in 1997 and 1998 were gradually repaid by the new owners — albeit, as reports by the weekly Respekt suggest, with money taken from the mining company. The difference between the Kč 20 billion paid by Tykač and Kč 650 million paid to the state is astonishing.

The case was, of course, investigated by Czech police and regional state prosecutors without anything concrete being brought before a court. “It was immoral, but not at all criminal,” was the conclusion of the former supreme Prague prosecutor, Vlastimil Rampula, according to the daily Mladá fronta dnes (MfD).  

The FNM documents prepared on the eve of MUS’ April extraordinary general meeting outlines how some of its managers tried to safeguard the billions of crowns at stake for the state.

In January 1998 the FNM received information which led to suspicions that some of the members of the MUS management were involved in misusing commercial information, abusing responsibility for management of third-party property, and the criminal act of fraud. All these were criminal acts focused on moves with regard to “the tunneling of MUS” and “the hostile takeover” of MUS.

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