Prague 10 Mayor Milan Richter is trying to reassure the district’s elected representatives and residents that the funds invested with Key Investments will be returned
The brokerage Key Investments has blamed Czech Position for causing problems complicating the return of Kč 200 million which the Prague 10 administration entrusted to the firm. On Monday, the assembly of Prague 10 discussed developments, or lack thereof, with district leaders’ attempts to get the public funds back from the nontransparent brokerage.
Summary: Czech Position has been closely following developments in the Key Investments case in which the administrations of Prague 6, 10 and 13 are trying to retrieve hundreds of millions of crowns from the brokerage, which bought non-liquid securities with dubious face values; the securities were issued by companies with various ties to Key Investments.
The three above-mentioned Prague districts have a total of around Kč 600 million still tied up with the brokerage: All have officially requested the return of the money they invested, but only Prague 13 has received money back (Kč 50 million) and according to the now terminated investment contracts, Key Investments is overdue.
Prague 13, however, has not presented any documentation showing which securities Key investments sold at what price to raise the Kč 50 million returned to the city district. All three districts are now looking for lawyers and advisors to help retrieve the public funds.
Czech Position is to blame!
On Monday, May 2, the assembly of Prague 10 debated a report presented by the council — the administration’s leadership elected by the assembly and headed by the mayor — on developments in negotiations with Key Investments. Prague 10 has Are we supposed to interpret this as meaning that if the media had not reported on this case Key Investments would have returned all the money by now?demanded that Key Investments return at least Kč 214 million. This figure must be a cynical joke on the part of Key Investments, which is still attempting to reassure Prague 10’s council that the actual value of its portfolio is higher.
According to Prague 10 council’s report, because of a “targeted, biased and scandalous campaign, namely by the [news] server Czech Position,” Key Investments says it is presently unable to liquidize the securities in Prague 10’s portfolio. Are we supposed to interpret this as meaning that if the media had not reported on this case, Key Investments would have returned all the money by now? This is, of course, nonsense; unfortunately, the majority of Prague 10 politicians appear to believe it.
In the report prepared by Prague 10’s deputy mayor Bohumil Zoufalík (Civic Democrats, ODS), the sale of the securities as requested by Prague 10 is not possible within the time limit specified in the contract with Key Investments.
These two revelations from the report are highly significant. What reaction from the media did Key Investments expect after it emerged that on behalf of the three administrations the firm had purchased securities that aren’t traded on any stock exchange or financial market, have no guarantees, the issuers thereof are in various ways linked to Key Investments, whose assets are held by banks and creditors as collateral for previous loans, and which have ridiculously low rates of return, considering the level of risk involved?
Key Investments and districts refusing to talk
We do not understand how a company can accuse a media outlet of targeted and biased reporting when it categorically refuses to communicate. Therefore, we call upon Key Investments to announce its position on all of its activities and actions that we have reported. In return, we pledge to publish the firm’s position in full.
But it’s not only Key Investments that is ignoring our requests for comment. For a while now, the administrations of Prague 6, 10 and 13 have refused to answer our questions. The worst is Marie Kousalíková (ODS), Mayor of Prague 6, which still has more than Kč 250 million of public funds tied up in Key Investments. Kousalíková has still not answered questions that we sent her on March 8!
Why is ČNB not taking action?
The debate in the Prague 10 assembly on Monday began with council representatives claiming that so far no loss whatsoever hasConsidering that it was the ČNB that imposed the considerable fine, one would expect that the same body would verify that the offender has corrected its errors and ended the irregular practices. been incurred as a result of the investment portfolio and that the hundreds of millions were invested through a firm which had all the required licenses. If we ignore the fact that the Prague 10 councilors should have been aware of the fact that in 2008 Key Investments was fined Kč 2 million by the financial regulator for irregular practices in its fund management, this assertion is essentially correct.
Nevertheless, in this case the conduct of the Czech National Bank (ČNB) appears inconsistent to say the least. Considering that it was the regulatory organ of the ČNB that imposed the considerable fine upon the brokerage, one would expect that the same body would verify that the offender has corrected its errors and ended the irregular practices. But Key Investments has basically continued with the same practices for which it was fined by the financial market regulator. The ČNB has, however, done nothing.
The Prague 10 council’s report for the assembly contains other interesting points. In March, the council requested several insurance companies for a policy to cover losses in the eventuality that the issuers of the securities in its portfolio fail to pay the principal upon maturity of bonds. No insurance company was willing to provide such coverage.