Despite nearly Kč 1 billion of public funds having apparently been lost or embezzled via Key Investments, in over a year nobody has been held to account. That could soon change.
The Czech police’s anti-corruption and financial crimes unit has been investigating several criminal complaints relating to the brokerage Key Investments for more than a year now, but not a single person has been charged, let alone prosecuted. That could soon change.
The battle over the investment firm’s assets, through which the administrations of Prague 6, 10 and 13 invested hundreds of millions of crowns of public funds, now undoubtedly has a number of politicians gripped with fear. Why? The organs of justice have finally begun to take action.
Several years ago, Key Investments got involved in dealing in private obligations issued by firms with which the brokerage had links, including E Side Property and the Via Chem Group. In mid-March the district court of Prague 2 ordered the confiscation of the assets of the firm Oleochem, Czech Position has learnt from a well-informed source.
Oleochem is part of Via Chem Group whose unsellable bonds Key Investments purchased for the three Prague administrations (all controlled by the Civic Democrats, ODS) and the northwestern Bohemian town of Sokolov. In all, Key Investments sunk over Kč 200 million of public funds into these illiquid bonds, while the administrations entrusted around Kč 1 billion of public funds to the dodgy brokerage, which has since lost its license and is under investigation by the Czech National Bank (ČNB).
In addition to the seizure of Oleochem assets, in a provisional ruling the same court ordered the freezing of Via Chem Group assets. Also, a proposal for the seizure of the assets of the firm LKOCZ (formerly Lukana Oil) is due to be heard soon by a court in České Budějovice. If the asset seizure application is approved by the court, it is likely to provide the grounds or a legal attack upon the firm BLACKDZAAR (formerly Lisovna Ústí nad Labem).
All the companies mentioned are part of the Via Chem Group, formerly the company Setuza, which according to various media was purchased several years ago by the controversial entrepreneur Petr Sisák, who has a past conviction for fraud.
Those implicated in the Key Investments affair are well known to Czechs who follow domestic politics: Environment Minister and formerly long-term Prague 6 mayor Tomáš Chalupa (ODS), Prague 10 Mayor Milan Richter (ODS) and one of his predecessors, Antonín “Tony” Weinert (Social Democrats, ČSSD); Prague 13 mayor David Vodrážka (ODS), who is also an MP and chairman of the lower house of parliament’s foreign affairs committee; and presidential chancellor Jiří Weigl, who was formerly the director of Key Investments’ former front parent company registered in the UK.
The Borsay problem
The proceedings from the seized Oleochem assets are to be paid to the leasing firm Borsay, which with mounting losses now faces the prospect of being placed in administration. Borsay has overdue debts amounting to almost Kč 400 million. If Borsay does go into administration, the future of the owner of Slavia Prague’s football stadium in Prague 10, E Side Property, could also be in doubt. The problem is that E Side Property into which public funds from Prague 6, 10 and 13, and also Sokolov were invested by Key Investments, is a guarantor for Borsay’s obligations to the tune of Kč 250 million.
In its attempt to stave off insolvency Borsay is negotiating with Česká spořitelna bank whichit owes Kč 190 million to postpone repayment of loans. But by the end of this year Borsay must also honor bond payments amounting to Kč 200 million and therefore has to levy cash from its debtors LKOCZ and Oleochem. As mentioned, some funds will be extracted from Oleochem through asset seizure, but getting money from LKOCZ looks to be a longer process.
Nevertheless, it now looks likely that E Side Property will have to pay off Borsay’s debts even though a court has still to decide on the matter. In its legal battle with Oleochem the lawyer Tomáš Jindra is representing Borsay. According to a number of sources, Jindra has close contacts with Ivo Rittig, a controversial businessman and lobbyist with close ties to the center-right party the Civic Democrats (ODS).
Borsay and E Side Propoerty were formerly controlled by former director of Key Investments, Vladimír Kroužecký, who now holds a 20 percent stake in the Slavia stadium. The ties between Via Chem Group, E Side Property and Borsay are so entwined and murky that even weathered financial administrators and lawyers shake their heads in disbelief.
The latest developments are not good news for the holders of Via Chem Group and E Side Property bonds. Oleochem is entirely owned by the firm Spolkem pro chemickou a hutní výrobu (Spolchem) which is the most valuable asset in the Via Chem Group. Oleochem’s operations include glycerin production and it’s likely that the asset seizure will affect the firm’s glycerol production and sales.
Under the seizure, all payments and debts due to Oleochem will be paid to the account of the court-appointed bailiff until all debts plus services and administration fees have been paid off. And the distributors of Oleochem will unlikely be willing to supply the firm’s products without receiving payment therefore directly.
And of course there’s the threat of Olechem being placed in administration. As soon as a record of the launch of asset seizure proceedings is made in the Czech Company Register, any other of the company’s creditors will be able to propose administration proceedings against Oleochem.