Cleaning up in the Czech environmental tender

By bne IntelliNews May 29, 2009

Jiri Kominek in Prague -

On October 29, CEZ's chief executive, Martin Roman, will celebrate his 40th birthday and with it the success he has enjoyed heading up what is now the largest utility in Central and Eastern Europe. Success, however, comes at a price: in recent weeks, Roman has become a target ahead of October's elections for politicians and the media, who accuse him of being a corporate fat cat enriching himself by overcharging taxpayers for electricity. And now questions are being raised about his ties to companies that are bidding in a huge tender for a nationwide environmental clean-up.

Critics of the CZK115bn (€4.3bn) tender launched by the Ministry of Finance in February to dispose of environmental waste charge that it's being rigged and is overpriced. "The real price is lower - according to our calculations it is CZK40bn," Green Party chairman and former environment minister Martin Bursik told the online news provider on May 18. "For me, this is a matter that keeps me vigilant, and I sense something dodgy, something unclean [about the tender]."

David Ondracka who heads the anti-graft organisation Transparency International in the Czech Republic, also expresses doubts about the tender's transparency. "There is a serious risk of a cartel agreement being formed [by bidding companies] and there's room for tens of billions of crowns to go unaccounted for," he says.

His comments were echoed by the chairman of the minor Christian Democrat party, Jiri Cunek, who accuses the current interim government, the previously governing Civic Democratic Party (ODS), the opposition Social Democrats (CSSD), and even his fellow Christian Democrat and former finance minister Miroslav Kalousek of pressing on with the environmental tender and other privatisations such as that of Czech Airlines before the voters have had a chance to decide on a new government. "It now appears the interim government will continue with privatisation projects; and concerning the multi-billion-crown environmental damage removal tender, that is proceeding as well. I am convinced that this grand coalition with the participation of Kalousek is after the proceeds [from these projects]," Cunek told Czech news agency CTK on April 15.

A short list

Cunek's suspicion of how such tenders are conducted in the Czech Republic is well grounded. Further investigation by bne has revealed that all three companies shortlisted by Tomas Uvira, the finance ministry official responsible for the environmental tender, have links to CEZ's Martin Roman and his firm's partners J&T, a Czech-Slovak private equity firm. The three companies in question, one of which will be chosen around September depending on the price its offers to do the clean-up, are the Czech firms Geosan Group and Environmental Services, and Denmark's Marius Pedersen Engineering.

The Czech Justice Ministry's business registry lists J&T as the sole shareholder in Environmental Services, one of the three companies shortlisted by Uvira. Further research has revealed that Uvira himself has direct links to J&T in that he was until recently a business director of one its subsidiaries, J&T Banka.

bne has also learnt that board members in the remaining two companies, Geosan Group and Marius Pedersen Engineering, have links to Roman and Plzen-based industrial giant Skoda Holding, which Roman ostensibly left as CEO in the spring of 2004 in order to head up CEZ, though sources close to the company tell bne that he retains financial ties to it.

According to the Skoda Holding in-house publication Skodovak, Geosan was hired to construct a number of assembly halls at its Plzen site and began the work in September 2004. According to the publication, Geosan was selected to perform the work by a government commission as part of a brown-field project aimed at gentrifying the vast environmentally damaged lands owned by Skoda Holding. Funding for the project was supplied by EU structural funds via the brown-field programme co-ordinator CzechInvest.

bne has further learnt through the Justice Ministry business directory that Hynek Gloser, who heads the Czech construction firm CIAS, is also a board member of another of the shortlisted firms Marius Pedersen Engineering. CIAS, via its subsidiary Adelardis, also participated in the CzechInvest-sponsored gentrification programme at Skoda Holding from 2004-2008, according to CzechInvest.

CEZ CEO Martin Roman has repeatedly denied reports in the Czech media that he continues to have an interest in Skoda Holding, but bne sources close to the company say this simply isn't the case. "Martin Roman continues to hold at least 50% in Skoda Holding, and along with Tomas Krsek, Michal Korecky and Jiri Zapletal [Skoda Holding board members], continue to call the shots in the company that is officially owned by the Netherlands-based Appian Machinery," a source close to Skoda Holding, who declined to be named, tells bne.

Martin certainly remains close to the other Skoda Holding board members: Ekonom magazine published an investigative article on January 22 in which it reported that Roman, Krsek, Korecky and Zapletal have purchased adjacent lands in the Prague suburb of Velka Chuchle and constructed luxury mansions on them, which all four inhabit.

The Skoda Holding source further told bne that Roman is concerned about the outcome of an ongoing Swiss investigation into alleged money laundering by individuals linked to Appian Group, which purchased Skoda Holding in 2004 when Roman was CEO of the company, and its opaque subsidiaries registered in Switzerland, Liechtenstein, Cyprus, the UK Channel Islands and the Netherlands. In early 2008, Czech authorities asked their Swiss counterparts to investigate Appian and its owners over the untransparent purchase of Mostecka Uhelna lignite mining operation in the late 1990s. The CTK news agency reported on October 3, 2008 that during the course of their investigation, the Swiss authorities unravelled the ownership structure surrounding Appian. Although not a target of the Swiss investigation, Roman nevertheless is concerned that one of the bi-products of the probe could be that the Swiss have discovered he continues to be one of the owners of Skoda Holding and might make this public. Sources say that for this reason, Roman is using his Czech political contacts to have the results of the Swiss investigation repatriated to the Czech Republic so that the findings can be suppressed.

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Cleaning up in the Czech environmental tender

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