Czech finance minister seeks to trump conflict of interest bill

Czech finance minister seeks to trump conflict of interest bill
Andrej Babis may be able to temporarily relinquish ownership of his empire, if only until he wins the general election.
By Tim Gosling in Prague January 5, 2017

Andrej Babis, the billionaire Czech finance minister, said late on January 4 that he will give up ownership of his key assets this month should parliament push through new conflict of interest legislation.

The bill, dubbed “Lex Babis”, was passed by parliament for a second time in November, but vetoed by President Milos Zeman last month. The lower house is due to vote on the legislative amendments again on January 10, and is highly likely to garner enough votes to over-ride the head of state.

Babis told Czech Television that should that happen, by the end of the month he will no longer be a shareholder in conglomerate Agrofert and his investment vehicle Hartenberg. The minister is full owner of the agricultural and chemicals giant, which is the largest private employer in the Czech Republic. Via Hartenberg he has pushed into the healthcare sector.

"I will get rid of the Agrofert shares. I will not be a shareholder of Agrofert," Babis said, without elaborating, according to CTK. He also promised he will exit Hartenberg.

“Lex Babis” stipulates that companies in which cabinet ministers hold 25% or more will be blocked from competing for public tenders and investment incentives. It also bans ministers from owning media companies. Babis did not specifically mention his Mafra holding, which publishes several large newspaper and magazine titles, nor his radio and TV assets.

According to an analysis released by the server recently, Agrofert has received public orders worth CZK35bn over the past 10 years. That report only increased the pressure in some quarters for the bill to be enacted.

Babis is the likely next prime minister, with his Ano party enjoying a strong lead in polls ahead of elections due in October. The CSSD, current coalition leader, sees the billionaire’s conflicts of interest as his main Achillies heel, although scandals and the passage of the bill have done little to dent his popularity.

Illustrating the building pressure as the autumn vote approaches, media also report that the finance minister is facing a criminal complaint over a spot of financial engineering. The complaint, from a private individual, accuses Babis of tax evasion and breach of trust over a 2012 scheme which saw him buy bonds issued by Agrofert to take advantage of a tax break loophole, Echo24 reports.

With a clear eye on building a significant lead over the rival CSSD, Babis has forged closer ties with wily populist Zeman in recent months. The president claimed as he vetoed “Lex Babis” that bills should not be aimed “solely” at one man.

Critics, meanwhile, argue that the bill’s weakness is that it does not also block ownership of companies and media by relatives of officials. Forced into a corner last year in a scandal connected to EU funding granted to a high-end resort called Stork’s Nest, Babis finally admitted he had temporarily transferred the asset from Agrofert to his lawyer and family members, a move that allowed the project to qualify for aid designed for small and medium sized enterprises.

Those events sparked “Lex Babis” as the CSSD spied a chink in the armour of the billionaire, who has led polls since the two agreed a spiky marriage of convenience following the last election in 2013. However, despite the embarrassment, the episode did not scupper Babis’ standing as by far the most popular current Czech political leader – aside from Zeman, who sits in a role that is largely ceremonial.

Yet in contrast to the president and his controversial statements aimed at immigrants and the West, the finance minister is a peculiar brand of populist. He is perhaps the only such political leader selling a form of austerity, leaving it to CSSD rival and current PM Bohuslav Sobotka to try to make up ground via promises of handouts and bashing foreign investors.

Babis concentrates on stressing that he is not a part of the traditional political elite, pledging to fight corruption and run the country like his successful business. He has recently pushed tax measures through at both the national and EU levels that he credits with fighting tax evasion, but critics claim hands Agrofert inside information on its competitors.

Yet such issues remain largely ignored by the majority of voters, who appear convinced he can create value for the country and themselves as he has for his businesses. In that sense, his appeal clearly echoes that of Donald Trump. The US president-elect has said he will avoid conflict of interest while in office by transferring control of his empire to his children, but has given no details.

The issue has produced thousands of column inches in the US media, but voters appear untroubled. Czechs are similarly unflustered. Just a point or two ahead of the CSSD throughout most of their time together in office, Ano has opened up a lead of close to 10 points in recent months.

Given that advantage, it may be that Babis calculates it’s better to drop the issue for the meantime in a bid to disarm the CSSD. Barring a calamity, Ano looks set to lead the next government, and if it can form it without the participation of the fast fading CSSD, then a swift repeal of “Lex Babis” could follow next year.