EU anti-fraud agency eyes Czech finance minister's conflicts of interest

EU anti-fraud agency eyes Czech finance minister's conflicts of interest
By bne IntelliNews January 7, 2016

The European Anti-Fraud Office (OLAF) confirmed on January 6 that it is mulling a probe into Agrofert, the agricultural and chemical group owned by Czech Finance Minister Andrej Babis, over allegations the company used “hidden lobbying” to have rules for EU subsidies changed for its own benefit.

Should OLAF decide to proceed, it could open a can of worms that would have the potential to bring down the Czech coalition government. Billioinaire Babis, the most popular politician in the country, has been fighting off allegations of conflicts of interest since leading his Ano party into government in January 2014. claimed on January 4 that OLAF is investigating reports that Agrofert vice chairman Petr Cingr sent a letter to Deputy Industry Minister Tomas Novotny, who handles EU funds for the innovation and competitiveness programme, asking for higher subsidies. A spokesperson confirmed on January 6 that the agency is looking into the issue to decide whether to launch a probe, according to CTK.

Several EU institutions received an anonymous warning at the end of last year concerning Agrofert’s alleged "hidden lobbying". Agrofert has strenuously denied the allegations, and claims that when Cingr lobbied for higher subsidies he did so as the head of the Association of Chemical Industry of the Czech Republic, with no specific bid to benefit Agrofert.

“Nothing more, nothing less," reads a statement on Agrofert's website. "We reject any linking of this matter with our company. We do not know about anyone examining subsidies to Agrofert in this connection."

Agrofert was the biggest Czech corporate recipient of EU funds in the 2007-2013 programme period, receiving CZK4.9bn, according to a report published by weekly Dotyk in September.

Politically motivated

Babis has dismissed the reports as a politically motivated attack. The second-richest man in the Czech Republic, with a fortune estimated at $2.4bn, Babis owns Agrofert - the country’s largest private employer - outright, as well as mass media assets. The Slovak-born billionaire has long been tipped as the next prime minister.

The combination of commercial, political and media power in one person makes Babis probably the most powerful person in the country. Despite worries expressed by his political rivals and those in the industry, the wider public appears less concerned by his numerous conflicts of interest. Opinion polls show Babis is the most trusted politician in the country.

That's despite the efforts of the opposition, which has homed in on Babis' conflicts of interest as a weak point. The ruling coalition passed legislation in May to continue tax advantages for biofuel producers. The move was heavily criticised by the opposition which filed a no-confidence vote. Agrofert is the country's largest supplier of biofuels. The finance minister moved last year to tighten his grip on state fuels company Cepro, which buys the subsidized bio-fuel.

Any finding by the EU anti-fraud agency that Babis has used his position to gain advantage for Agrofert would essentially confirm the accusations that he suffers from chronic conflicts of interest. That would hit Ano hard, given that it's surprisingly successful campaign for the October 2013 election was based on an anti-corruption platform.

The young party is all but entirely dependent on Babis, and would be unlikely to survive his departure, should it come to that. Yet even if Babis did survive, the probe could rock the coalition to its core.

Senior coalition partner, the left-leaning Social Democratic Party (CSSD), is an unlikely bed fellow, and the pair regularly bicker in the media. Babis complained to bne IntelliNews late last year of his partners, and of "sitting in parliament listening to stupidities of corrupt people". Meanwhile, Prime Minister Bohuslav Sobotka has claimed Babis’ power in the Czech Republic is “unprecedented since 1989” and represents “a permanent risk of a conflict of interest”.

However, with opinion polls showing neither has the support to govern alone, the coalition has proved surprisingly stable up to now. It's debateable, though, if the pair could paper over the cracks - of if the CSSD could resist the temptation to try to twist the knife - should an EU probe find Agrofert guilty.