Mol's Balkan blues deepen

By bne IntelliNews June 22, 2011

Guy Norton in Zagreb -

Hungary's leading oil and gas company Mol looks set to provide the hard-pressed legal profession in Croatia with some much-needed revenue in the coming weeks as it seeks to defend its reputation after allegations over its management of Croatian peer Ina, in which it's the largest shareholder.

Amid reports that a growing number of lawyers are either unemployed or have been forced to take menial jobs in order to make ends meet as a result of the economic downturn in recession-hit Croatia, a select band of lawyers is set to reap a handsome reward for defending the Hungarian company's corporate governance record.

The latest scandal to hit Mol broke on June 20 when it emerged that the Croatian anti-graft agency Uskok had initiated an investigation into whether Mol paid a €10m bribe to former Croatian prime minister Ivo Sanader to gain management control of Ina as part of a revised shareholders' agreement concluded in June 2009, a month before Sanader unexpectedly resigned from office. The emergence of the new allegations caused the Mol share price to hit a four-month low in trading in Budapest.

The bribery allegation comes on the back of an explosion at an Ina refinery in the Croatian town of Sisak on June 19, which has sparked accusations of negligence by Mol and Ina. Environment Minister Branko Bacic told Croatian news agency Hina that he would await the completion of an investigation into the causes of the explosion before deciding whether to bring any charges over the incident.

Given the damaging nature of the bribery allegations, Mol was quick to issue a denial of any wrongdoing. "There has not been any payment, or agreement on any possible payment, with not a single one of the players and decision-makers of Croatian politics, either directly or indirectly, either before or after a shareholders' agreement," says Mol spokesman Domokos Szollar. He added that Mol would take "strict legal measures against those who spread such allegations and accusations."


For it's part, the anti-corruption agency Uskok confirmed to Hina that based on evidence supplied by Austrian and Swiss authorities it had initiated a investigation based on the suspicion that two government officials abused their positions and received bribes. Alongside Sanader, former deputy prime minister Damir Polancec has been charged with aiding and abetting the abuse of office, although he is not suspected of accepting a bribe.

According to Croatian daily Vecernji List, which broke the news about the bribery investigation, a series of payments where made by Mol to accounts belonging to Robert Jezik, a Croatian businessman with close ties to Sanader, who is currently in jail in Salzburg awaiting extradition to Croatia on the basis of corruption and abuse of office charges. Sanader recently dropped his appeal against Austria's decision to extradite him to Croatia; Sanader fled to Austria in December 2010 as a far-reaching investigation into bribery closed in on him.

Cedo Prodanovic, a Croatian lawyer who is defending Sanader, says he has spoken on the phone to his client who "firmly rejected" the bribery accusations made against him. Podanovic claims the accusation formed part of a series of unjust allegations made against Sanader by Robert Jezic who is seeking to mitigate the seriousness of charges made against him by Uskok. Since December last year, Jezic, who owns leading Croatian petrochemical firm Dioki, has been under investigation by Uskok on suspicion that together with Sanader and two officials at Croatian power company HEP, he agreed a deal whereby HEP would supply Dioki with electricity at sub-market levels, whereby HEP allegedly lost out on HRK6.3m (€0.85m) of revenues.

Meanwhile, Mol is already set to go to court in Croatia to contest charges of market manipulation in the trading of Ina shares. The company has requested a judicial review and annulment of a ruling by Croatia's financial markets regulator Hanfa at the end of May charging Mol with deliberately spreading information that gave false and misleading signals about its intentions when it launched a public tender for Ina shares in December 2010. According to Hanfa, although Mol stated that its public tender was designed to give current and former employees of Ina as well as private individuals the chance to sell their holdings at a significant premium to the then market value - Mol offered, HRK2,800 when the outstanding price was around HRK1,750 - it failed to state that its real goal was to raise its share in Ina to over 50%.

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