Polish tape alleges MOL chief sued himself to evade Croatia corruption trial

By bne IntelliNews June 24, 2014

Tim Gosling in Prague -


The head of Hungarian energy giant MOL set up a lawsuit against himself in order to avoid a corruption trial in Croatia, according to a recording claimed to be of the head of Polish refiner PKN Orlen. This accusation made on the latest batch of recordings released on June 23 by the Polish weekly Wprost means the ripples from the Polish tape scandal are starting to reach across Central and Eastern Europe.

Amongst the latest batch of illegal recordings, whose provenance is still unknown, is a tape purportedly featuring PKN Orlen CEO Jacek Krawiec, in which he discusses a recent Hungarian lawsuit against MOL CEO Zsolt Hernadi. Speaking to Polish Treasury Minister Wlodzimierz Karpinski in January, Krawiec says Hernadi had told him the case was arranged in order to evade problems from a case in Croatia connected to oil and gas group INA that hangs over his head. He adds that the conversation came up as he asked Hernadi what price MOL would want for its stake in INA.

Krawiec says on the tape that Hernadi told him at a meeting in Hungary that the wife of a "trusted associate," who had the first name of Abel and was present at the purported meeting, would be filing the lawsuit against him in Hungary and he would have a not-guilty verdict by April, reports Bloomberg. Hernadi is facing a corruption case in Zagreb over MOL's 2009 purchase of a stake in INA. It secured management control at the same time, despite holding just a 49% stake; Zagreb holds 44% of INA.

"My lawyers found out that if there's a case brought on the same matter in any EU country and there's a not-guilty verdict, then all EU countries have to respect it and I'm free to travel to Europe," Krawiec says he was told by Hernadi, according to the transcript. "So the wife is the one pressing charges" that led to a "not-guilty verdict and it's all done and dusted," the PKN head continues, according to Bloomberg. "Can you imagine something like that happening here?"

Hernadi was cleared in Budapest on May 26 in a case brought by an unnamed MOL minority shareholder, which claimed the plaintif lost money when the corruption scandal hit MOL's share price. The company's shares have lost over 40% since June 2011 when Zagreb first said it wanted to review MOL's management agreement. Lawyers for the Hernadi insisted at the time that Zagreb would now have to respect the ruling.

However, with the Croatian government still scrapping with MOL over control of INA, it is pushing hard to keep the case against Hernadi alive. A Zagreb court on June 9 upheld an indictment against the MOL chief, saying he should be tried in absentia on accusations that he gave bribes to former Croatian prime minister Ivo Sanader. Sanader is currently serving a 10-year sentence handed down last year for accepting a €5m bribe from Hernadi in return for the 2009 deal on INA.

No help

Hernadi's reported plan appears to depend on the solid support shown by the Hungarian government - which owns 24% in MOL - throughout the fight. MOL declined to comment directly on the alleged meeting or illegally taped conversation. "During the last years, numerous rumors and speculations - which all turned out to be false - have been published in various local media," MOL said in a statement. "MOL has never commented on any of these pure speculations and it does not intend to start doing so now, especially not when they originate from third parties."

Like most of the revelations on the Polish tapes released thus far - the major one being that politicians offer crude opinions in private, and wheel and deal on the edge of the law - the accusation against Hernadi is no shock. Many analysts already assumed the lawsuit was set up in order to preempt the Croatian trial.

However, advertising the scheme will not help Zagreb and MOL find a route out of the bitter war over INA, which is harming the Croatian energy firm's business just as the Balkan country embaraks on a huge effort to develop its offshore oil and gas resources. The pair has been at loggerheads for years with little sign of progress. It's clearly become a battle of pride as much as practicality, with both sides suffering self-inflicted wounds that have seen profitability and share price at both MOL and INA hit. Public revelations of Machiavellian manoeuvres will do little to deflate those egos.

Late last year, both sides suggested they would sell at least part of their stakes in a desperate bid to put an end to the damaging spat. However, the current state of the European energy sector and the high price being sought left Russia's state giants Rosneft and Gazprom as the only serious potential bidders. Those targets became unattainable due to the Ukraine crisis, with the US and EU unlikely to sanction such a deal.

Krawiec all but confirmed the warring parties have priced themselves out of being able to sell a stake in INA to an acceptable bidder like Poland's PKN. Asking Hernadi about the price that MOL would seek for its INA stake, Krawiec said he was told MOL was "trying to sell [the stake] to the Russians."

"The way they value it is a couple of billion too much. What we would have to pay now is 15 billion and you know we can't afford to be that leveraged," Krawiec said.


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