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Vol 2, No 16
25 April 2000
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Culik's Czech RepublicThe Profits of Privatisation
Jan Čulík

Libor Novák, former deputy chairman of Václav Klaus's Civic Democratic Party (ODS), is currently on the docket of Prague's Municipal Court. He is accused of perpetrating tax evasion on behalf of the ODS. Novák is alleged to have divided a financial gift, donated to the ODS by a former Czech tennis star Milan Šrejber in 1995, into several smaller sums and ascribing each of them to a different donor. As a result, he is accused of depriving the taxman of 1,077,000 Czech crowns (some USD 30,000).

Milan Šrejber took part in the privatisation of Třinec Iron Works in northern Moravia. Subsequently, in an expression of gratitude to the Civic Democratic Party, he donated 7.5 million Czech crowns (some USD 250,000) to the party. However, this gift was then registered by the party as a donation from two fictitious donors – Radzhiv M Sinha from Mauritius and Lajos Bacs from Budapest. The gift of another 7.5 million crowns from a former employee of the Silas Group Company, Jarmila Mlejnková, was entered into the ODS books by Libor Novák as four smaller donations from four other fictitious donors.

The scandal of these fraudulent registrations was one of the reasons why the right of centre coalition goverment of Václav Klaus fell at the end of November 1997. Another reason was the allegation that Klaus's ODS had a secret account in Switzerland where it had deposited bribes from the Czech privatisation process.
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While a forensic audit, conducted by a reputable Western auditing firm, did confirm that there were serious irregularities in the funding of the Civic Democratic Party, the allegations surrounding the ODS's foreign bribe account have never been sufficiently explained.

Letting the cat out of the bag

On 19 April 2000, Petr Kolář, the current Czech Ambassador to Ireland and a former advisor to former ODS Foreign Minister Josef Zieleniec told the court in Prague that the ODS leadership must have known as early as spring 1996 that the fictitious names of Bacs and Singha in fact covered up a donation from Milan Šrejber. In 1997, the Civic Democratic Party tried unsccessfully to sweep the matter under the carpet, but Kolář had already given his information to the media by then.

Prague political commentator Václav Žák wrote in Britské listy on 30 November 1997:

The organisers of the Czech privatisation, including Václav Klaus, decided that the economic restructuring in the Czech Republic should be driven by people's desire to get rich quick. The Civic Democratic Party was united by the common desire of its members to acquire money and power. This meant that corruption became absolutely common.

The Civic Democratic Party believed that law and order should be based on private ownership. In their view, private ownership originated by "switching off the light for five minutes" while everyone was free to grab what they wanted of the former state-owned assets.

After Klaus became prime minister in 1992, corruption became a normal part of the Czech economy. Bribes were generally given to government officials for privatisation favours. The Czech public refused to see this as a problem, although some cases of corruption were published. The ruling Czech political parties concluded that it was enough to deny everything and nothing bad could happen.

A change took place after the Czech economy began stagnating in 1997. This is when Klaus admitted mistakes for the first time. This shook the confidence of many people in Klaus's government. The public began to see corruption as a more serious problem than it really was.

Corruption is primarily an economc problem. It caused allocation mistakes in the Czech Republic: as a result of corruption, Czech businesses came to be owned by pseudo-owners who asset-stripped them.

Jan Čulík, 16 April 2000

The author is the publisher of the Czech Internet daily Britské listy.

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