A report submitted to cabinet August 15 showed that 52 out of 104 bad loans transferred from state bank IRB to hospital bank Slovenská konsolidačná (SKo) had been awarded non-transparently by IRB managers.
The SKo report showed that the credits, some dating as far back as 1990, had been given without proper assessment of client solvency or the projects for which the credits were being sought. In some cases managers had violated internal rules by extending advantageous loans to certain clients.
Five billion crowns of credits were transferred to Konsolidačná along with other bad loans from state banks Slovenská sporiteľňa (SLSP) and Všeobecná úverová banka (VÚB) between 1999 and 2000, under a 100 billion crown banking sector clean-up carried out by the state prior to the banks' privatisation. SLSP and VÚB were both privatised in the last nine months, and earlier this month the state received a $14 million unofficial offer from Hungarian finance house OTP for a majority in IRB.
However, following the release of the report, doubts were raised that all those behind the loans would be brought to justice, despite the report's having shown that some bank managers and clients faced charges of fraud.
"There is the question of punishment. What will the financial police do? What will the government do? Who will be held responsible for this?" said Anton Marcinčín, executive director of the Slovak Foreign Policy Association and former World Bank advisor.
The SKo said one debtor had been convicted of fraud, two were held in custody, and criminal proceedings had been launched against "several others" in connection with the loans. It also said that fraud charges had been laid against former managers in IRB's Nitra and Trenčín branches.
SLSP and VÚB bad loans were also awarded non-transparently, said the report. Twenty-nine people connected to past SLSP loans are facing criminal proceedings and a further 19 in relation to old loans from VÚB.
Representatives of the Finance Ministry were unavailable for comment on the report.
The government's bank clean-up programme was designed to make IRB, VÚB and SLSP attractive for investors.
But while the clean-up and sale of the banks is expected to make for a much cleaner sector, the government's record on bringing suspected economic criminals to justice does not bode well for future convictions on the IRB credits.
When it took power in October 1998 the government launched a high-profile campaign to examine, and ideally prosecute, people who had been involved in illegal privatisations. In what appeared at the time to be one of the first such cases, an investigation was launched into the privatisation of oil and gas storage firm Nafta Gbely by entrepreneur Vladimír Poór.
Poór was found to have owned a firm which privatised a 46% stake in Nafta Gbely in 1996 for one sixth of its market value. However, rather than bringing him to trial and submitting to a court judgement, the FNM reached an out-of-court settlement with the businessman in early 1999 to hand back the stake without further penalty.
Another former economic baron, Alexander Rezeš, suspected of at least mismanaging the once hugely profitable Slovak steel giant VSŽ, has not been investigated for his dealings while chief shareholder in the company between 1994 and 1998. During that time the company moved from an annual profit of four billion crowns to a loss of 7.2 billion, while Rezeš himself managed to find 100 million crowns ($2 million) to build a villa in Spain.
Rezeš also expanded the VSŽ empire to take in non-steel companies, including Prague football club Sparta Praha, and a stake in IRB which allowed him in 1997 to nominate Vojtech Vranay, brother-in-law of his son Július, to the presidency of the bank. IRB ran into liquidity problems that same year and was put under caretaker administration by the central bank.
Corruption watchdogs such as Transparency International Slovakia have said that one reason why government investigations into corruption had often not translated into charges was because of corruption in the judiciary itself.
A World Bank survey released last year showed that the courts were perceived as among the most corrupt Slovak institutions. The SFPA's Marcinčín suggested court corruption could hold up further prosecutions connected with the IRB loans.
27. Aug 2001 at 0:00 | Ed Holt