Clients read a notice stating BMG will be closed indefinitely.
But within 24 hours depositors' worst fears were confirmed: The firms had been sold to an unnamed American buyer, said Horizont officials, who would either reopen after an unspecified time or close and pay off as many deposits as possible.
Depositors know little at this point other than their money is unavailable until further notice, and that the former owners of the Horizont group are nowhere to be found. Neighbours of board chairman Vladimír Fruni say they have not been seen him for six months, and the daughter of BMG board member Marián Šebeščák says that her father is on a business trip abroad from which he is unlikely to return soon.
Jaroslav Spišiak, deputy chief of Slovakia's police corps, said Horizont's claim of a new owner "could be camouflage. Other non-banking entities which crashed have used similar tactics to hide their end."
He said that police had begun "an investigation leading to criminal charges" with the news of the Horizont sale, and added: "I firmly believe that Fruni will be called before police as an accused in this case rather than a witness."
Police visited Horizont and BMG offices February 6 to collect documents for the investigation. Justice Minister Ján Čarnogurský and Attorney General Milan Hanzel promised to work quickly to produce international arrest warrants for Interpol.
Opposition politicians, working with the ruling coalition SOP and SDĽ parties, forced Prime Minister Mikuláš Dzurinda to schedule an appearance before parliament for February 8, where he was to explain the government's failure to prevent the crisis.
But as The Slovak Spectator went to print, the PM was defiant. "A look at the work we have done in financial controls will answer the question of whether we could have done more," he said.
Ivan Bencze, the new director of the Horizont group, said even if the companies had been sold customers were unlikely to see the 16 to 50 per cent interest that the investment firms had been promising.
"The rates these companies were offering before are simply unrealistic," he said.
BMG Invest, which ran an aggressive and expensive advertising campaign to attract business since its formation in 1996, has over 140,000 clients and Sk4.5 billion ($92 million) in deposits, according to estimates from financial market analysts. the real figures are unknown because Slovak law does not require firms like BMG to disclose them.
Miroslav Roganský, spokesman for Horizont, said he believed that the US buyer's audit could take "two to three weeks", after which clients would find out the fate of their money.
Clients of licensed banks enjoy deposit protection from a fund that guarantees 90 per cent repayment in the case of bank crashes. But clients of unlicensed investment funds have no protection other than what the law gives ordinary creditors - bankruptcy court.
"Non-banking entities have nothing like the protection system that banks have. That's why people always have to bear in mind the level of risk they're getting into," said Martin Barto, head of strategy at Slovakia's largest bank, Slovenská sporiteľňa.
Economic analysts have warned in the past that investment funds use tactics similar to pyramid schemes, in which promises of high interest or 'double your money' can only be kept by ensuring a steady inflow of new deposits.
Investment funds spent almost Sk104 million in advertising last December, more than double the Sk44 million that licensed banks spent. Horizont Slovakia alone channelled Sk27.7 million into its campaign to attract new business, according to market research by ACNielsen.
Among the slogans BMG Invest used in its ads were "profit through prudence" and "regular and healthy yields". Zuzana Mistríková, head of the Slovak Advertising Council, said her office could ban adverts that made clearly false claims but not those it merely felt to be misleading.
Only one investment fund ad has been banned so far - the "profit with zero risk" campaign of Drukos-Výnos, said Mistríková.
Six investment funds have already failed in Slovakia, costing depositors over Sk4 billion.
"In Slovakia there are very few ways to invest money at high yield without huge risk," said Barto. "This situation was exploited by non-banking entities, which used aggressive campaigns to convince citizens to trust them with their money.
"In western Europe you can invest money into company shares, which can have quite high yields. The difference is that there you get information on the company, while here non-banking entities give out very little information on their activities."
11. Feb 2002 at 0:00 | Tom Nicholson