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EDITORIAL

The pyramid crashes six months on: Social tragedy or political weapon?

A 33-YEAR-OLD man burned himself to death last week in front of a BMG branch in western Slovakia's Piešťany. Before he died, he apparently told police he had lost his savings in the unlicensed deposit fund's crash this spring, and had nothing left to live for.
BMG Attack, a group formed to promote the interests of the 170,000 Slovaks who lost over Sk16.7 billion ($370 million) in the collapse of BMG and its parent, Horizont, threatened to bomb Slovak shopping malls if the government didn't promise by July 1 to compensate the victims of the bankruptcies. No bombs have been found so far, although Bratislava's Polus Centre was evacuated because of a threat last week.
The Association of Defrauded Citizens (ZPO), an civic association, was formed in early June to pressure the government and the courts to cover the damages suffered by depositors. It claims to have 35,000 members and climbing.


FRUNI: Villainous or incompetent?
photo: TASR

A 33-YEAR-OLD man burned himself to death last week in front of a BMG branch in western Slovakia's Piešťany. Before he died, he apparently told police he had lost his savings in the unlicensed deposit fund's crash this spring, and had nothing left to live for.

BMG Attack, a group formed to promote the interests of the 170,000 Slovaks who lost over Sk16.7 billion ($370 million) in the collapse of BMG and its parent, Horizont, threatened to bomb Slovak shopping malls if the government didn't promise by July 1 to compensate the victims of the bankruptcies. No bombs have been found so far, although Bratislava's Polus Centre was evacuated because of a threat last week.

The Association of Defrauded Citizens (ZPO), an civic association, was formed in early June to pressure the government and the courts to cover the damages suffered by depositors. It claims to have 35,000 members and climbing.

Across Slovakia people are counting their losses and licking their wounds, amazed that such a massive collapse could have come so quickly and with so little warning from guardians of the public interest.

The February-March closures, followed by those of similar funds such as Drukos, caught many in the country completely by surprise. The most shocked were depositors, who had been lured by the up to 58 per cent interest rates and the 'security' the funds had been promising. Caught napping were also Horizont bosses Vladimír Fruni and Marián Šebeščák, who fled the country but were nabbed by Croatian police and returned to Slovakia this past week.

Less surprised were police, who have been trying to find a way to charge 'non-banking entities' with unauthorised activities and fraud since 1995. Nor, for that matter, did the crashes come as a big eye-opener to politicians, many of whom had been informed that BMG and Horizont were in trouble in 2001.


VICTIM: Caught completely unawares.
photo: TASR

Perhaps least surprised was financier Jozef Majský, who seems to have been at least present at the denouement of Horizont.

Fruni and Šebeščák, along with co-founder František Matik, launched BMG in 1995 and Horizont in 1997, apparently intending to use client deposits to finance massive purchases of property and business interests. By the time the firms ran into deep trouble in November 2001, when incoming deposits failed to cover mounting company losses, the Horizont empire included some 35 properties.

The three men seem to have been more naive and incompetent than villainous, according to people who knew them. With the police apparently powerless to touch them, and company lawyers arguing that commercial law allowed firms which aren't banks to collect deposits and pay interest, it probably wasn't difficult for Fruni and his colleagues to think of themselves as honest businessmen.

But then along came Jozef Majský, who had 'bought' a claim for Sk112 billion against telecoms monopoly ST from plaintiff Ivan Matušík (the latter is suing ST for hundreds of billions more for breach of contract). Majský apparently proposed to throw the Sk112 billion into Horizont's assets in exchange for the firm's best properties. The rest - including the 170,000 depositors and their money - could look after themselves.

What happened next would require a crystal ball to explain, but several interesting questions can be asked. Is it possible that Majský got word a certain opposition party was willing to help out with the plan? Could the party have proposed it would announce it was willing to honour the state's liability for the absurd ST claim - and thus repay depositors from state funds? If such a deal ever existed, it would certainly be a sweet way of picking up several hundred thousand voters for the party, and a sweet deal for Majský, who told this newspaper last year after buying the receivable that he would make good on it "within 12 months." Could it also explain why Majský's wife, MP Diana Dubovská formerly of the ruling coalition SOP party, on July 2 joined the HZDS?

These are only questions. No such announcement has been made by any party.

But no maneuvering could have led to such disastrous consequences for depositors if more urgent warnings of the danger of 'investing' in the funds had been sounded. The press, in particular, failed on this score, perhaps because both TV and print media earned hundreds of millions of crowns in advertising from these unlicensed funds.

Fruni, for example, had interests in the domestic TV Global and in WA Slovakia, the operator of Rádio Koliba. He also apparently provided Sk150 million in backing to the news channel TA3, much of it in the form of up-front money for later advertising. Sme editor in chief Martin Simečka told this newspaper several months ago that his paper had a deal with Horizont that any article published in Sme about the firm had to have a quote from the firm. While that is consistent with ethical journalism, the fact that editorial deals were struck with advertisers is a sign of how much media clout the funds wielded before their demise.

The role of politicians is also rather murky. The daily Pravda reported PM Dzurinda's SDKÚ party had taken a Sk300,000 donation in 2000 from the Jefo firm, which is linked to Drukos; whether the gift helped to keep the SDKÚ quiet, and whether other such gifts were made, cannot be answered given the secrecy around party financing in this country.

The collapse of the funds has taken a huge financial and emotional toll on thousands of voters. Perhaps more than any other 'scandal' that can be cooked up by political adversaries this summer, the issue of compensation for several hundred thousand angry people could become a powerful political weapon.

Assuming, that is, that any party could be irresponsible enough to pledge taxpayer funds to compensate people whom politicians themselves helped con out of their savings.

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