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STATE FINANCIAL WATCHDOGS FINGER PRIVATISATION AGENCY FOR IRREGULARITIES UNDER MEČIAR, DZURINDA GOVERNMENTS

Auditors find holes at FNM

SLOVAKIA's FNM privatisation agency is mismanaged, inefficient, and corrupt, according to a report published recently by the country's Supreme Audit Office (NKÚ).
Although the FNM, or National Property Fund, is widely seen as the tool with which vast sums of Slovakia's privatisation revenue were looted under the third government of Vladimír Mečiar between 1994 and 1998, the most recent NKÚ findings suggest that the two Mikuláš Dzurinda governments since then have not been able to eliminate corruption at the agency.
The NKÚ report, which examined activities at the FNM between 1999 and 2001, specifically criticised non-transparent bonuses paid to FNM management of nearly €2 million, external contracts for legal services worth Sk740 million (€17.9 million), and loans from the FNM to businesses at rates below those offered by commercial banks.

SLOVAKIA's FNM privatisation agency is mismanaged, inefficient, and corrupt, according to a report published recently by the country's Supreme Audit Office (NKÚ).

Although the FNM, or National Property Fund, is widely seen as the tool with which vast sums of Slovakia's privatisation revenue were looted under the third government of Vladimír Mečiar between 1994 and 1998, the most recent NKÚ findings suggest that the two Mikuláš Dzurinda governments since then have not been able to eliminate corruption at the agency.

The NKÚ report, which examined activities at the FNM between 1999 and 2001, specifically criticised non-transparent bonuses paid to FNM management of nearly €2 million, external contracts for legal services worth Sk740 million (€17.9 million), and loans from the FNM to businesses at rates below those offered by commercial banks.

"After we reported the suspicious cases to the police, our investigation at the FNM was completed by the submission of our report to the government," said NKÚ chairman Jozef Stahl at a June 5 press conference.

Since Slovakia's 1993 independence, the FNM has been charged with selling off huge volumes of state-owned property and businesses. However, a change in the FNM's statutes and constitutional limits meant state financial auditors were barred from the agency between 1994 and 2001.

The lack of oversight in the body allowed those close to the Mečiar government to use the fund as a private bank, and to acquire assets from the state at bargain prices, say corruption watchdogs.

In 2001, however, legislative and constitutional changes gave NKÚ auditors an expanded range of institutions to examine, and the right to make its findings public. Chairman Stahl was soon releasing regular reports of corruption large and small in state enterprises, and setting his sights on the FNM.

"Even though the NKÚ was founded in 1993, within a year it lost the power to investigate the activities of the FNM," Stahl told The Slovak Spectator in August 2001.

"Apart from the agency's own management, executive, and supervisory organs, [the FNM] was not subject to control, which created space for some people to gain control of large amounts of property," he said.

This February, former officials from the FNM and the now-defunct Privatisation Ministry were charged for misusing public authority and illegally handling privatisation revenue.

According to Interior Ministry investigators, the accused transferred large sums of privatisation revenues without authorisation between various ministry, the FNM, and personal accounts between 1991 and 1996.

In spring 2001, former privatisation minister Peter Bisák and former FNM head Štefan Gavorník were charged for taking more than Sk19 million (€459,000) in bribes during the privatisation of some companies.

Although the most recent NKÚ report focuses on the financial condition of the FNM between 1999 and 2001, some of the examples of mismanagement stem from Gavorník's 1994 to 1998 tenure at the agency. As of the end of 2001, the FNM held claims worth more than Sk139 million (€3.4 million) from loans it had offered under Gavorník's administration.

Although the average bank-lending rate in 1996 was 18.8 percent, in one case the FNM loaned over Sk70 million (€1.7 million) to a Trnava-based firm at 8.8 percent interest, reads the NKÚ report.

"The FNM offered this firm in 1996 and 1997 a total of five loans at a discount rate, despite the fact that the debtor did not fulfil claims on even one of the contracted debts," the report says.

The questionable use of FNM funds was not limited to the Mečiar era, however, and irregularities at the FNM have also been found during the Dzurinda-era management of current Labour, Family, and Social Affairs Minister Ľudovít Kaník (1998-1999) and current director Jozef Kojda.

In 2001, for example, the FNM spent almost Sk240,000 (€5,800) on a technical seminar in the spa town of Piešťany, which included Sk74,000 (€1,800) in an undefined "representation" line-item, and Sk16,000 (€390) in alcohol.

Investigators also found that the FNM has been contracting external law offices for services that fall within the responsibilities and capacities of agency officials.

"For example, on the basis of a contract from 2000 between the FNM and a legal office, the fund was billed Sk492,000 (€12,000) for the preparation of the document 'Statutes of the FNM'," the report reads.

"The contract promised the [external] lawyers a further personal reward of Sk200,000 (€4,800) if the document were to be accepted by parliament," NKÚ investigators said.

The FNM also reportedly paid over Sk78 million (€1.9 million) in management bonuses between 1999 and 2001, without defining any quantitative or qualitative indicators to justify the awards.

FNM officials, however, say that the bonuses were awarded in place of wages, and that the management of the fund has been in line with the law since 1998.

"The president and the members of the executive and supervisory boards are not employees of the fund; they are appointed by parliament and they are not entitled to a salary, but to rewards," said FNM spokesperson Tatjana Lesajová.

The NKÚ report will be discussed by parliament in its current session, but so far no personnel changes or other reprisals at FNM have been suggested.

FNM managers say they have been working to correct shortcomings the agency had in the past, but that the current directorship is innocent of financial misconduct.

"Of course, we have been removing formal defects in the management of FNM, but we reject the NKÚ's principal objections," said Lesajová.

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