The Spanish villa of Alexander Rezeš, privatiser of steelmaker VSŽ, is worth a reputed 100 million Slovak crowns ($2.3 million).photo: Plus 7 Dni
Karol Martinka is in deep trouble. The husband of Blažena Martinková, former Prime Minister Mečiar's advisor for "everything," Martinka is hiding out in Austria from charges of fraud laid by the Slovak financial police. In a tacit admission of his guilt last week, Martinka authorized his Vadium Group company to return the 68% stake that it acquired in the Piešťany spa in 1996 to the state privatisation agency, the FNM.
FNM President Ľudovít Kaník told The Slovak Spectator on June 21 that once the Vadium Group stake is back in the government's hands, "the only possible future for the [Piešťany spa] shares is a public tender organised by the Slovak government." Martinka's capitulation might well be cause for government rejoicing, given the difficulties that the FNM has encountered in forcing crooked privatisers under the Mečiar regime to return their ill-gotten booty to the state.
After eight months in power, the FNM has over 400 court cases on its hands, dealing with distraints, broken contracts and various financial and tax offences committed by those who acquired public property cheaply under the former government. However, the agency has requested the courts to lay charges in only nine privatisation cases, disappointing analysts who expected 're-privatisation' to proceed more swiftly.
"According to the FNM's promises last year, I expected that the process would be quicker," said Ivan Chodák, an analyst with CA IB securities. "The slow pace isn't improving Slovakia's image abroad, and it looks as if it [re-privatisation] will continue a long time into the future."
Big cases, hidden tools
Anton Kuchta, deputy director of the investigation section at the Interior Ministry, said that his section currently was pursuing four major cases of financial fraud. "Apart from Martinka, there is a person under investigation at [gas storage company] Nafta Gbely, and we have formed a special team for investigation of fraud at [giant steelmaker] VSŽ, which started operations on Tuesday [June 22]," he said. Kuchta added that the Interior Ministry was also investigating massive bille of exchange drawn on natural gas supplier SPP and signed by former SPP director Ján Ducký. Ducký, who was an Economy Minister in the Mečiar government, was murdered on January 11.
For all that the Interior Ministry is pursuing big fish like VSŽ, Nafta, SPP and Vadium Group, however, it is still limited in its investigative role by the fact that privatisation cases must be referred to it by the FNM before a criminal investigation can be launched. And one of the biggest concerns with the FNM's role has been that no one knows exactly how privatisers who bought property illegally are being brought to book or forced to return their shares to the state.
Kaník said that "the FNM uses the power of arguments and personal charm" to get its property back. "We have contracts [with privatisers], and for us the result is the same whether we file charges or come to an agreement. For privatisers, of course, it's different, and that's why if a privatiser is reasonable enough, he will choose to return the shares."
However, a source close to the government, speaking on condition of anonymity, said that out-of-court settlements based on 'personal charm' did not always work to the benefit of the state. "Imagine you are a privatiser with property from which you have already taken hundreds of millions of crowns and laid it in offshore accounts," the source said. "Now the FNM approaches you and offers a deal - return the tunnelled property in exchange for not being charged. I'd say you take the deal."
Investor reaction
The lack of clarity surrounding the FNM's methods has led to charges that the state is giving soft deals to some former privatisers. "What are the tools that the FNM uses?" asked CA IB's Chodák. "No FNM official has said what tools they use. We are not seeing the transparency that the FNM promised last year."
"The big shift away from clientelism under the previous government does not seem to be happening," agreed the government source.
But Matthew Vogel, a senior economist with Merrill Lynch's Emerging Markets Fixed Income Research unit in London, said he was not surprised that the FNM had referred so few cases for criminal prosecution.
"They [the government] are really stuck, because their legal recourse is limited," he said. "The former government may have given property away cheap, but that's not necessarily illegal. Their real chance to recover shares is very limited, and I'm not surprised they haven't been able to do much."
Economy Minister Ľudovít Černák told The Slovak Spectator on June 23 that he had not encountered any disapproval of his government's fight against economic crime. Foreign investors, he said, "appreciate transparency and the interest of the government in creating better legal conditions and in improving the functioning of the police, including the financial branch. They regard the solving of privatisation cases as our own internal matter."
Vogel agreed, saying that while the EU's concern with corruption in Slovakia under the Mečiar government may have given a "political angle" to re-privatisation under the current administration, investors generally saw investigating financial crime as simply "the ethical and moral thing to do."
