US Steel Košice head John Goodish: "According to the world this transaction was not transparent."photo: TASR
THE CONTROVERSIAL sale of a 21 per cent stake in the VSŽ steel firm has finally been approved by the Bratislava stock exchange, with the shares on February 11 ending up on the books of Poštová banka and brokerage SMD.
However the deal, which had been held up for a month amid concerns over transparency, remains under investigation by the Attorney General's Office for possible insider trading.
It also continues to rankle with foreign investors, particularly US Steel Košice, which had declared an interest in the shares but had not been told they were to be sold during the final two hours of trading on December 21, the last business day on the stock exchange in 2001.
US Steel Košice President John Goodish accused the government of backtracking on its promise to fight corruption, an issue of major concern to firms investing in Slovakia.
"It's more than clear here that someone deliberately tried to lower the price of the shares," he said in an interview with local paper Košický večer. "In America you would go to jail for that.
"I'm pretty shocked and frustrated by the whole thing. A government which advertises and promotes fighting corruption and transparency has done the exact opposite. I'm very disappointed."
The VSŽ shares, which had been on the account of the state-controlled pipeline operator Transpetrol, were on December 13 approved for sale on the stock exchange by Economy Minister Ľubomír Harach after the failure of negotiations last year to have them transferred to the FNM state privatisation agency.
The Privatisation Ministry had also been unable to come to terms with US Steel Košice on the shares after months of negotiations.
However, despite reports that interested parties including VSŽ itself had offered at least Sk200 crowns per share, they were eventually sold on December 21 for Sk160 a piece, netting the state Sk559 million - Sk140 million less than they would have raised at Sk200 a share.
The deal brought protest from financial markets, investors and politicians. Investigations were launched by the Economy Ministry, the Financial Markets Office and a group of parliamentarians, but none turned up evidence of wrongdoing.
An offer by Economy Minister Harach to resign in January was rejected by Prime Minister Mikuláš Dzurinda, but was repeated after Goodish visited Harach in early February.
"It looks as if something was amiss with the price movement of the shares," Harach said on February 11. "I feel responsible, and it's not exactly a nice feeling. I'm prepared to leave and bring this whole matter to a close."
VSŽ share prices plunged inexplicably in December to around Sk100 from over Sk250 the month before, prompting Harach to declare on December 19 that the government would wait to sell the shares until the reason for the suspicious decline was uncovered. Two days later, however, the shares were sold.
"I have a lot of questions," said Ralph Johnson, the former US ambassador to Slovakia (1995 to 1998) and a legal representative of the J&J consulting firm which advises US Steel among other clients.
In an interview with the weekly paper Domino fórum, Johnson said: "Why did the price of VSŽ shares fall so quickly? Why did the minister stop the sale, and why were the shares then sold two days later? Why did the transaction take place in the last few minutes of trading on the stock exchange, preventing anyone else from preparing an alternative offer?
"According to my information, at the time the sale occurred there was an offer of Sk200 on the RM-System. When I take into account the timing of the VSŽ share sale and the manner in which it occurred, I can only come to one conclusion: no one was interested in holding a true competition."
The Financial Markets Office agreed on February 6 with the Bratislava Regional Court that the sale would go ahead while the court heard testimony from representatives of Transpetrol, the Economy Ministry and the stock exchange. The aim of the criminal investigation, according to Attorney General Milan Hanzel, is to discover whether the buyers knew beforehand that the ministry would permit the snap sale.
Deputy Prime Minister for Economy Ivan Mikloš, who according to his ruling coalition partners in the leftist SDĽ party also bore responsibility for the murky transaction, shrugged at the reactions of the US investment community.
"What can I say? Yes, it was untransparent and that matters a great deal, but it's being investigated."
However, Johnson said the VSŽ share sale was likely to affect potential foreign investors.
"Firms which want to invest in Slovak shares will start to weigh their decision in the knowledge that they too could become the victims of manipulation that they can't control, since trading in shares here is not open and transparent."
Goodish added: "This is a country and a government which has committed itself to transparency, but this was a transaction that according to the world was not transparent."
US Steel Košice has not ruled out the possibility of buying a 16 per cent stake in VSŽ that the FNM privatisation agency still has on its portfolio.
