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Bin Laden charge triggers Prague denials

JOHNSON’S RUSSIA LIST [1]

PRAGUE, Czech Repub­lic, Jan. 14 (UPI) — Prague offi­cials scram­bled Mon­day to deny a Moscow news­pa­per’s claim that an invest­ment firm with ties to Osama bin Laden will earn about $770 mil­lion for arrang­ing a Russ­ian debt-pay­off deal with the Czech Repub­lic.

The office of Jiri Rus­nok, Czech finance min­is­ter, said the invest­ment firm Falkon Cap­i­tal was cleared by both the Czech and Russ­ian par­ties.

But the bin Laden alle­ga­tion, appear­ing in the inde­pen­dent week­ly Nova­ja Gaze­ta, was only the lat­est in a months-long string of intrigu­ing reports high­light­ing the mys­ter­ies of the Czech-Rus­sia-Falkon deal.

Prague jour­nal­ists, oppo­si­tion politi­cians and even the Czech gov­ern­men­t’s intel­li­gence ser­vice start­ed rais­ing cau­tion flags when con­fi­den­tial talks on a debt agree­ment began last spring.

Rus­sia has owed the Czech Repub­lic about $3.6 bil­lion since the fall of the Sovi­et Union 12 years ago. The size of the debt was set in 1994, but efforts to set­tle dragged for years before the first sign of progress was announced last April.

Even­tu­al­ly the talks led to an agree­ment signed by Russ­ian Prime Min­is­ter Mikhail Kasyanov and Czech Prime Min­is­ter Milos Zeman in Prague in Octo­ber. The deal was closed Dec. 19 when Falkon agreed to pay the Czech gov­ern­ment about $570 mil­lion for $2.5 bil­lion, or about two-thirds, of the Russ­ian debt. The rest of the debt will be nego­ti­at­ed lat­er.

Although basics of the deal were pub­li­cized — and even hailed by Rus­sia as a land­mark prece­dent for its future debt pay­offs — offi­cials involved in the talks kept most trans­ac­tion details secret.

Rus­nok said pri­va­cy was a con­di­tion stip­u­lat­ed by Falkon and the Russ­ian gov­ern­ment. But the secre­cy — as well as uncer­tain­ty sur­round­ing Falkon’s activ­i­ty and finan­cial back­ers — fanned sus­pi­cions and helped jour­nal­ists fill Prague news­pa­per columns for months.

News of Nova­ja Gaze­ta’s report moved as a bul­letin Mon­day after­noon on the Czech news wire CTK. With­in an hour, Rus­nok, Zeman and oth­er offi­cials were respond­ing to a flood of media calls.

In his sto­ry, Nova­ja Gaze­ta reporter Oleg Lur­je claimed that Falkon is a daugh­ter com­pa­ny of the Sau­di Bin­Laden Group, the multi­bil­lion-dol­lar con­struc­tion com­pa­ny oper­at­ed by bin Laden’s fam­i­ly. Although the fam­i­ly says it has dis­owned the ter­ror­ist mas­ter­mind — and denied him any stake in the com­pa­ny — Lur­je assert­ed pro­ceeds from the Falkon deal “will flow smooth­ly in the direc­tion of Osama bin Laden.”

The report said Falkon would receive $1.35 bil­lion from the Russ­ian gov­ern­ment, includ­ing $580 mil­lion in cash. Most of the cash was to be trans­ferred direct­ly to the Czech gov­ern­ment. The non-cash pay­ment to Falkon was in the form of about $770 mil­lion worth of cred­it toward future sales of Russ­ian-pro­duced elec­tric­i­ty, stretched over sev­er­al years.

The report called the Rus­sia-Falkon deal “extreme­ly tan­gled” and “dif­fi­cult” for any gov­ern­ment agency try­ing to mon­i­tor the cash flow. But essen­tial­ly Falkon — and alleged­ly by exten­sion, Osama bin Laden — was to make $770 mil­lion from the deal.

Gaze­ta’s alle­ga­tion of an Osama bin Laden con­nec­tion to Falkon was empha­sized with a schemat­ic dia­gram of Sau­di Bin­Laden Enter­pris­es that the reporter said came from an Amer­i­can source.

Although lit­tle is known about Falkon, even among finan­cial ana­lysts in Prague, the firm won the exclu­sive right to bar­gain with Moscow and Prague last sum­mer, after the two gov­ern­ments agreed to set­tle the debt. The pre­lim­i­nary agree­ment was penned in June at a pri­vate meet­ing in St. Peters­burg between the Czech and Russ­ian prime min­is­ters.

The final agree­ment was sup­posed to be signed in July. But the process was delayed. That’s when alle­ga­tions of bribery and orga­nized crime began to sur­face.

An intel­li­gence report writ­ten by the Czech Min­istry of Inte­ri­or and obtained by a Prague news­pa­per sug­gest­ed Falkon may have ties to the Russ­ian mafia and “for­eign intel­li­gence ser­vices.” How­ev­er, the report did not stop the deal­mak­ing.

Jour­nal­ists also dis­cov­ered through police reports that, in July, Falkon direc­tor Jozef Cimb­o­ra lost a suit­case in Prague stuffed with $180,000 in U.S. cur­ren­cy. The suit­case and cash was recov­ered, but Cimb­o­ra nev­er explained why he had the mon­ey, and the finance min­istry declined com­ment.

A few days before the final agree­ment was signed in Octo­ber, the eco­nom­ics news­pa­per “Hospo­darsky noviny” — an affil­i­ate of The Wall Street Jour­nal Europe — charged that Falkon was tied to a heat­ing-oil tax scan­dal. That same month the polit­i­cal week­ly “Respekt” claimed Falkon might use the debt trans­ac­tion to laun­der mil­lions of dol­lars in dirty mon­ey.

Oppo­si­tion politi­cians also joined in crit­i­ciz­ing the debt set­tle­ment. Lead­ers of the Free­dom Union par­ty, for exam­ple, filed a law­suit against the Social Democ­rats-led cab­i­net for refus­ing to release the Falkon con­tract.

And the anti-cor­rup­tion watch­dog Trans­paren­cy Inter­na­tion­al has been mon­i­tor­ing devel­op­ments. “It’s def­i­nite­ly very sus­pi­cious,” said David Ondrac­ka, an employ­ee at the group’s office in Prague.

Rus­nok, the finance min­is­ter, has insist­ed that a vari­ety of fis­cal con­trols were imple­ment­ed to guar­an­tee the legal­i­ty and safe­ty of the deal. The $570 mil­lion cash pay­ment from Falkon, for exam­ple, was to be “san­i­tized” by audi­tors to make sure the mon­ey was not from crim­i­nal sources.

The cash, in U.S. cur­ren­cy, was deposit­ed just before Christ­mas at a Prague branch of Deutsche Bank. Even­tu­al­ly it was to be con­vert­ed into Czech cur­ren­cy and trans­ferred into a gov­ern­ment account at the Czech Nation­al Bank.

Mon­day night on Czech Tele­vi­sion, the Moscow reporter Lur­je said he was “dead cer­tain” that Falkon was con­nect­ed to the bin Laden orga­ni­za­tion.

But Zeman, the prime min­is­ter, reject­ed the claim. He said all Czech com­pa­nies were thor­ough­ly exam­ined after Sept. 11 for pos­si­ble ties to ter­ror­ists, and Falkon “was not on the list.”