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The Swiss falcon shows the white feather

by Jan Kovalík, Jaroslav Spurný

New com­pro­mis­ing facts in the gov­ern­ment deal on Russ­ian debts

The way in which our gov­ern­ment set­tles one hun­dred bil­lion of Rus­si­a’s debt towards the Czech Repub­lic facil­i­tates the dan­ger that the trans­ac­tion turns into a huge dirty mon­ey laun­dry. The com­pa­ny Falkon Cap­i­tal is buy­ing the debt from the gov­ern­ment for twen­ty-two bil­lion crowns, though they them­selves do not have the mon­ey to pay for it. The own­ers of the com­pa­ny are insignif­i­cant Swiss and Geor­gian trades peo­ple. The firm nev­er­the­less promised the Czech gov­ern­ment to raise the entire sales price by the end of Decem­ber; the gov­ern­ment refused to dis­close how the ori­gin of the mon­ey would be mon­i­tored. But this is not mere­ly about high­ly sus­pi­cious funds pos­si­bly being trans­ferred to the gov­ern­men­t’s account. Should the Czech claim towards Rus­sia wind up in the wrong hands, then the ben­e­fi­cia­ry would be enabled to legal­ize an unbe­liev­able amount of one hun­dred bil­lion dirty crowns on very favourable con­di­tions.

Con­tract pack­ages

Rus­sia owes more than one hun­dred and thir­ty bil­lion crowns to the Czech Repub­lic. A fort­night ago, the rep­re­sen­ta­tives of both coun­tries have signed a pack­age of four con­tracts on how Rus­sia shall return about nine­ty-five bil­lion crowns of this amount. The Czech gov­ern­ment has declared the con­tract­s’s word­ing to be clas­si­fied mate­r­i­al and refus­es to pro­vide even the oppo­si­tion in par­lia­ment with the doc­u­ments — alleged­ly on request of the Rus­sians. The deputy min­is­ter of finance, Ladislav Zelin­ka, who took part in the nego­ti­a­tions con­cern­ing the sales of the debt to Falkon Cap­i­tal, is sur­prised: “I can­not under­stand why this is kept secret even after the exe­cu­tion of the con­tracts,” he says.

This calls for a sim­pli­fied account of the mat­ter: the Czech gov­ern­ment sells a one-hun­dred bil­lion claim to Falkon Cap­i­tal for less than twen­ty-two bil­lion, and the for­mer is going to exact the debt from Rus­sia on its own — and what they recov­er, is theirs. The Russ­ian gov­ern­ment itself, though, will not pay a sin­gle crown back — the domes­tic ener­gy dis­trib­u­tor RAO JES took over their debt on a con­trac­tu­al basis. The lat­ter’s man­age­ment, in turn, signed an agree­ment with Falkon Cap­i­tal, accord­ing to which they shall sell elec­tric­i­ty on favourable terms to Falkon Cap­i­tal; the Czech com­pa­ny is then sup­posed to export the elec­tric­i­ty to Turkey, and the prof­it shall rep­re­sent “install­ments” on the Russ­ian debt.

Zelin­ka admits that the gov­ern­ment required no bank guar­an­tee from Falkon, no war­ranties what­so­ev­er con­cern­ing the source from which they intend to take the twen­ty-two bil­lion for the pur­chase of the debt. Falkon sim­ply has to make pay­ment of the mon­ey to an already agreed bank account by the end of the year, and if they fail to do so, then the con­tracts will be null and void. But what guar­an­tee does the gov­ern­ment have that their dis­in­ter­est in the source of the funds does not sup­port the legal­iza­tion of mon­ey acquired by crim­i­nal activ­i­ties? “This is real­ly a risk, and I hope intel­li­gence to elim­i­nate this risk, as they ascer­tain the mon­ey’s source,” says deputy min­is­ter Zelin­ka. “But this is none of my sor­rows — I mere­ly nego­ti­at­ed the price for which we sold the debt. Any­thing beyond that is the gov­ern­men­t’s respon­si­bil­i­ty.” Deputy min­is­ter Zelin­ka admits that he has nev­er seen the Swiss own­ers of the com­pa­ny dur­ing nego­ti­a­tions, that he does not know them and has no idea as to their finan­cial poten­tial. “I nego­ti­at­ed only with a cer­tain Paa­ta Mamal­adze,” says Zelin­ka. But this man has ceased to play an offi­cial role at Falkon three years ago already. “Well, yes, but he was autho­rized to nego­ti­ate on their behalf,” says Zelin­ka with­out being spe­cif­ic.

The investors from Switzer­land

We have reached the point where we must deal with the involve­ment of Falkon in the set­tle­ment of Libya’s debts: in 1997, Falkon rep­re­sen­ta­tives attempt­ed to buy Libya’s debt in the amount of sev­er­al mil­lion crowns from our gov­ern­ment. Ivan Pilip, then min­is­ter of finance, refused to enter the con­tract with them. “I had received infor­ma­tion by the [Secu­ri­ty and Infor­ma­tion Ser­vice] BIS accord­ing to which the com­pa­ny con­sti­tut­ed too much of a secu­ri­ty risk,” recalls Pilip today. The issue was that both BIS and the Sec­tion for the detec­tion of orga­nized crime had tak­en inter­est in two of the Geor­gian own­ers of Falkon, Paa­ta Mamal­adze and Važa Kik­navelidze, because of their con­tacts to the Russ­ian mafia gang­land. The Geor­gians lat­er left their posts in Falkon’s statu­to­ry bod­ies.

In April 1998, their posi­tion was assumed by two Swiss broth­ers (not spous­es, as we had stat­ed in a pre­ced­ing arti­cle): Hans Peter Moser and Beat Urs Moser. “The com­pa­ny was prop­er­ly sold. Today, nine­ty-five per­cent of the stock is in the hands of Swiss legal per­sons,” says Jozef Čimb­o­ra, Falkon’s direc­tor. In his opin­ion, the com­pa­ny’s slate is now untar­nished owing to this cor­po­rate change. But Mr. Čimb­o­ra is not quite right. Nine­ty-five per­cent of Falkon are in the own­er­ship of “Magchim”, a Swiss com­pa­ny of the Moser broth­ers, the direc­tor of which is Mamal­adze. More­over, Mamal­adze runs anoth­er com­pa­ny in Switzer­land, Falkone, where two oth­er Geor­gians join him on the board — Kačkačišvili and Tej­mu­raz (the Swiss com­mer­cial reg­is­ter does not pro­vide their first names). Upon the ques­tion whether Falkone is anoth­er own­er of Magchim, Moser replies: “I am not major­i­ty share­hold­er.” All debt medi­a­tors we have addressed, from Moser to Čimb­o­ra, refuse to answer any ques­tions relat­ed to the Russ­ian debt. There is a high sus­pi­cion that all these peo­ple are pup­pets. “We screened them and informed the gov­ern­ment that the com­pa­ny is not exact­ly sol­vent and that their inten­tion might be to laun­der mon­ey,” says intel­li­gence chief Fran­tišek Bublan. “On the oth­er hand, the com­pa­ny had already set­tled stuff for the gov­ern­ment ear­li­er, and that must have been more impor­tant when they made up their mind,” he adds. Among the things that had made the secret ser­vice sus­pi­cious were the inac­ces­si­bil­i­ty of the cor­po­rate rep­re­sen­ta­tives and their false address­es.

A cat-and-mouse game

For instance, accord­ing to the Com­mer­cial Reg­is­ter, Falkon Cap­i­tal has its seat in Husová Street in Prague. At the respec­tive address, how­ev­er, a Domini­can monastery and its church are sit­u­at­ed. “Falkon has nev­er had their seat here. We know the com­pa­ny because of the con­stant inquiries,” says the gate­keep­er. The com­pa­ny’s office is locat­ed half a kilo­me­tre away from there. They are inac­ces­si­ble. Upon ring­ing the bell, one is being told by a female voice with hard Russ­ian accent that the com­pa­ny’s boss Jozef Čimb­o­ra is not and will not be present. Paa­ta Mamal­adze’s reg­is­tered domi­cile is a non-exist­ing address. It is a har­row­ing expe­ri­ence to vis­it the Swiss own­ers of the firm, whose alleged finan­cial strength is stressed by Čimb­o­ra. On the out­skirts of Neuhausen, a small town of 7,000 inhab­i­tants, a small indus­tri­al zone is stretched out which fea­tures unat­trac­tive office build­ings for dozens of firms. Magchim has a rent­ed office in one of the stan­dard­ized con­tain­er build­ings. The same office is shared by fur­ther com­pa­nies of the Moser broth­ers and Paa­ta Mamal­adze. The com­pa­ny does not even have a sec­re­tary. Behind the desk sits Beat Moser him­self. He is appar­ent­ly caught off-guard by the vis­it of Czech jour­nal­ists. He refus­es to talk about any­thing relat­ed to the debt. “Write down your ques­tions, I shall answer in writ­ing,” he says appre­hen­sive­ly. After two days of reminders via phone, he says: “We have read about you in the news­pa­per, you sup­pos­ed­ly write anti-gov­ern­ment stuff. We are not going to com­mu­ni­cate w
ith you. You must under­stand that any trans­ac­tion has con­fi­den­tial­i­ties.”

The Moser broth­ers and their com­pa­nies are unknown even to the local paper Schaffhauser Nachricht­en. “No, they cer­tain­ly aren’t among our major busi­ness­peo­ple, their names mean noth­ing to me,” thinks edi­tor Karl Holz aloud. “Where are they sup­posed to have their premis­es? In the indus­tri­al zone of Neuhausen? But that is an area for small-scale entre­pre­neurs.”

Rus­sia in the NATO

Accord­ing to Bublan, the min­is­ters had all the infor­ma­tion at their dis­pos­al. In spite of this, they approved a sales trans­ac­tion in a way that allows pos­si­ble crooks to have effec­tive­ly legal­ized up to two bil­lion dol­lars acquired by crime. (To put it some­what exag­ger­at­ed­ly: it suf­fices to sim­ply get hold of a fake con­fir­ma­tion from some­where with­in the entan­gled mesh of Russ­ian offices accord­ing to which com­pa­ny so-and-so has just been paid such-and-such an amount of mil­lions or bil­lions as an install­ment of offi­cial­ly acknowl­edged debts — and you are home and dry.) Nev­er­the­less, the min­is­ters are not upset by the fact that in their eager­ness to add twen­ty bil­lion to the state bud­get as fast as pos­si­ble, they might have sup­port­ed crime. “Set­tle­ment of debts? That’s not my depart­ment. We have approved sales to a com­pro­mised firm and now there is the dan­ger of mon­ey laun­der­ing? I don’t know the least about such a thing,” says Jaromír Schling, min­is­ter of trans­porta­tion, for instance. “I shall not talk to you about this at all,” refus­es to com­ment for­eign min­is­ter Jan Kavan. Eduard Zeman, the min­is­ter of edu­ca­tion, also does not want to con­cede that the gov­ern­men­t’s draft of con­tracts might have allowed for cor­rup­tion and mon­ey laun­der­ing. “Falkon was men­tioned, but I do not quite recall the details,” he adds. Min­is­ter of jus­tice Jaroslav Bureš says he was inter­est­ed in the legal aspects of the agree­ments only, which were alleged­ly all right. Bureš denies that the gov­ern­ment has gen­er­ous­ly cre­at­ed an oppor­tu­ni­ty to laun­der mon­ey. “I do not under­stand this issue, but I have faith in deputy prime min­is­ter Špid­la, who ruled out the pos­si­bil­i­ty,” he adds.

The whole trans­ac­tion has two more inter­est­ing aspects. The first one is of a tech­ni­cal nature. “If I was in charge, I would dis­trib­ute the risk among many more com­pa­nies,” says main nego­tia­tor and deputy min­is­ter Zelin­ka. “This is how it has worked so far, and the Rus­sians have returned us almost thir­ty bil­lion crowns.” So why did they enter the con­tract in ques­tion? “There was not much time, and the gov­ern­ment had cal­cu­lat­ed with the mon­ey in the fol­low­ing year’s bud­get already. I am a pub­lic offi­cial and my job is to car­ry out gov­ern­ment direc­tives,” he says. The sec­ond issue is a polit­i­cal one. No one knows what has been incor­po­rat­ed in the con­tract between the Czech and the Russ­ian gov­ern­ment. But prime min­is­ter Miloš Zeman, for instance, has repeat­ed­ly put him­self on record since the time the con­tracts were exe­cut­ed that he did not have objec­tions against Rus­sia join­ing the NATO.

Our way of set­tling debts

Any effort to exact for­eign state debts falls into one of two cat­e­gories. The first one is the one pro­mot­ed by deputy min­is­ter Zelin­ka. The debt is exact­ed in small install­ments by com­pa­nies which have usu­al­ly good con­tacts in the tar­get coun­try and which usu­al­ly suc­ceed in recov­er­ing approx­i­mate­ly forty-five per­cent of the orig­i­nal amount. As a rule, how­ev­er, only around thir­ty per­cent actu­al­ly wind up in the state trea­sury.

The sec­ond mod­el is rep­re­sent­ed by “big shows” a la Fal­con. In 1993, Lubomír Soudek, then exec­u­tive of the Ško­da works, tried to ini­ti­ate the first major set­tle­ment of the Russ­ian debt, sin­gle-hand­ed, so-to-speak. Upon his return form Moscow, while still at Ruzyňe air­port, he let the Cham­pagne bot­tles pop, stat­ing that he had nego­ti­at­ed fan­tas­tic deals. None of which would come true in the end. We almost became an object of dis­grace in 1998, when Ivo Svo­bo­da, then finance min­is­ter, tried to pro­mote Barak Alon as our medi­a­tor for the Russ­ian debt — a man who short­ly there­after found him­self the object of inves­ti­ga­tions in the affair of an eight-bil­lion asset strip­ping at Komerční ban­ka. Svo­bo­da’s suc­ces­sor Mertlík sug­gest­ed to have a part of the debts amor­tized by ways of import­ing MiG-29 fight­er jets. This sug­ges­tion did not pass due to crit­i­cism voiced by right-wing deputies who point­ed out that this would ren­der the army depen­dent to a large degree on Russ­ian indus­try.


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