One of the big cases that was not only discussed at length but also investigated was the tunneling of the CS Fund.
It all started after the Velvet Revolution in the early days of the fragile but wild open economy, when a group of young entrepreneurs Pavel Tykač, Jan Dienstl and Aleš Tříska founded the investment group Motoinvest. Much has been heard of all of them since then, especially Tykač, who became one of the richest Czechs, and is one of them at the time of writing.
Tykač’s fortune was estimated at CZK 173 billion in 2023. He currently owns everything from mining companies to the football club Slavia, which he took over from Zeman’s Chinese, to shares in a bank. His best-known brand, however, is the Sev.en group, which has a massive business in the energy sector, for example speculating in decommissioned coal-fired power plants. Before the first financial league, however, he also played a dirty foul-up-filled game in the colours of Motoinvest in a showdown between other financial predators and mafiosi from the early 1990s.
Motoinvest was founded in 1991 and in 1996 the company purchased three funds from the investment portfolio of CS Fond. The shares tied to the funds were then skillfully sold to new smaller investors, which gradually generated approximately CZK 1.5 billion. The account with the funds was kept in Plzeňská banka, which was controlled by Motoinvest itself.
As a reminder, in 1997 Motoinvest sold the CS Fund portfolio to Austel Enterprises, which then transferred the investment funds to the Crassus company, and they eventually ended up in the hands of Russian businessman and senior civil servant Nikolai Trofimov through his Kos-Kos company. The Russian investor was to be linked to the Czech side of the acquisition by the brokerage firm Umana.
Kos-Kos appointed Václav Franta as head of the CS Fund, who transferred 1.23 billion of the fund’s resources to Uman’s account at Plzeňská banka. The brokerage firm presented the transfer as a preparation for the advance payment for new investments. The funds were therefore transferred to Swirglen’s account in the Austrian bank GiroCredit. From there, the owner of Swirglen moved the money to the account of another of his companies, Tre-Union, in Luxembourg. The transaction was suspicious for a number of reasons – in particular the amount, the lack of documentation, the speed and the reported decision – and was therefore promptly examined by the Financial Analysis Unit (FAU) of the Ministry of Finance.
Here, however, there was a great embarrassment and a suspicious mistake by the department. The FAU was supposed to decide within 24 hours whether to give the green light to the transfer. If the transfer is not rejected, the money will be released. The FAU officials, reasoning that they assumed the 24-hour deadline applied only to working days, let the matter lie during the weekend, made no decision. 24 hours, of course, in the real world does not take into account whether it is a weekend, and so the transaction went through as approved. The situation was tried to be saved by the head of the department, who tried to put the payment on hold for 48 hours after arriving at work on Monday. However, the embarrassing situation was resolved by legal threats from the other side and the money did indeed flow.
CS Fond was thus waiting for a reward in the form of new interesting purchased investment portfolios. Instead, the company received worthless shares of Drůbež Příšovice. When a broker promises to buy attractive stocks with high potential, you don’t have to be an economist to be surprised by the poultry company’s stock, to say the least.
The whole fiasco and obvious fraud, which included the failure of several state institutions, ended with the establishment of the receivership of the CS Fund. The remnants left in the investment company were to be managed by Akro. The latter managed to extract CZK 200 million in claims from foreign accounts and tried to extract another CZK 650 million from the Cyprus-based Naval Architects Shipping Company. This was part of the money taken out of the dubious transaction described above. However, it was interesting to note that according to several indications, Pavel Tykač, together with managers from the J&T and PPF groups, were behind the Cypriot shell. The bank subsequently went bankrupt.
Smaller unauthorized transfers, later mapped, were also part of the web of wild transactions around CS Fund and Plzeňská banka. All indications are that these were deliberate transfers of money from companies to anonymous foreign accounts.
Suspicious transactions around Tykač’s companies ended in financial losses for investors, a blunder by the Czech regulatory authorities and a paradoxical lawsuit against the state by the Cypriot Naval, which tried to take advantage of the authorities’ failure as FAU and demanded payment of CZK 4 billion from the Czech Republic over and over again.
Police have been investigating the fraud for years. But they only caught four minor figures. The tunnel’s masterminds were never convicted in court. And in 2015, Tykač himself was able to fight off suspicion legally.
