Another of the characteristic phenomena of this period was the need to get funds from bribes or other illegal activities back into circulation. The fact that a politician or official receives some undue benefit, most often a bribe, is only a partial success for him or her. It depends on what the bribe looks like. If an official at a building authority receives, say, ten thousand in an envelope for issuing a building permit that contravenes building regulations, he or she can quickly get that amount into circulation. The afternoon after the corrupt transaction, he goes to an electronics store, pulls the appropriate amount out of an envelope, and dazzles his family at home with a new television. But if such an economist of a political party has a hundred million in an offshore account, the situation is different. For example, the account may belong to a company, which in turn has an owner, and that owner is identified by a single share. The economist of the political party therefore has that share in his safe and knows that the company has the hundred million in exotic money institutions. But the ownership of those few pieces of paper is as valid as a dead man’s chill to the economist, the political party and the leaders of that political party. All involved need to enjoy the money somehow or use it for more power. Well, it is the time at the turn of the millennium that would warrant a display in a monument to corruption entitled “How to launder what I have stolen”.
If we were to walk through the halls of an imaginary exhibition, we would look into the showcases with examples of more or less successful attempts to launder stolen property.
Showcase 1 – foreign accounts
The period of the Opposition Treaty, i.e. the second half of the 1990s and the time when the Czech Republic was not a member of the European Union and other international organisations, is characterised by reliance on law enforcement authorities not obtaining information from abroad. Indeed, at that time, it often got away with it, because the Czech police did not know what was going on in foreign banks, and foreign banks and the supervisory authorities of these foreign countries in turn knew nothing about the corrupt origins of Czech money. Often it was enough to set up an account a few kilometres across the border and have bribes sent to it through front companies. Then all that was needed was to buy foreign real estate, live foreign companies or consumer goods with which the corrupt could dazzle his cronies at golf or party congresses.
A textbook example of corruption and the subsequent laundering of bribes through a foreign account was former Chomutov mayor and ODS senator Alexandr Novák. He was found guilty of the crime of accepting a bribe of 2.27 million marks, or about CZK 43 million. According to the conviction, he committed this crime when he accepted this money in 1999 in return for the sale of gas and energy shares in the companies Severočeská plynárenská and Severočeská energetika Děčín to the German company VNG-Verbundnetz Gas. The money was funnelled through a front company, Intercontractor, into an account in Austria owned by Novák and his wife Eva. She was prosecuted in Austria following Novák’s conviction by the Czech judiciary, but the prosecution was subsequently dropped because it was not proven that Nováková knew where her husband had stashed the money.
Showcase 2 – Financial Genius and Happiness
Another way of laundering illegally obtained money, already somewhat more sophisticated, was the creation of a kind of cover legend around 2000, a fairy tale about how a clever investor came to his fortune. We can illustrate such a fable about a successful corruptor with the fictitious Mr. Čistil.
Mr Čistil was promised a bribe of CZK 60 million by his corruption partner. With a fraction of this money, which he had in his briefcase and with his grandmother’s money, he bought a hotel in the Krkonoše Mountains for 18 million. He then invested another two million in its improvement. Meanwhile, his corrupt partner created a company with an untraceable ownership structure. Two years after buying the guesthouse, Mr Čistil sold the “renovated” building into the hands of the company he created for, say, 65 million. Few can see the transaction as a money laundering scheme. Mr. Čistil simply got lucky and made a profit with a clever business plan. The money is in his account, he may have taxed the difference between the purchase and sale price, the bribe has been passed on and there is no link between the two corrupt parties. Proof of money laundering, or in the words of criminal law “laundering the proceeds of crime”, is scant. In order to prove it, it is usually necessary to prove the so-called source offence, i.e. bribery. However, this would have to be one of the parties to the corrupt act talking or there would have to be, for example, a recording of their agreement.
This pure situation can then be further obfuscated, complicated or otherwise confused by its actors in various ways. A well-known architect who participated in the reconstruction can add credibility, another company can sponsor an advertising campaign for the region in order to increase the number of visitors to the guesthouse, etc. It also doesn’t have to be about the property at all. Few people understand the prices of artwork, jewellery or less common things like a diamond or old wine or a racehorse anymore, so it’s no wonder that many former politicians and civil servants have found happiness selling their uncle’s stamps or their great-grandfather’s vintage car. Next to real estate, buying and then selling securities is the most common tool for making a miraculous fortune. The most pertinent example is the ingenious transaction of former Prime Minister Stanislav Gross, which is discussed in this book in connection with Mr. Chrenko’s dealings and ownership of Moravia Energo. We can learn a lot from this example too. The transaction was very skillfully obfuscated. Gross bought the shares from his party crony and sold them at a multiple of the value, which could have been arranged by the entire criminal structure of his friends and friends of his corrupt partner.
Showcase 3 – Advertising and legal services
Our money laundering exhibition should definitely pay attention to another proven method of directing dirty money through the advertising or advocacy laundry where it belongs, in the pocket of the politician or his family. Mr. Propral will illustrate this story for a change. He promised himself a bribe of 50 million to be awarded a contract to repair several ministerial buildings by a construction company from the city, from where he worked his way up to the seat of a member of the government. So the construction company, after agreeing with Propral, enters into a contract for some activity that is difficult to quantify. Most often it is advertising, marketing or legal services. In the case of Minister Propral’s corrupt crony, it is both – on the one hand, the construction company had a marketing plan for the next few years prepared for 25 million and, on the other hand, it had a law firm prepare a risk analysis of the implementation of harmonisation of construction regulations into Czech law in the next decade. In both cases, they will receive hundred-page papers with colour charts and texts that someone copied from the internet, i.e. a week’s work worth, say, CZK 5,000. Now all that is left is for the 50 million divided between the two to reach the Proprals’ home, so Propral the younger has joined the advertising firm and Propral the daughter has joined the law firm. They will then be paid the appropriate remuneration and they can put it into the family business, which is run by Propral’s father. And it’s home.
We don’t know if any readers have noticed this, but it is remarkable how many former prime ministers, interior ministers and other top politicians are entering the advocacy or consultancy sector. They, of course, can advise through their contacts, but they can also implement the model of proselytizing. Miss Propral may not join the law firm at all, but after his political career is over, Propral himself, without a job, can have the tens of millions he has stolen paid out to him that have been waiting patiently there.
Showcase 4 – All for the party
In the final showcase of our exhibition there could be the largest panel with many spiders and maybe even fold-out snakes. However, this interactive panel is not intended to display money laundering for the benefit of individuals. It will show how secret party accounts and companies can support an entire criminal structure. The smarter party chairmen realized in the 1990s that it couldn’t go on like this. All politicians steal, buy a lot of interesting real estate, buy profitable businesses that will still support their children, and buy badges of status – watches, sports cars and mistresses . But the proceeds will be used up, and in the next term there may be a different set of people who also want to get their way. So the founding father had to bang the table and dictate that there must be some order in the stealing too. In addition to money for himself, someone has to steal for the party. He explained straight away to the top brass of his party present that the party would have a manager, perhaps an economic vice-chairman, secretary or an arch-stealer, who would ensure that stealing was sustainable for all in the years to come. The task of the arch-grabber was not only to collect the bribes and other illegal commissions from somewhere, but also to reproduce them with appropriate entrepreneurial efforts and to use them at the right time for the benefit of the party’s interests, i.e. the interests of this organised criminal structure. The existence of black accounts was mentioned in connection with the end of Klaus’s second government. Now, however, let us look at how the money was managed by our colleagues from the Socialists.
One of the arch-proprietors was Michal Kraus, an MP, party treasurer of the ČSSD and former head of the parliamentary club of the same party. He was one of Zeman’s typical cadres, a former ambitious communist who worked his way up to the Central Committee of the Communist Party at a young age.
Let’s look at the sequence of events for the money laundering mechanism. Although the African cocoa case relates to activities in 2001, it did not burst out until five years later. At that time, it became one of the central issues during the rather tumultuous campaign for the elections to the House of Representatives. Someone may still remember the ODS election video parodying these obviously corruption-smelling social-democratic shenanigans.
But let’s go back to the time of the opposition agreement, when the then Socialist grandee Kraus decided to invest funds of unknown origin in Ghana, Africa. This was an investment in a cocoa bean processing company. Later, Kraus had to explain why he had signed as a “Director” for the Czech party and where he got half a billion to buy the whole company and about two million as a deposit. Former correspondent František Rigo was in Ghana with Kraus at the time. He was the one who spoke out about the corrupt background at the time of the cocoa scandal. Rigo was being prosecuted for other frauds at the time. Rigo confided that the amount in question was to be used by the Zeman-led ČSSD to buy the processing plant. And the Social Democrats were supposed to get it as part of a bribe for brokering the purchase of Swedish Gripen fighter jets for the Czech Republic. Kraus denied everything at first, and then it came out of him like a hairy blanket where he had gotten the money, at least the deposit. Later, according to police sources, he plausibly explained at least this fraction as a loan from his friends. But the rest remains completely unexplained by law enforcement. The reason is that Ghana kept crucial information to itself and did not respond satisfactorily to the Czech police’s calls. According to insiders at Lidovo dom, this was the very reason why Kraus and co. wanted to invest in Ghana.
The story of the Cocoa King Kraus brings a new interesting element to our history, i.e. that international politics is apparently beginning to be used as one of the tools to consolidate criminal corruption structures. None of us were present at any of the negotiations between the Czech Republic and Ghana, but the conclusion is quite clear. More than half a billion from illegal sources has been laundered in Afric e by the arch-proprietor of social democracy so that the proceeds of this transaction can be used further, and another state is silent to help bring the truth to light. The only possible conclusion, therefore, is that there were some agreements whereby the leaders of one state insured with the leaders of another state that their multiple criminal activities would go unpunished.
