Illegal Public Aid

 
 

whose money?

After the fall of communism, the corrupt elements of the former regime were selling off state owned mining company, OKD. Bakala wanted to buy it but he had to be careful. Purchasing the company through a shadow entity, Karbon Invest, no one knew he was involved. Karbon Invest bought a majority stake in OKD for considerably less than market value, shorting taxpayers by over half a billion dollars.

Details

The European Commission is currently investigating hundreds of millions of Euro worth of illegal public aid during the Privatisation of the Mining Company OKD. 

The state ownership interest in the company OKD was sold on the basis of a distorted expert opinion without a public tender

In 2004, during the privatisation of the Czech company OKD, which was one of the biggest central European coal producers, the state ownership interest in the company (almost half of OKD) was transferred into the hands of KARBON INVEST for approximately €153.3 million. The transaction also included 43,000 housing units which belonged to OKD and served as apartments for mining employees. The state’s share in the company was sold for a price which was not created under market conditions, but rather through a skewed expert assessment.

In the matter of the sale of the state’s share in OKD, which also included the sale of OKD housing stock, complaints were submitted to the European Commission on suspicion of illegal public aid. Relevant evidence demonstrating the enormous amount of public aid includes an expert opinion issued by the expert institute RSM TACOMA, which valued the property of the company RPG Byty – original OKD housing stock – as of December 31, 2015 for the purposes of a merger at almost €1 billion. Data from the Czech Statistical Office on trends in housing prices shows that, at the time of privatisation in 2004, the collection of OKD flats was worth approximately €524 million. According to an expert opinion prepared for the purposes of privatisation in 2004, however, the entire OKD housing stock was valued and sold for approximately €67 million, a price several times lower. Czech taxpayers were cheated out of 450 Million Euro (over half a billion dollars). 

Based on a simple comparison of the opinion from 2004, which valued the housing units at an approximate sum of €67 million, and the opinion of 2015, which calculated the value of the flats for the same period at around €524 million, there can be no doubt that, in relation to the housing stock alone, unlawful public aid amounting to hundreds of millions of euros was provided and that the state sold its share in OKD for an amount far below the market price. A further matter is the valuation of the entire company OKD beyond just its housing stock, where it is possible that illegal public aid reaching up to hundreds of millions of euros may have been supplied.

Criminal proceedings in connection with the affair, in which the Czech government is suing the culprits for damages incurred, are currently underway. By taking this case to the courts, the Czech Republic has confirmed that the sale of OKD was carried out in contravention of market conditions for a price which grossly failed to reflect its true value, putting the buyer at an unjust advantage and causing significant damages to the Czech Republic.

It cannot be doubted that the sale of the state’s ownership interest in OKD was conducted in conflict with competition rules and rules for the provision of public aid. It is therefore up to the European Commission to immediately assess whether the public aid was compatible with the common market or not.