James de Candole of Candole Partners -

Once hailed by the Financial Times no less as a shining example of the new breed of Czech young managers, untainted by the corruption and incompetence of the past, Martin Roman is now ensnared in multiple police investigations, all of which involve deals he closed at Skoda Plzen and CEZ – the state firms he led between 2000 and 2012.

The manager of choice of state enterprises among Czech politicians for more than a decade, Martin Roman is today at the centre of at least six separate investigations. These include power utility CEZ’s purchase of a half stake in the German coalmine Mibrag in 2009, which it later sold on to its competitor EPH for a fraction of what it had originally paid. Then there is CEZ’s sale of its daughter company, I&C Energo, to the Hungarian state energy firm MOL in 2008, which soon after contracted to sell the firm onto a Dutch entity represented by a Czech lawyer, Josef Broz, with close ties to Martin Roman. CEZ’s 2007 contract with Alstom of France for a supercritical boiler, part of the refit of its Ledvice power plant, is also being investigated; the plant sits idle to this day, seven years on, due to problems with the boiler. CEZ’s acquisition in 2010 of its three largest photovoltaic plants are under investigation as well, as are CEZ’s award of a spent fuel dump contract to CEEI in 2008 and Appian’s acquisition of Skoda Plzen in 2003. These last two cases have been reopened recently by the public prosecutor, more on which later.

Indeed, so frequent are the visits of investigators to the management floor of CEZ’s headquarters in Prague, people joke that it is the police and not the board who manage CEZ these days. But no investigator has so far gathered enough evidence to prosecute Roman himself. This may yet change if Prague’s senior public prosecutor, Marek Bodlak, whose name means "thistle" in Czech, gets his way.

The Appian way

Bodlak is leading the investigation into the Skoda Plzen case (not to be confused with the carmaker Skoda Auto), the sprawling engineering conglomerate sold to an obscure Swiss outfit called Appian in 2003.

Skoda has been a major supplier to CEZ, consuming a hefty chunk of the €25bn in capital expenditure invested by CEZ under Roman’s leadership in refitting its power generation fleet. 

It is the precise nature of the relationship between Roman and Appian that Czech public prosecutors have been attempting to establish for over five years. Or at least pretending to attempt to establish: past public prosecutors have understood well enough that some cases can never be allowed to get anywhere. Two such public prosecutors, Libor Grygarek and Vlastimil Rampula, have recently been disciplined because of police suspicions that they have been obstructing investigations connected to Appian. Roman denies having any links whatsoever to Appian.

There is a popular perception that Roman continues to enjoy high-level patronage. The former Czech president, Vaclav Klaus, is Roman’s oldest patron. For many years, Roman employed both of Klaus’s sons, one at PORG, the private school controlled by Roman, the other at CEZ. Another notable Roman patron is Bohuslav Sobotka, today’s prime minister, who as finance minister in 2004 appointed him to run CEZ.

No one is more aware of the immunity from prosecution that Vaclav Klaus has been able to secure for those he considers deserving cases than Prague’s senior public prosecutor.

Bodlak is best known for his trenchant public criticism of the pardon granted by Klaus in 2012 to the former director of the Prague Metropolitan University, Anna Benesova. Bodlak had successfully prosecuted Benesova in 2011, securing her conviction for bribery and embezzlement. Police wiretaps later revealed that she had spoken by phone with Klaus’ wife, Livia, so often during her investigation and trial that Bodlak actually expected her to be pardoned. Indeed, Benesova received a full pardon from Livia’s husband and her criminal record was wiped clean.

Bodlak publicly attacked the president’s decision at the time, saying that his pardon had "ripped up four years of work by the police, the state prosecutor and the courts." In response, political supporters of Vaclav Klaus going by the name of the Salamoun club (the club is campaigning for Klaus to run for president for a third time) called for Bodlak to face disciplinary proceedings. Their request was dismissed by the justice ministry.

In September, Bodlak revealed to Jana Klimova of the Czech weekly Respekt that he had obtained promising new evidence from the Swiss prosecutor of a related case involving Appian – its acquisition of the MUS coalmine in 1999. In October 2013, the Swiss handed down prison terms to former MUS managers convicted of fraud and money laundering.

According to Klimova, Bodlak has won the confidence of the Swiss authorities, who will now formally share evidence gathered in the course of their MUS investigation. Previous public prosecutors, such as Vlastimil Rampula, are suspected by the police of having buried the evidence provided by the Swiss, who sensibly stopped providing it as a result. Rampula has denied the claims.

This new evidence appears to confirm suspicions that Skoda Plzen, like MUS, was sold to Appian for much less than its true value. The Czech state sold Skoda Plzen to Appian for CZK800m (€29m). Within a year, Appian sold off the conglomerate’s nuclear engineering division, Skoda JS, to the Russians for CZK1bn.  Bodlak revealed to Respekt that he has commissioned a new appraisal of the transaction and that he is focusing on Roman’s role as the CEO of Skoda Plzen at the time of its sale to Appian.  

Whitewash

In 2011, writing then for the Czech daily newspaper Mlada fronta dnes, Jana Klimova published the most comprehensive account to date of Roman’s relations to Appian, and specifically to Appian’s turbine maker, Skoda Power. In 2009, with its workbook full of CEZ orders, Appian sold its Skoda Power division to the Korean firm Doosan at the top of the market for a hefty CZK11bn (€450m). 

In early 2012, CEZ’s internal audit committee concluded that the arm’s length principle was adhered to in all CEZ’s transactions with Skoda Power, dismissing all allegations of related-party transactions as journalistic gossip and concluding that there is “no evidence of informal relations that would indicate any improper, unethical or corrupt conduct.”

So much then for internal audits. Nevertheless, the tide appears to be turning against suspicious deals carried out by the country's state companies.

Bodlak’s colleagues in the Prague state prosecutor’s office have reopened their investigation into another notorious deal done under Roman's watch – the awarding in 2008 of a €60m contract to a Liechtenstein-registered firm, CEEI, to build a spent nuclear fuel dump at CEZ’s Temelin nuclear power plant. 

The wall of silence surrounding Roman’s time at the top of CEZ appears to be cracking. For example, Dana Drabova, who for 15 years has led the Czech office for nuclear safety, let slip in an interview over the summer that the value of the fuel dump contract was "inexplicable" and that, in her professional opinion, there was "no logical explanation, none whatsoever" for the price paid by CEZ. She pointed out that the dump at Temelin cost more than two equivalent dumps at the Dukovany nuclear power plant. A recent decision by the Czech competition authority ruled that CEZ had no legal foundation for awarding the business to a firm that had no experience of building such dumps.

The reopened police investigation will now seek to establish why Roman was so keen to hand the work to such an unsuitable firm. The answer is certainly because of who owns the firm, with Appian once again the prime suspect.