Jan Macháček

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Czech Business Weekly

Reliving communism’s curse and the CLAMMY HAND OF THE ’90s

 06. 08. 2007
Headlines of late have recalled that well-worn but all-too-true and chilling quotation, “Those who cannot remember the past are condemned to repeat it.”

Given recent history, it is indeed imperative that Czech society maintains a deep, detailed discussion about the past, but we should not only be dwelling on the communist era, we should also reflect on the 1990s.

Given an alarming verdict just handed down by Supreme Court Judge Jiří Pácal, however, let’s first return to the 1980s. Pácal has refused to exonerate former dissident and protestant priest Jan Šimsa. More than 20 years ago, StB secret police officers were searching Šimsa’s flat when one of them began twisting the arm of his wife behind her back. Šimsa sprang to her defense, throwing the policeman onto a bed. Subsequently, he was sentenced to prison for “attacking a public officer.” Some 17 years later, Pácal has decided Šimsa’s actions really were such an act.

Clearly, it wasn’t feasible to replace all judges with a communist past, such as Pácal, after the 1989 revolution. Moreover, not all such judges were party members. And the fresh intake wanting to work in the post-revolution Czech judicial system were extremely young and inexperienced. Intelligent judges turning in their robes and escaping into the business world—where the demand was skyrocketing—worsened the situation, as did the chronically low wages judges received in the early part of the decade.

But these distressed times are long gone. If society was so minded, we could easily rid ourselves of the judges with a communist past and attitude. Judges’ wages are improving and the terrible work backlog is being tackled. “Communist” judges could be encouraged into early retirement with a generous pension. And perhaps they would be—if the political and social elites were actually interested in such a discussion and deep reflection. As it is, from time to time stupid judges will keep pronouncing absolutely stupid, scandalous and humiliating sentences and verdicts. What a shame that really is! Seventeen years after the fall of communism!

Nobody doing time

But, as stated, the past isn’t only about communism. Unbelievably inappropriate sentences do not stem from the totalitarian days alone. Think about it: since democracy arrived, not a single major communist criminal has been imprisoned. What’s more, though the Czech Republic gave the world of financial fraud a new word—“tunneling”—not a single big-name 1990s “tunneler” sits in prison. The few that were sentenced are appealing.

Last week, meanwhile, saw a Liberec court free four men notorious in the 1990s for offering false diamonds to semi-privatized banks. In return for fake precious stones, they received soft credits, which were not repaid. Now the judges say it was not punishable behavior. We know these judges are only of average intelligence, but they certainly don’t operate in a social vacuum.

There’s virtually no political or social demand to explain the 1990s, to determine responsibility for the soft credits, the postponed bank privatization and the draining away of immense fortunes through privatization and financial systems. There’s just this typical Czech attitude: potentially troubling matters for discussion are avoided or tossed to the side.
Remembering the diamonds, there’s a certain matter closely related to the “opposition agreement” period that’s never made the press. In 1999, Jan Stiess became a key privatization player as leader of the National Property Fund (FNM). Before that, Stiess worked for ALL IN, a company that evaluated collateral, including diamonds, for Komerční banka. Thus Stiess had excellent information about most bad loans and could easily obtain missing information by dealing with counterparts working for other banks. This scenario saw him emerge in a powerful position. None of this was ever properly analyzed through public discussion. Most of the diamond mob are still considered serious entrepreneurs and walk freely amongst us.

Tussling over IPB’s corpse

The clash between the government and ČSOB is also rooted in the 1990s. Before it fell, IPB bank’s ownership structure was the stuff of dreams for Václav Klaus: unreadable ownership that changed on a daily basis, soft loan provision subject to political influence and financial enterprise lacking proper regulation. When IPB went down and—following forced administration—was taken over by ČSOB, it was a disaster for Klaus and his Civic Democrats (ODS). The ODS had never been so angry, protesting at the “daylight robbery” and making out that IPB had been healthy enough to continue without a radical solution.

Both ex-Finance Minister Vlastimil Tlustý and current Finance Minister Miroslav Kalousek are very close to Klaus. They’re keen to help him change history: to them, the criminals were the crisis regulators, not those who exploited IPB’s fraudulent schemes.

As usual, ideals mixed with down-to-earth interests. Tlustý and Kalousek had very friendly ties with Nomura, the IPB co-owner which detached most of IPB’s valuable assets. Since the days of sitting with Nomura as Agriculture Ministry representatives at brewery Plzeňské pivovary, they’ve always defended its IPB role. 

While many people think ČSOB once had a cozy relationship with ex-Finance Minister Bohuslav Sobotka (Social Democrat, ČSSD), this government is clearly a Nomura government. In the charge leveled against ČSOB, Kalousek writes that IPB was acquired “deceitfully.”

This, by the way, is “the state vs. the state”—the state officially asked ČSOB to acquire IPB. How on earth could ČSOB have organized such a deceit? From a rational standpoint it’s just not comprehensible.

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