A Prague court has sentenced Antonio (Antonin) Kolacek, a former manager of the Mostecka uhelna spolecnost (MUS) mining company,  to  7.5 years jail and several hundred million Czech korunas in damages in a notorious 20-year-old privatisation fraud case.  

MUS’ ex-CEO Oldrich Klimecky was handed a six-year prison term and confiscation of money secured by police. Both men were found guilty of fraud and abuse of business position and were also handed a 5-year ban from being in any company’s management.

Kolacek and Klimecky, together with Lubos Mekota, Petr Pudil and Vasil Bobela, became controlling owners of MUS in 2005 following the  fraud scheme  and subsequently sold it to Czech energy oligarch Pavel Tykac.  

According to the verdict, the former managers of the mining company caused at least CZK3.2bn (around €135mn at today's exchange rate) in damage to the state when they concealed from the government that they were the real buyers of a minority state stake in MUS.

The fraudlent privatisation of MUS was one of the most notorious scandals of the widely corrupt privatisation of state assets during the 1990s and early 2000s and one of the few that has resulted in significant criminal sanctions.

The partly state-owned mine's executives gradually accumulated a blocking shareholding from shares floated in voucher privatisations and then concocted a mysterious Swiss-based foreign investor, the Appian Group, that bid to buy the state's remaining shares, using funds accumulated by the mine to pay for the clean up of environmental damage. They eventually reached a position where they could pressure the state to sell the remaining state-owned stake to Appian, which was actually themselves.

Before the Prague court verdict, the only real progress in punishing the Czech fraudsters had been made by the Swiss judicial authorities, where Appian Group had its seat. In 2013 a Swiss court handed prison terms to five Czechs – Jiri Divis, Marek Cmejla, Antonin Kolacek, Petr Kraus, Oldrich Klimecky – and a fine to Belgian Jacques de Groote for the fraudulent takeover of MUS and money laundering of the proceedings. 

Judge Silvie Slepickova singled out Kolacek as “the key person” behind the scheme aiming to take over MUS “using its own means”. He was the only defendant present in the courtroom to hear the Prague verdict, wearing a white top hat and a holding a cane, the Czech Press Agency (CTK) reported.

“I am not saying I am shocked. I am surprised,” he told journalists during a break after the verdict was passed.  “It seems there is a significant misunderstanding of how the privatisation in the 1990s took place,” Kolacek  said, adding he and others have “not committed anything illegal”, and that “we have only done what the then governments wanted”, causing no harm to Czechia or Switzerland.

The full privatisation of MUS was approved in 1999 when the cabinet of the then prime minister and later  president Milos Zeman was in power.  In the past Kolacek told media that several of Zeman's cabinet members knew that MUS management was behind the privatisation, even though Appian Group was officially presented as representing American investors.

Zeman was called in as a witness in MUS-related hearings while in office as president, and so was his former cabinet colleague and then Minister of Industry and Trade Miroslav Gregr.

State prosecutor Radek Bartos cast doubt on the testimonies delivered by Zeman’s cabinet members, pointing out that some of them were still politically active and were motivated to defend their decisions from the privatisation era.

There was also a 3-year prison term and CZK4.5mn fine for the former Deputy Minister of Industry and Trade Robert Sykora for accepting a bribe while working on the government materials leading to the government decision to sell its share in MUS.

The verdict is not yet legally binding . The defendants have appealed the verdicts.

The criminal code stipulates a 20-year-long period for  criminal liability related to the processing of privatisation era projects.

Klimecky is 83 years old now, and his lawyer told the court earlier that Klimecky is incapable of comprehending the indictment, and does not remember the period in question.

Charges were originally brought against altogether eight persons – one of these, Lubos Mekota died in 2013 and Pavel Musela, who sustained a serious accident while hunting in 2008, was freed of charges on health grounds.   

Murky Swiss investment group Appian has since been connected to many high-profile cases of suspicious takeovers or sales, including the break-up of the iconic Skoda Plzen  industrial conglomerate. 

The Prague city court has been examining the Czech part of MUS for 4 1/2 years.  The case included over 36,300 pages of documentation and over 60 main court hearings.