On the eve of the Czech general election this weekend, opposition parties received a surprise present: Among the worldwide Pandora Project’s leaked files was evidence that the country’s billionaire premier and self-declared anti-corruption champion Andrej Babis had hidden his acquisition of a French chateau through a web of offshore companies.
The only question is, can the opposition make use of it effectively?
The bombshell dropped just hours before the start of a major TV Prima debate on Sunday evening between four of the party leaders, at which the new scandal was chosen as the first topic.
The Slovak-born businessman was clearly flustered – he kept peering through his owlish glasses at a sheaf of papers, and his statements were littered with grammatical mistakes. He denied any wrongdoing and alleged that the whole international Pandora Project was somehow a “mafia” conspiracy to ruin his chances at the election.
Of course, he failed to mention that before the 2017 election he pulled a similar stunt to the one he is alleging, by claiming that his Social Democrat coalition partners were scheming to sell the country’s lithium deposits to an Australian company, a scandal subsequently shown to be misinformation.
Babis says he has proof that he paid tax on the money used to buy the chateau, though he has yet to furnish any. Nor has he explained why he used such a convoluted structure to hide the acquisition if it was all above aboard. The revelations are now being investigated by Czech police.
“Andrej Babis must prove that he used taxed money for this transaction,” said Petr Fiala, leader of the Civic Democrats, from the centre-right opposition coalition SPOLU. “If not, he has no right to be in politics and take care of taxpayers’ money.”
Czech media have followed up the case by showing how Babis has often used offshore structures throughout his business career, while at the same time he was regularly accusing the opposition of being funded by oligarchs such as the disgraced financier Zdenek Bakala, who live abroad or who register their companies abroad and allegedly use tax havens to avoid Czech tax.
Top Czech TV moderator Vaclav Moravec, long accused by Babis of being biased against him, tweeted on October 5 that the then finance minister had told MPs in May 2015 “I don’t have any offshores like your friends. And some of you as well. You keep your companies in offshores.”
Babis’ agro-chemicals conglomerate Agrofert is based in the Czech Republic and pays it taxes there, unlike most of the holding companies of the other Czech oligarchs, something that he has often boasted about. While finance minister, Babis also launched a crackdown on tax evasion by small businesses (though he has been noticeably quieter on multinationals' tax avoidance).
Based on the Pandora Papers, Babis could have taken money out of Agrofert without paying dividend tax, transferred it offshore, and then used it to buy the French property, while also evading any future liability for capital gains tax. He denies that the money was untaxed, though he is clearly guilty of not declaring the properties, as he is meant to do as a public official.
Even if Babis is eventually able to show that he has paid tax on the acquisition money, the way he moved the money through a web of offshore companies blows to smithereens his claims to be a hard working ordinary businessman who does not use the financial tricks of other oligarchs.
This pose was always threadbare anyway, given that the former communist informer had built his business empire through political connections in the murky free for all during the 1990s. Much of his chemical empire was built from state-owned companies he acquired at favourable prices as the best connected bidder.
However improbable his anti-corruption credentials were, such was the popular anger against the scandals of the previous Civic Democrat and Social Democrat governments that he was able to use the issue to become the second largest party in 2013 and then premier in 2017.
Needless to say, his government has made little progress fighting corruption, with bills protecting whistleblowers, regulating lobbying, or strengthening the powers of the Supreme Audit Office blocked or watered down.
Babis himself is under investigation for fraud for his application for EU subsidies for his Stork’s Nest conference centre, and the European Commission has found him to be in conflict of interest for simultaneously exercising political power and benefiting from EU subsidies as owner of Agrofert (the biggest private recipient of EU funds in the country). Babis denies any wrongdoing and blames the probes on a conspiracy by his enemies.
According to Transparency International – another member of the ‘mafia’ that Babis says is conspiring against him – the Czech Republic’s ranking in its Corruption Perceptions Index has slipped from 47th in 2016 to 49th last year.
All this should be meat and drink to any decent opposition but the two Czech coalitions seeking to unseat him, SPOLU and the liberal Pirates-STAN coalition, have mounted an astonishingly toothless campaign so far.
They have not even been able to take advantage of the government’s lamentable handling of the COVID-19 pandemic, so more technical subjects such as Stork’s Nest and Babis’ conflicts of interest have been far beyond them. Offshore companies and the complex question of whether Babis evaded tax look equally difficult to explain in a comprehensible way.
"Even after eight years of Babis the opposition still don't know how to play this guy," says David Ondracka, former head of the Czech branch of Transparency International. "They still play the normal political game but they are playing someone who is not playing by the rules."
"[Babis'] machinery works very efficiently in masking the scandals and marginalising them," he adds.
Babis also benefits from populist voters’ refusal to accept any evidence that goes against their own preconceptions.
Babis once admitted that he entered politics because he was tired of having to bribe politicians – a claim that would destroy most budding politicians. But he turned this into a positive, claiming that as he knew how the ‘mafia’ worked, he would be able to defeat them. He also wheeled out the old populist businessman-politician defence that he was rich enough already, so he didn’t need to steal.
In the Czech case, this populist support is reinforced by Babis’ own media empire, as well as that of other oligarchs who are quietly supporting him, together with disinformation websites.
"If he hadn't bought the biggest publishing house in the country [Mafra], he would have had serious troubles," says Robert Casensky, editor of Reporter magazine, who quit Mafra's daily Mlada Fronta Dnes when Babis bought it and neutered its investigation team. "The other big publishing houses which are owned by oligarchs don't want to fight with him," he adds.
Most real investigations in the country are now led by news websites, rather than daily papers, and so do not get wide coverage anyway. Moreover, the public broadcasters – while certainly staffed by journalists hostile to Babis – are playing it safe before an election that could lead to a crackdown by the populist billionaire and his potential extremist allies in the Communist and far-right SPD parties.
Yet even if it is not a game changer, the Czech election is so tight that the Pandora Papers scandal could make the difference between the two opposition coalitions having the votes to form a government together or not. If not, and the polls are right and the election is a stalemate, according to some commentators the revelations could at least make it more difficult for the rightwing Civic Democrats to go back on their pledge not to work with Babis.
But that may be wishful thinking. If the myth of Pandora teaches us anything in this case, it is that often no good comes from opening up scandals – especially at election time.