A court distrainment order was served to the brokerage Key Investments on Feb. 24, 2011 (distrainment order no. 086 ExS 34/11-11), which affects the company’s 100-percent stake in its subsidiary Depozitní centrum, the operator of a safe deposit box service in central Prague.
For a week now, Czech Position has been attempting to ascertain details about the court order, but the whole case is wrapped in secrecy. The administrations of Prague 6, 10 and 13 have a total of around Kč 650 tied up in investment portfolios managed by Key Investments, which is under investigation by the anti-corruption police and the regulator of the Czech National Bank (ČNB).
Three mysteries surrounding distrainment
It could happen that Key Investments will sell the portfolios of stocks and shares it is managing and pay back the money it owes to its clients down to the last crown. If this does happen, the brokerage and its managers will gain our sincere admiration.
Another possibility is that a fairytale investor will appear — one or several large Czech financial groups with close ties to the center-right Civic Democrats (ODS) and the tangled web of companies associated with the Via Chem Group, to which Key Investments has provided considerable sums of its clients’ money — and will pay back at least some of the investors’ money.
The ODS has a majority in the assemblies of Prague 6, 10 and 13; likewise the districts’ of all three districts are members of the same party. Failing the emergence of a beneficial investor, there’s a distinct possibility most of the clients’ money won’t be returned
According to Czech Position’s information, prominent Prague ODS politicians have been negotiating potential solutions for Key Investments with various financiers since the beginning of this year. Nevertheless, given the large amount of money the administrations of Prague 6, 10 and 13 have invested through the controversial brokerage, a takeover of the company would not be straight forward and would take months.
Furthermore, given the considerable funds that would be required, the “savior” could well expect something in return. Given the degree to which the opposition is scrutinizing ODS politicians, it would not be straight forward for them to provide such favors.
Failing the emergence of a beneficial investor, there’s a distinct possibility that most of the clients’ money will not be returned and that resources from the Securities Traders Guarantee Fund, or in the case of Prague 10, the minor insurance company Maxima — which unsurprisingly belongs to the group of companies linked to the Via Chem Group — will not be sufficient. Then a guilty culprit will be sought.
This scenario would not be good news for the taxpayer as the Key Investments clients who lost funds could demand compensation from the ČNB on the grounds that it failed to fulfill its regulatory duties.
Czech Position asked the ČNB whether it would feel responsible for a lapse in financial regulation of Key Investments should the brokerage’s clients lose money and consequently cover the loses they incurred. “The ČNB does not comment on administrative proceedings,” the central bank responded.
What do Richter and Vodrážka have to say?
This February, the mining company Sokolovská uhelná lodged a criminal complaint against Key Investments after the brokerage returned of less than 10 percent of the money invested by the mining company. Last week, Czech Position attended the assembly of Prague 13 representatives on Wednesday, and the assembly of Prague 10 on Friday. We’d be more than happy if Mayor Richter found us new premises in Prague 1 with a rental agreement as advantageous as the one he secured for his family residence
Prague 13 signed a contract with Key Investments on May 6, 2010 to which two amendments were later added. The second amendment tied the contract to the administration’s provisory budget, which terminated on March 9 with the approval of the budget for 2011. At the meeting of the assembly, Prague 13 Mayor David Vodrážka (ODS) said that immediately afterwards he would go to Key Investments to request the sale of all securities in the administration’s portfolio with the brokerage and a return of the funds invested.
We don’t know the details of the contract between Prague 13 and Key Investments, but we estimate that the contract termination period should be two weeks or so.
The debate at the assembly of Prague 10 was more revealing: District mayor Milan Richter (ODS) announced that one of his greatest concerns was that Key Investments would sell the securities in Prague 10’s portfolio in haste, which could lead to a loss of profit for the administration.
Richter also promised to provide more detailed information at the assembly’s next meeting in April. Several of the opposition representatives in the assembly quoted Czech Position’s articles about Key Investments, to which Richter responded that our publication is in fact a media mouthpiece of the center-right party TOP 09.
If Richter has a problem with the fact that Czech Position is seated in premises rented from a company that belongs to TOP 09 chairman Karel Schwarzenberg, we would be glad to please him and move out. We’d be more than happy if he found us new premises in Prague 1 with a rental agreement as advantageous as the one he got in the district for his family.
All previous articles on the Key Investments case are available here