Ex-ČEZ boss admits offshore trust links, ‘victim’ of coal contract battle

Martin Roman admits offshore trust links at center of conflict of interest claims but says he cut ties when he took up the ČEZ post

Chris Johnstone 17.10.2011
Vysoká škola dle Martina Romana: mimořádně náročná studia zaměřená na právo a ekonomii, kde přednášejí kapacity v oboru. | na serveru Lidovky.cz | aktuální zprávy Vysoká škola dle Martina Romana: mimořádně náročná studia zaměřená na právo a ekonomii, kde přednášejí kapacity v oboru. | foto: © ČTKČeská pozice
Vysoká škola dle Martina Romana: mimořádně náročná studia zaměřená na právo a ekonomii, kde přednášejí kapacity v oboru.

The former head of Czech electricity giant ČEZ, Martin Roman, has admitted links to offshore trusts connected to the owner of engineering giant Škoda Holding but is sticking to his line that these links were cut when he became CEO of the state-controlled power company.

Roman is under increasing pressure over the suspicions of a clear conflicts of interest if ongoing links with the Plzeň engineering group, where he was general manager before taking up the ČEZ post, are proved. Škoda Holding received turbine contracts worth hundreds of millions of crowns during Roman’s more than seven years at the head of ČEZ.

Now head of ČEZ’s supervisory board after stepping down as CEO and board chairman in mid-September, Roman admitted in an interview with the business daily Hospodářské noviny (HN) published on Monday that he had links with trusts established in the Cayman Islands and British Virgin Islands that were connected to Škoda Holding’s owner, Appian.

‘During my time at Škoda I had links with the companies you mention [the offshore trusts]. I discontinued them when before I joined ČEZ.’

“During my time at Škoda, I had links with the companies you mention [the offshore trusts]. I discontinued them before I joined ČEZ. These, however, had no ownership or management relations with Škoda,” Roman told HN.

Roman had previously suggested that documents establishing the links between the offshore trusts and top managers at Škoda Holding, including himself, which were earlier published by the Czech daily Mláda fronta Dnes, were forgeries.

‘Victim’ of Czech Coal battle

Roman told HN he is a victim of “alleged” documents with incriminating passages being released by MF Dnes from an unknown source.  The only document he recognized, he said, was a pact between managers allowing him to return to head Škoda Holding from ČEZ and giving him a veto over the appointment of the general manager or board chairman of the engineering firm.

Roman said he believed MF Dnes was being used in a campaign being waged by mining group Czech Coal and its owner Pavel Tykač to pressure ČEZ into accepting a disadvantageous long-term coal supply contract that would cost the state-controlled firm hundreds of billions of crowns.

Pavel Tykač personally warned me about this campaign; I see that he was not bluffing,” Roman said. “If ČEZ does not stick to the validity of the coal supply agreements from 2005 and accepts the sort of offer that Mr. Tykač offered last week to Plzeňska Teplárenská, that would mean channeling around Kč 200 billion from ČEZ to benefit this company.”

ČEZ and Czech Coal have been at loggerheads over a long-term supply agreement for around six years. ČEZ says the two sides agreed a cooperation agreement in 2005 that should have been followed by mid-2007 by a deal to supply coal for up to the year 2055. But the deal has never been hammered out, with the result that ČEZ has been forced to freeze plans for a new coal plant at Počerady.

ČEZ filed a law suit against Czech Coal at the end of 2010. In mid September, it complained of unfair pressure and “attacks” on its managers from Czech Coal in a bid to seal an unfavorable deal, citing the mining companyl’s complaints to the European Commission against ČEZ and  pressure on coal supplies to heating companies. ČEZ said in spite of the pressure it was still keen to seal a coal supply deal.

‘Pavel Tykač personally warned me about this campaign. I see that he was not bluffing.’

Meanwhile, the pressure on Roman is undoubtedly increasing. The Czech Ministry of Finance said Friday it would ask the new CEO of ČEZ, Daniel Beneš, to investigate the claims concerning his predecessor’s possible conflict of interest. Foreign Affairs Minister Karel Schwarzenberg (TOP 09) has said police anti-corruption units will assign a special team to the case this week.

Prime Minister Petr Nečas (Civic Democrats, ODS) said over the weekend that Roman would have to step down as head of the ČEZ supervisory board if the claims are proved. Commenting on the developments, Bram Buring, a Prague-based analyst from Wood & Co. said said rumors about Roman had long been circulating:

“For as long as we can remember, the speculation has been that Martin Roman is an owner of Škoda Plzeň; we will assume that today’s ruling politicians are likewise aware of this rumor. So, in our opinion, the political angle goes something like this: having just promoted Roman to Chairman of the supervisory board (and his closest associate as CEO), PM Nečas and his government are either: a) so far out of the look as not to know about this possible conflict of interest; or b) they promoted him despite the suspicions and so are part of the same corrupt network. For the time being, we assume that the issue will be duly investigated but will find insufficient evidence to warrant the rolling of any heads (Roman’s or anyone else’s).”

Jail term

Meanwhile, Roman told HN he has done nothing wrong. “I did not do anything and am prepared to cooperate with the state bodies which investigate this, which will undoubtedly show this.” He said Škoda Holding won contracts from ČEZ in fair and above board tenders by making the best offer, pointing out that it had traditionally been the company’s main turbine supplier.

HN pointed out that Roman is threatened with charges of abuse of information and position in business relations, carrying a maximum penalty of 5-10 years in prison, and abuse of management responsibility, which has a maximum jail term of eight years.