Our wanderings in tracing the business practices of Key Investments now take a break from finances and have a look at football. Even though, as you’ve probably guessed, it won’t be about goals. But it will be about a brutal and direct offensive.
Key Investments, which has been investigated by police since February because it only returned one-tenth of the money entrusted to it by coal company Sokolovská uhelna, most likely has payment commitments to Prague 13 of roughly Kč 205 million, another Kč 265 million to Prague 6 and Kč 4.2 million are the subject of an ongoing distraint. In all it is just over Kč 465 million. (For some unknown reason, Prague 10, which entrusted Kč 200 million to Key Investments, doesn’t want its money back.)
If that is the case, Key Investments is insolvent and the board should submit a proposal to declare insolvency and appoint an insolvency trustee. This has yet to happen and, strangely, the situation is not even attracting interest from the Czech National Bank (ČNB) , which remains inactive, although it has been investigating Key Investments since August 2010. Maybe both subjects — the company’s board and ČNB — have (perhaps similar) reasons for their inactivity, ones that are eluding us.
Public money into chemistry and football
As Czech Position has already reported, by means of Key Investments, the Prague districts 6, 10 and 13 are financing the private activities of Via Chem Group and the firm E Side Property, which owns the Eden football stadium where Slavia and, momentarily, Bohemians 1905 play.
But let’s look at Slavia, which is also connected to Key Investments. Czech Position first reported that distraint has been imposed on Key Investments’ property. Now, however, we have found out that the seizure, started at the end of February 2011, is to benefit Luxembourg-based ENIC Football Management. This company, which owns a share in clubs such as Tottenham Hotspur and AEK Athens, is the real majority shareholder of joint-stock company SK Slavia Praha - fotbal, which runs the Slavia football team. Naturally, the business register currently holds different data about the owners. Those circling around Slavia regularly state that the real owner will be published within a month. So far, nothing of the kind has happened.
At the start of the 1990s, the football team’s first known owner was entrepreneur Boris Korbel. Since 1994, financial group PPF owned the majority share in the club. It sold this to ENIC in 1997. By 1999 it had gradually acquired a 97 percent ownership share in Slavia. During its time at Slavia, ENIC provided a large sum of money in the form of loans, of which around Kč 110 million has yet to be paid back. Slavia is facing a lawsuit to return the money immediately, but it managed to get a court in London to postpone the payment date to November 2011. The majority shareholder, ENIC, was precluded from taking part and voting at the general meeting.
The turning point in the ownership relations came in January 2008. A general meeting was called for the firm SK Slavia Praha – fotbal, where it was decided to increase the registered capital by Kč 618 million to Kč 1.04 billion. Key Investments carried out the increase in the form of a nonmonetary investment. The majority shareholder, ENIC, was precluded from taking part and voting at the general meeting. Thus, ENIC lost its majority in Slavia in a manner that is reminiscent of the ’90s, and not even here, more like Somalia. And we’re worried that Somalia will litigate because of that sentence.
The subject of the investment was the theoretical sum of the maximum insurance benefit from the life insurance of the Slavia football players; however, Key Investments gained the new shares. If you think you misread the previous sentence, then, unfortunately, that is not the case. In his testimonial of Jan. 14, 2008, legal expert Otto Šmída estimated this utterly virtual asset to be Kč 618 million stating that the subject of the nonmonetary investment is fully economically usable for the company. Unfortunately, he didn’t write how. He did, however, write that he admits that opinions on rights assessed such (in addition with uncertain origins and extent and testifying for completely other subjects) could be contrasting. Dear sir, they are not contrasting. It is absolute nonsense!
How to become the biggest bank in Europe
In essence, it is a call for all entrepreneurs in the Czech Republic to start using the theoretical maximum insurance benefit of their life and other insurance policies for making nonmonetary investments into their firms’ basic capital. As a bonus, they can cancel the insurance the next day, but the increased capital stays with them. Banks providing mortgage financing can also use this nonstandard trick. Why not increase the capital by the sum of all property insurance that you are financing and that will be tied up in your favor? Šmída will confirm that it is a serviceable asset and you may well become the biggest bank in Europe.
Even though in this case it is now just an insignificant trifle, we would quite like to know how much of these usable insurance policies are still valid and how the auditor assessed this property, which quite demonstrably does not belong to Slavia. In 2008 Slavia underwent an audit conducted by Auditing-Dykast (belonging to the Dykast family), located in Šestajovice, Prague-East.
The testimonials of an expert and auditor are one thing, but to get this nonmonetary benefit, which has arisen in such a mind-boggling manner, entered into the register, one needs a judge’s ruling. So far we don’t know the judge’s name, but, we promise you, we’ll soon find out and ask why. Registering this investment is a candidate for one of the most absurd judicial rulings of the last decade.In any case, the act of registering this investment is a candidate for one of the most absurd judicial rulings of the last decade. We’re keeping our fingers crossed that ENIC doesn’t go to arbitration, giving rise to a second TV Nova case.
There is little need to add that, logically enough, ENIC attacked this and other general meetings at court. The issue of ownership is thus bound by the court’s ruling, and if someone declares that tomorrow or later they will announce an owner, it is unreal. The only possibility would be an agreement with ENIC. Maybe here this miraculous strategic owner will turn up, the one we have written about in connection with managing the assets of several Prague districts, and he’ll settle all the liabilities. Slavia would definitely be glad of it, but it has been talked about for far too long.
What does ENIC think about it all?
Czech Position asked the director of ENIC, Matthew Collecott, for his views on the events at Slavia. Collecott doesn’t give too many interviews to Czech journalists, but he agreed to our request. The answers are printed here without editing.
Q: What is the shareholder structure of SK Slavia - fotbal?
A: ENIC was and is the genuine owner. It seems that those claiming to be the owners have merely fraudulently issued shares to themselves. ENIC has the real shares in the safekeeping of its lawyers, where they have always been.
Q: Was ENIC represented at the general meeting in January 2008? And how did it vote to increasing the capital?
A: ENIC does not recognize any general meeting, or the current chairman or the board. They occupied the positions and are driving the club to wrack and ruin. Compare it to when ENIC ran the club, it had a strong position in Europe and the Champions League.
Q: Did ENIC impugn the 2008 general meeting or other transactions at court?
A: We can’t comment on our legal steps, but we have given Slavia financial support since 1997. Assets have been taken out of the club and there have been no related investments. ENIC is a long-term investor in various countries. Without doubt the integrity of the corporate, legal and business environment determines a country’s attraction for incoming investment. The Czech Republic is definitely not doing itself any favors when it supports a situation where someone can take over property by fraud. It is no accident that football in Britain is appreciated and that business partners from all over the world invest into it. The Czech Republic will never have such success if you allow such behavior to continue.
Q: What about the club’s debts?
A: ENIC lent the club millions of euros, that loan is valid and repayable. The current “board” is constantly trying to appeal on the basis of jurisdiction with the aim of not paying, as they originally promised. This means we had to go through a complicated court case so now they have nowhere to hide. The dispute was never about whether or not they should pay. On their part, it has always been about obstruction.
Will Petr Kellner save the club?
In 2008 Key Investments became the majority shareholder (at least according to the commercial register) at the peculiar general meeting. It now states that it is just holding the share for someone, but, in essence, it makes no difference. It has one distraint from ENIC around its neck and the other will be around Slavia’s neck, most likely in November. Probably that is the reason for all the activity with subjects close to the events around Slavia – E Side Property – entering into the Czech Football Association
Not even here in the Czech Republic would a club with the threat of a Kč 110 million distraint be allowed to play in the league. The manner of squeezing out the majority owner from Slavia is quite close to the manner in which the owners from the group around Via Chem Group were pushed out. Essentially, only the last step is missing: Transforming the viable part of the club to a new entity and leaving the debts in the original part. The know-how is there. Perhaps a property distraint in the form of using fictive debts. Then the real creditors will never get their rights. How do you think it will end up?
Czech Position hopes that financier Petr Kellner will step in with his company PPF, pay off all of Slavia’s debts to ENIC and a fairy-tale ending ensues. If PPF doesn’t do so by November, Slavia will be in an even worse scrape.
For more coverage of Key Investments, click here.