As has been widely reported, ProMoPro, the firm contracted to provide audiovisual and interpreting services during the Czech EU presidency, paid Kč 378 million to the firm NWDC as a subcontractor. But while just what NWDC did to earn the money remains an unanswered question, Czech Position has discovered that NWDC was sold at the start of the Czech EU presidency for a ridiculously low price.
Several lawyers have concluded that the legal owner of NWDC is not entrepreneur Vlastimil Maxa as has so far been reported, but the Prague-listed real estate developer Orco Property Group.
First, in the way of more background: Czech Position asked the co-owner of ProMoPro Jaroslav Veselý whether for the sake of clearing the name of his company he hadn’t considered publishing the contracts, amendments and invoices relating to the mysterious payments made by ProMoPro to NWDC.
“The contract with NWDC specifically forbids its publication. Nevertheless, thank you for the suggestion. Today I will send a letter to NWDC on behalf of ProMoPro requesting agreement to publish,” Veselý replied, though no further response came. However, questions surrounding NWDC’s ownership give rise to more intrigue.
A company with reputable clients
According to NWDC’s website, the company was founded in 1998 and was originally an installer of telecommunications routers. The company then expanded its activities to include the delivery of both low- and high-voltage technologies. Now the company also presents itself as a provider and operator of data networks and electronic communication services.
According to the company’s website, NWDC’s clients include development companies, hospitals, the auditing firm Ernst & Young, Hotel Jalta on Wenceslas Square in Prague, Ericsson and British ICT firm Damovo (the firm’s Czech subsidiary filed a suit for Kč 17 million against NWDC a year ago for nonpayment of rent for use of technological equipment in the Prague Congress Center).
From Maxa to Orco and back again
NWDC was founded by entrepreneurs Pavel Girstl, Aleš Sova and Martin Kudělásek, and toward the end of 2006, Vlastimil Maxa became the firm’s 100 percent owner. At the end of 2007, Maxa sold a 51 percent stake in the firm to Orco Property Group, and then on April 3, 2009, Orco sold the stake back to Maxa.
If the transaction was as described in official and publically accessible documents, Orco didn’t negotiate a good deal. The price that Orco officially paid for Maxa for the 51 percent stake in NWDC was Kč 10.8 million, but at the time the deal was sealed, NWDC had already signed a contract with ProMoPro that guaranteed a profit of around Kč 140 million. Veselý confirmed to Czech Position that the contract between ProMoPro and NWDC was signed Sept. 3, 2008 — half a year before the change of NWDC’s ownership.The question arises as to whether the deal cost Orco’s shareholders and creditors Kč 60 million
“When we sold the company, we didn’t know about any contracts,” Orco spokeswoman Petra Zdeňková told Czech Position. This appears to be unfortunate for Orco because had the contracts been taken into account, it could have sold the stake in NWDC for at least Kč 70 million more. Thus the question arises as to whether the deal cost Orco’s shareholders and creditors Kč 60 million.
The extent to which the Czech EU presidency profited NWDC is clear from the company’s results. Although the company’s financial results for 2008, 2009 and 2010 are absent from the commercial register, records available on the Internet and information on NWDC’s website show a turnover of Kč 147 million for 2007 and Kč 260 million in 2008. In 2009 — in the first six months of which the Czech Republic held the EU presidency — the figure rocketed to Kč 520 million.
Orco says the small price paid by Maxa to buy back the majority stake in NWDC was due to the fact that the developer had previously concluded an agreement with Maxa giving him priority rights to supply electrical systems for all of Orco’s construction projects. “But the business plan was not fulfilled, so we ended the cooperation amicably a year and half later,” Zdeňková said.
Without consent
According to the NWDC company charter, the company’s management required the supervisory board’s consent to enter into contracts. That could also apply to the contract concluded with ProMoPro; Orco had a majority on the supervisory board. “[The consent] was required for concluding contracts according to which assets worth more than Kč 100,000 were transferred to or from the company — but not to contracts binding the company to fulfillment,” Zdeňková said. The question is whether the transfer of the stake in NWDC breached the terms of the court protection
Zdeňková added that if it was the company’s executive head signed the contract, it would still be valid even without the agreement of the supervisory board. Maxa was the executive head of NWDC as of 2006. “Mr. Maxa didn’t request the supervisory board for its consent to conclude the contract with the company ProMoPro, and neither Orco nor the members of the board knew about that contract,” Zdeňková stated.
Yet the transfer of ownership of NWDC raises doubts for other reasons: In 2009, Orco successfully applied to a Paris court for protection against insolvency due to severe financial problems, and the question is whether the transfer of the stake in NWDC breached the terms of the court protection. Orco claims this was not the case.
“The contract [for the transfer of the stake in NWDC] was signed in on March 18, 2009, and the safeguard [against insolvency] was announced on March 25. Until this time, the Paris court did not have the right to grant consent, and Orco wasn’t obliged, nor had the option, to ask the court for consent,” Zdeňková claims.
However, several lawyers contacted by Czech Position independently asserted that Orco required the court’s agreement, and as a result the transfer of the NWDC stake back to Maxa is probably not valid. If it transpires that their assessment is correct, Orco would remain the holder of the 51 percent stake in NWDC.
