Police probing ‘suspiciously cheap’ sale of villa to ex-Prague transport firm CEO’s mother

Ex-DPP head’s mum bought villa for Kč 200,000 up front from partner in firm representing Prague ‘godfather’ who consulted on dodgy ticket deal

Brian Kenety 25.1.2012

Ivo Rittig: Jsem šokován. foto: © ČTKČeská pozice

Ivo Rittig: Jsem šokován.

Martin Dvořák’s last official act as head of the city-owned Prague public transport company (DPP) before resigning in December was to cancel a controversial multi-million crown contract he had signed off on in 2007 with the private Czech security paper mill Neograph to produce metro, tram and bus tickets.

It has now emerged that his mother, Marie Nováková, bought a luxury Prague villa in 2010 for a symbolic price, with the remainder to be paid off later, through a partner in the law firm Šachta & Partners, which also represents Ivo Rittig, a prominent businessman who earned commissions — alleged to be “kickbacks” — from DPP’s contract with the paper mill.

Rittig, known as a gray eminence to the center-right Civic Democrats (ODS), which have long governed Prague City Hall, until last year with the left-leaning Social Democrats (ČSSD) and now with their ideological compatriots TOP 09, is sometimes referred to in the Czech media as one of the “Prague godfathers” due to his alleged influence over the awarding of lucrative public contracts.

Dvořák — who was asked to resign by Prague mayor Bohuslav Svoboda (ODS) as allegations began to emerge that tens of millions of crowns had been siphoned off from DPP during his tenure — told the business daily Hospodářské noviny that his mother is a property developer and that he had nothing to do with the purchase of the villa in Hanspaulka, a posh area of Prague’s Dejvice district that is home to a number of foreign embassies.

However, the former DPP chief remains under scrutiny as regards the contract with Neograph, which has been investigated by an anti-corruption watchdog group and, along with other contracts, is being examined by the Czech police. The paper mill had been receiving Kč 0.37 for each and every metro, tram and bus ticket it produced and was transferring some Kč 7 million annually to the offshore company Cokeville Assets Inc., registered at a P.O. Box in the Virgin Islands, to which Rittig is linked.

Cokeville Assets Inc. —  which had mediated the contract between DPP and Neograph and to which Rittig acted as a consultant — was getting Kč 0.17 per ticket, in what Stanislav Beránek of the Czech branch of anti-corruption watchdog Transparency International said appeared to be a form of “kickbacks to DPP itself,” possibly to Dvořák himself as well as to other top management at the city-owned transport company. 

According to the Czech anti-graft group the Endowment Fund Against Corruption (NFPK), from January 2007 to February 2008 some Kč 73 million was transferred from the account of Cokeville Assets to an account controlled by Rittig; not all of the payments could be directly linked to fulfilling the contractual relationship between Cokeville Assets and Neograph, it alleged.

According to Aktualne.cz — the news server that broke the story of the Hanspaulka villa  earlier this month — apart from examining the DPP contract, anti-corruption police are also looking in to the financial dealings of Dvořák and his family members, over suspicions that they may have benefitted from his decisions while head of the transport company. “The police are examining all the circumstances of the [DPP] case, but at this time cannot comment further on the details,” Soňa Bělohlávková of the Supreme Public Prosecutor’s Office in Prague told the news server.

Future earnings for Future Earnings?

Dvořák’s mother bought the Prague villa through the Cypriot-registered firm Future Earnings, represented by David Michal, a lawyer in the firm Šachta & Partners that also represents Rittig, who — according to the NFPK investigation — received the tens of millions of crowns in questionable commissions from DPP. 

The former DPP boss denied any connection between the DPP-Neograph-Cokeville Assets arrangement and Nováková’s transaction with Michal. “My mother is a major developer who has dozens of real estate projects of all sorts … not a poor pensioner. I did not take part in this in any way,” he told Hospodářské noviny.

The business daily said it had uncovered evidence of the indirect connections between Rittig, Dvořák and (via his mother) Šachta & Partners during its own ongoing wider investigation “mapping the property and assets of public officials and managers [of publicly-owned companies like DPP] who worked with billions of crowns of public funds and arranged questionable contracts.”

According to Hospodářské noviny, Future Earnings bought the Hanspaulka villa for Kč 25 million. Dvořák’s mother, Marie Nováková, bought the house in June 2010 through Michal of Šachta & Partners for a “suspiciously low” price through one of her companies, HK development. She says the transaction was the private business of Michal, and not the law firm, and chaulked up the indirect connect to her son and Rittig as pure coincidence.

“He [David Michal] bought it for himself and then didn’t know what to do with it because it needed reconstruction and he did not want to do it, so he offered it to me,” Nováková said, as cited by the daily. “Because I liked the house, I said ‘great,’ we’ll buy the house, fix it and see what to do next.”

According to the Company Register, Dvořák’s mother bought the house for the nominal value of Kč 200,000; Nováková and Michal say, however, that that was not the final price, which Michael acknowledged she has yet to pay.

“The price of the acquisition is made up of both the nominal value of shares of Future Earnings and secondly in payment for the assignment of claims that arose due to a loan to purchase the house, for approximately Kč 10 million,” he told Hospodářské noviny, neglecting to say what the “final price” would be.

Aktualne.cz reported that Nováková had also been assisted by Michal in the purchase of a villa for some Kč 40 million located at a luxurious golf resort on the Portuguese archipelago of Maderia; the lawyer for Šachta & Partners has refused to provide documentation about the loan she supposedly took out to purchase the property, the news server said.