The phenomenon of the emergence of market environments in Slovakia and the Czech Republic was the lack of capital. The first big billions that were up for grabs were taken by the strongest players who were best prepared for the transformation of the economy. Then came a long phase of attracting foreign investors, who often bought for a song in the friendly Czech Republic and Slovakia what they could only dream of in the west of these countries.
The remaining part of entrepreneurs, together with households, were often referred to non-bank entities – companies with looser criteria for loan approval, but also unfavourable pricing policies for clients, which often led to double-digit interest rates on loans and credits.
Dozens of non-banking institutions were established in the Czech Republic and Slovakia, especially at the threshold of the millennium. The reason was weak regulation. As it later turned out, it was shaped together with those who had vested interests in the business of non-banking institutions. Weak supervision by supervisory authorities, the absence of a reserve requirement, the freedom to choose criteria for clients, unlimited profits and the absence of the need to guarantee financial products attracted entrepreneurs of all kinds to the business. A large group were those who had access to capital but were unable to meet the more demanding conditions of a banking licence. As the years of the Opposition Treaty and the years that followed showed, many entrepreneurs were attracted to the non-banking business by the possibility of laundering the proceeds of crime or creating fraudulent schemes that ultimately defrauded small clients at the expense of related companies of the non-banking institution itself or at the expense of other large players.
The list of owners of non-banking institutions speaks for itself. Jozef Majský, Juraj Široký, Viktor Kožený, Boris Vostrý and many others haunted in their sleep and perhaps still haunt tens of thousands of people who fell for them and, after entering into a client relationship with their companies, lost their life savings.
Thanks to his large investments in relations with politicians and the underworld, Viktor Kožený himself escaped not only Czech but also American arrest warrants. As such cases of failure of justice show, risk has paid off for the perpetrators of non-banking fraud more than once.
In 1979, Viktor Kožený’s parents emigrated to Munich with their then 15-year-old son. Subsequently, in 1982, Kožený left to study in the USA. In 1989 he received a bachelor’s degree in economics from Harvard University. He then worked for six months in London as an investment banker at Flemmings and it was there that he conceived the idea of throwing his knowledge into the Czech opaque and ignorant financial environment like a wolf into a flock of sheep.
In 1991 Kožený returned to Prague and immediately entered the ongoing coupon privatisation. He correctly assessed the domestic atmosphere, inexperience and superficiality. People wanted to live the American dream or, as politicians in Slovakia promised, to go to sleep one day in Slovakia and wake up in Switzerland. That’s why a superficial yet massive advertising campaign in which dozens of Czech celebrities lent their faces worked for Kožený. Harvard investment funds, where he first used the good sound of the name of the university where he received his degree, bought over a million coupon books from citizens thanks to the promise of tenfold appreciation.
With money from small investors, it was then possible to embark on bigger adventures and, in an unregulated environment, to transfer money relatively easily to accounts that were not under the gaze of the domestic authorities. In 1996, the six Harvard investment funds from the first wave of voucher privatisation were transformed into the Harvard Industrial Holding, together with the company Sklo Union Teplice.
In August 1997, Harvard Industrial Holding entered liquidation with Boris Vostry as liquidator. At the end of 1997, after a sham tender, he sold Harvard Industrial Holding to HCMW. In January 1998, Kožený bought Harvard Industrial Holding in a public tender. He paid for it with two promissory notes maturing at the end of 1999 in the amount of CZK 10,559 billion. For a long time, the owners of the so-called Harvard holdings pretended that these were only clever and profitable moves to multiply their money.
Although the fraudulent scheme was already underway in the 1990s, it was not until the opposition agreement period that fund shareholders had to finally accept the loss of their money and the fact that they had simply been duped. The fact that the fraudsters – unlike the defrauded – did not have to face the consequences also left a stench.
On 14 October 2003, the District Court for Prague 4 issued international arrest warrants for Kožený and his colleague Boris Vostrý. Kožený also committed similar fraud in Azerbaijan. There, he is suspected of luring a group of private investors to participate in the Azerbaijani equivalent of the Czech coupon privatisation, which ended in failure. The investors lost their money and suspect Kožený of embezzling a substantial part of it. Two former US officials have agreed to testify against their former employer, Kožený, in the Azerbaijan bribery scandal.
According to testimony, Kožený bribed prominent Azerbaijani officials to privatize the Socar oil company. Among those corrupted, they said, was former Azerbaijani President Heydar Aliyev. Later, in February 2009, the weekly Respekt published a letter dated 24 October 1997, in which Jiří Weigl, then head of advisors to Czech Prime Minister Václav Klaus, recommended Viktor Kožený to Azerbaijani President Hejdar Aliyev as a pioneer of privatisation processes whose experience could be useful for privatisation projects in Azerbaijan.
In 2005, Kožený was detained in the Bahamas on the basis of an American extradition request. In the US, he and two other men were charged with large-scale bribery, which they were alleged to have committed in Azerbaijan. He was released from prison in the Bahamas in April 2007 and in October 2007 the Bahamas Court of Appeal ruled that he would not be extradited to the US. The United States has stated that it will continue to seek extradition.
In July 2007, Czech Interior Minister Ivan Langer refused a request by former police investigator Václav Láska to be released from confidentiality so that he could testify in the Viktor Kožený case in the USA. According to spokeswoman Alena Vokráčková, the reason was “the difference in the legal systems of the two countries”.
In February 2008, the trial against Kožený and his partner Boris Vostrém, who lives in Belize, began before the Municipal Court in Prague. Both are being prosecuted as fugitives. Kožený called on the prosecutor to disclose the indictment, which the prosecutor refused. Therefore, Kozený called on his ex officio defence lawyers to disclose the indictment.
Both Kožený and Vostrý were convicted of criminal activity by a final judgment of the High Court in Prague in October 2012. The court sentenced them to ten and nine years in prison. According to the verdict, the men cheated in securities transactions and caused damage of over ten billion crowns. Both are being prosecuted as fugitives and are expected to compensate for the damage. Kožený should pay about 8.3 billion plus interest, Vostrý over 2.2 billion plus interest. Kožený lives in the Bahamas, Vostrý apparently in Central America, there is talk of Belize.
In the structures of Harvard, and especially in the money pipelines that brought out the deposits of the shareholders, it was later possible to recognize several other names that anyone who has followed the fraudulent activities in mafia, business and political circles for many years encountered.
One of them is Juraj Široký. The Slovak, who sponsored successful political projects of the HZDS, SOP and Směr-SD, was described in the Gorilla dossier as a close friend of Ivan Gašparovič, the former Slovak president and former right-hand man of Vladimír Mečiar. The very fact that his name appears in several chapters of the History of Corruption is an indication of the type of character involved.
During the “Mečiarism” period, Široký was supposed to have collaborated with Viktor Kozeny in tunneling Harvard funds and moving money from them to tax havens.
To the bunch that found their fortune in the misfortune of naive savers in a non-bank savings bank, one must also add the name Jozef Majský.
The Specialized Criminal Court in Pezinok has repeatedly sentenced Majský and his partners, Patrik Pachinger and Dávid Brtva, for fraud. Yet he managed to evade justice for decades. The trio of crooks defrauded 170,000 clients of non-banking institutions BMG and Horizont, taking an estimated 26.5 million euros from them.
Although during his later years Josef Majský presented himself as a harmless pensioner with failing health, which he often played on in the courts, in reality his family continued to hold parts of the corporate empire. This, of course, in a way that made it impossible for a bankruptcy trustee, for example, to access the assets.
