As part of the transformation of the economy and public administration in Slovakia, the decision was also made to transform the health sector. In the first phase, it was decided to transform state-owned hospitals and outpatient providers into joint stock companies. The latter were to be able to admit private companies into their structures in some cases. This naturally attracted the interest of several well-known financial groups, which in the next few years bought up either a majority or entire stake in some facilities.
The problem in terms of corruption, which persists in the legislation to date, is the decision that the losses of these companies will be covered by the state. The original intention of the state to pay off the health sector on a one-off basis has persisted as a regular feature. The management of the facilities is not motivated to avoid debts and the losses incurred are covered by public funds. A large number of health facilities have also fallen into the hands of local governments, which, however, face the same problem. They cover the losses from the budget and then demand payment from the state budget. This system did not change in the following two decades, and many reform plans did not find political support. The inefficient financing of the state health system suits the private one.
Private financial groups, especially Penta Investments and its shareholders, also benefited from another phenomenon of previous years – corporate insurance companies. In particular, the winners of privatisation in the 1990s forced employees of industrial enterprises to pay contributions to insurance companies set up by the enterprise itself or by the trade union (Slovak trade unions were the crème de la crème of corruption). Although there was a choice, if the employee opted for another insurance company, he or she received fewer benefits and paid more. Large numbers of these insurance companies were then acquired by financial groups. Penta thus got its hands on a large number of insured persons and influence on the health sector under favourable conditions. A large number of insured people were and are motivated to visit health care facilities in the hands of Penta.
Moreover, the lobbyists managed to introduce a system that still works in Slovakia today – equal payments by the state for surgical operations. Simply put, for an expensive operation that a state hospital is forced to perform, the facility receives the same amount of payment as for a cheaper operation performed by a private hospital. A private facility, unlike a public facility, is not obliged to accept patients who need more expensive procedures, but can choose its focus.
Penta
Around the time of the privatisation of healthcare, the American dream of the founders of the Penta group was coming true. Two of the group’s key co-owners, Jaroslav Hashchak and Mark Dospiva, as well as another of the group’s owners, Jozef Oravkin, graduated from the Moscow State Institute of International Relations (MGIMO), which recruited not only Soviet bloc diplomats but also agents of the totalitarian secret services.
Haščák and Dospiva then studied in Beijing, where their business instincts first kicked in when they realised the differences between prices in the Czech Republic and Slovakia.
At the time, the silk shirt and jacket in which Karel Gott performed were a hit in the Czech Republic. “Everyone wanted it. So we thought of going to the factory in China and asking how much they would sell us a container of silk products for. We bought them for a very good price and sold them at home with a considerable profit,” Dospiva told Deník N about the beginnings of their business. I guess you can see that’s not enough for applause. Anyone could have thought of it, they just didn’t have the access and the capital. “So, together with Slava [Jaroslav Haščák, author’s note], we set up a small import company and started importing shirts and jackets from China to Kotva and Prior department stores. This was the basic capital that financed the founding of Penta,” Dospiva says of his official entrepreneurial roots.
Subsequently, together with Oravkin and two other partners, Martin Kúšik and Juraj Herko, they founded Penta Brokers at the end of 1993.
According to the memoirs, it was Oravkin who helped his classmates to acquire shares in the investment fund VÚB Kupon (in that period repeatedly expropriated by gangs with which members of Penta’s management allegedly had relations). The Kupon privatisation in Slovakia was a turning point for Penta, and the purchase of shares and companies started its upward journey.
Subsequently, two of the founding co-owners, Herko and Kušík, left the group and were replaced by minority partners Ian Child and Eduard Maták.
After the initial take-off on the wave of coupon privatisation, Penta’s backbone investment became the pharmacy chain Dr. Max and the betting company Fortuna. While until then Penta’s strategy was to divest companies as soon as possible with the highest profit, the group later changed its approach – keeping key companies and expanding abroad with them.
While most of the firms in Penta’s portfolio operate in Slovakia and the Czech Republic, Penta’s ownership structure is very complicated and includes more than three dozen mostly Cypriot shell companies. Most of the activities, however, are in Slovakia, according to publicly traceable data. And most of the group’s controversies are also linked to the country under the Tatras.
