MEPs put pressure on Commission to take position on Czech PM fraud case

Czech Prime Minister Andrej Babiš (L) is welcomed by the President of the European Commission, Jean-Claude Juncker ahead of a meeting at the EU Commission in Brussels, Belgium, 29 January 2017. [Stephanie Lecocq/EPA/EFE]

MEPs have urged the European Commission to investigate Czech Prime Minister Andrej Babiš for possible conflicts of interest involving EU funds, after being persuaded by the Czech branch of Transparency International and the Czech Pirate Party.

The European Budgetary Control Committee will urge the Commission to assess whether Babiš has conflicts of interest after it emerged that many of his former companies have received financial support from Brussels.

His previous businesses, like holding company Agrofert, could face losing investment if the EU inspections prove the suspicions to be true.

Babiš has repeatedly rejected the allegations levelled against him. His argument is that he has done enough to avoid any conflicts of interest by transferring ownership of his former firms to two trust funds, AB private trust I and AB private trust II. 

The Czech police say that in 2007, Babiš excluded the Stork Nest farm south of Prague from Agrofert to make it eligible for a €2 million European Union subsidy for small companies.

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The budget control committee discussed the Babiš case on 11 September. It became part of the agenda after being added at the last moment by Belgian Green MEP Bart Staes.

The move got widespread approval from representatives of all political factions in the European Parliament, including from the Alliance of Liberals and Democrats for Europe, where Babiš’s ANO movement (Action of discontent citizens) belongs.

In his proposal to deal with the case, Staes used materials provided by the Czech branch of Transparency International and by the Czech Pirate Party.

“If that’s true, it would be a big conflict of interest for the Czech prime minister even under the EU’s Financial Regulation,” Staes indicated to his colleagues, referring solely to the documents Transparency had sent to all the coordinators from the Parliament committee.

The committee’s leadership decided to ask for further clarification and evidence concerning the findings of the Commission. Corina Crețu, the European Commissioner for regional policy, will also be invited to one of the next meetings.

Last week, Crețu was in Prague where she met with Babiš and later with Czech MPs from the European Affairs Committee, who voiced their suspicions concerning the prime minister’s alleged conflicts of interest.

“As for Transparency International, it is a matter for the European Commission, which is responsible for handling EU funds. If the Commission raises suspicion that there has been a breach of EU rules, it will forward this information to the member state, in this case to the Czech Republic,” said MEP Martina Dlabajová (ANO), describing the course of the committee’s meeting.

Dlabajová belongs to a group of European politicians who believe the new Brussels definition of “conflict of interests” will not affect Babiš or his companies.

EU Justice Commissioner Věra Jourová is also from the ANO party.

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Huge conflict of interest’ 

On the other hand, MEP Tomáš Zdechovský (KDU-ČSL, Christian Democratic Union-Czechoslovak People’s Party) and some other politicians believe the Commission will have to look into it and are taking the accusations seriously.

“The Commission will have to deal with it and, in the extreme case, the payment of the disputed subsidies can also be suspended on a preventative basis,” Zdechovský, who is one of the committee coordinators, told Czech online daily Aktuálně.cz.

The European institutions are under pressure not only from Transparency International, which will begin an official initiative at the start of next week, but also from the Czech Pirate Party or KDU-ČSL. They want more precise instructions on legislation that has been in place since 2 August.

The Parliament, Council and Commission have all decided to scrutinise possible conflicts of interest more rigorously. This concerns not only the officials who decide where money is distributed but also the politicians themselves – including cases such as the one involving the Czech leader.

“We are convinced that Babiš is in a huge conflict of interest, and we expect that there are European institutions that have to say so,” said David Ondráčka, the head of the Czech branch of Transparency International.

Who is in control?

Transparency International wrote a letter to the EU, referring to an extract from the Slovak Public Sector Partners’ Register. The Slovak registry publishes a list of “end-users of benefits”.

In the case of the joint-stock company Agrofert, the registry mentions five of these beneficiaries, among them Babiš and his wife Monika, as well as the administrators of two trust funds. The Slovak registry identifies these five persons as “controlling or operating” the Agrofert company.

As for the Brussels’ definition of conflict of interest, the crucial element is deciding who has ownership of the company. According to Transparency International, a “reasonable suspicion” exists that Babis did not actually give up control of the companies.

A previous investigation, undertaken by the Pirate Party, appears to have reached the same conclusion. At the beginning of August, the party sent a letter with other documents to the Commission, citing them as proof of Babiš’s conflict of interest.

“In our opinion, supported by expert analysts’ expertise, Babiš is a controlling entity in relation to Agrofert and thus violates the law on conflict of interest,” Pirate Party boss Ivan Bartoš insisted.

The defence line

Agrofert has challenged Transparency International’s findings and according to Babiš’s fund managers, Zbyněk Průša and Alexej Bílek, the Czech prime minister does not violate the Conflict of Interest Act. They say the NGO has misinterpreted the information contained in the Slovak Registry.

Průša and Bílek, who released a joint statement on the matter, are convinced that both trust funds are managed by their trustees and that furthermore, they are not entitled to comply with Babiš’s instructions.

“Andrej Babiš has no rights that would allow him, directly or indirectly, to exercise a decisive influence on the administration of trust funds during their existence,” Průša and Bílek said. They point out that the Czech prime minister can dismiss the administrator, but only if he is in breach of his duties.

“Babiš is entitled to appoint and dismiss only one of the three protectors of each trust fund, and other options to influence the administration of the trust fund management by the trust funds’ status are not given to Mr Babiš,” the administrators of both Czech Prime Minister’s funds added.

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