Czech secret service raps state firms for lawbreaking

Reuters News
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Posted: Aug 23, 2012 1:11 PM
Czech secret service raps state firms for lawbreaking

PRAGUE (Reuters) - The Czech secret service on Thursday accused state-owned companies of violating procurement laws and selling assets off cheap, saying such cases damaged state interests and could be corrupt.

The BIS counter-intelligence agency accused a number of firms, including the 70 percent state-owned energy giant CEZ, of circumventing the law.

Rampant corruption in the public sector has become the main political topic in the central European country, exposing the weakness of police and judiciary, which often appear unable to bring corrupt officials to trial.

The BIS said tenders for state contracts were often rigged, some contracts were awarded with no tenders at all and that personnel and strategy decisions in some firms were influenced by parties related to management.

"Some tenders in the energy sector had only a formal character, because its winner had been decided beforehand ... a procedure was being used allowing the law on public procurement to be circumvented," the report said.

It said CEZ had used a subsidiary to make orders directly in situations where CEZ itself would have had to hold a tender.

"The CEZ group has always fully met the requirements of the procurement law," CEZ spokeswoman Barbora Pulpanova said. Even at the subsidiary, all major market players were always asked for bids, she added.

The secret service said there was a long list of state firms which used opaque and non-standard practices, including a body in charge of strategic oil reserves.

Suspicious practices included undervalued asset sales, said the BIS, which gives a general annual report to the public and detailed information to the prime minister.

"Some sales of assets of the companies aroused grave doubts about their transparency and their benefit for the state," the report said.

It added corruption was widespread in a number of city administrations across the country, making it difficult to bring culprits to justice.

"Investigation of serious cases where there is a suspicion of criminal conduct is complicated by the political consequences and by the possible bias of local authorities engaged in prosecution," it said.

The government has won investors' confidence through its drive to cut debt and improve procurement legislation but has lost several ministers because of suspicions of graft. It had no immediate comment on the report.

The EU temporarily halted development subsidies to Prague this year due to mismanagement.

(Reporting by Jan Lopatka; editing by Andrew Roche)