DOKUMENT: Audit Jiřího Čunka - Employment history

Zbrojovka Vsetin

Mr. Cunek joined Zbrojovka Vsetin as a safety technician in 1982, upon receiving his high school diploma in 1982. In 1993, after a decade with the company, he was promoted to Chief Safety Manager. (3)

It was at this time that Mr. Cunek became involved in politics. He became an active member of KDU-CSL, which was beneficial for his career because KDU-CSL was influential at the Czech Defence Ministry. The former Zbrojovka Chief Executive Karel Dancak (4) told Kroll that Mr. Cunek used his contacts to help Zbrojovka deal with two “big problems“ threatening the survival of the company. He also said that Mr. Cunek was active in helping Zbrojovka lobby the ministry for at least one large government military contract.

Mr. Dancak said that in the early 1990s the state-owned Zbrojovka was a money-making enterprise, but that profit stripping by the government brought it near to collapse. “In 1990, we made CZK 236 million in operating profit which was taxed by 75%,” the executive said. “On top of this we had to pay the government a fixed payment of CZK 60-75 million. This pushed us into insolvency,” he explained.

Mr. Dancak said that Mr. Cunek had good government-level contacts and often travelled to Prague to “inform members of the government about our situation.“ He said that it was his understanding that Mr. Cunek was already “involved in national KDU-CSL bodies.”

The executive said that although Zbrojovka failed to persuade the government to change the tax regime, the company never remitted the owed tax and was never punished for it.

Mr. Dancak said that Zbrojovka experienced a second “life-threatening” moment in 1993, during the break-up of Czechoslovakia. He said that the company owned CZK 1 billion worth of forest land located in a contested border area between the Czech Republic and Slovakia. He said that the amount represented one third of Zbrojovka’s core assets and that “without it the company would fail.” The executive said that Mr. Cunek started again travelling to Prague and helped the arms maker negotiate a deal with the government that “allowed the company to restructure its assets.”

Finally, Mr. Dancak said that Mr. Cunek was involved in Zbrojovka’s efforts to win a government contract for the Plamen machine gun commissioned for the Czech-made L-159 military jet. The executive said that Zbrojovka was “the only company in the Czech Republic who had the capability to produce” the weapon, but that other companies, most notably the much larger Skoda Plzen, were also bidding. The executive noted that prominent KDU-CSL member Miroslav Kalousek, currently the Czech finance minister, served at the time as deputy minister of defence responsible for acquisitions and budget. “They definitely knew each other,” the Zbrojovka executive said. “They knew each other from some [party] committee.” Kroll notes that the Defence Minister at the time was also a KDU-CSL member.

The contract was reportedly valued at CZK 1.3 billion and was awarded to Zbrojovka in September 1995. (5)

Mr. Dancak was not explicit as to how Mr. Cunek was compensated for his lobbying efforts. However, he implied that the reimbursement for Mr. Cunek’s travel expenses was generous, and told Kroll that the travel Mr. Cunek had undertaken on the company’s behalf was extensive. Travel expense reimbursement does not have to be declared as taxable income and was paid in cash.

Mr. Dancak told Kroll that employees received performance cash bonuses. He said that Mr. Cunek would have received bonuses as Chief Safety Manager since “there were no serious injuries on his watch.”

Mr. Dancak said that employees were paid in cash in the 1990s because “people did not have bank accounts and the company did not have the capability to do [individual] bank transfers.” Kroll understands this situation changed in the late 1990s.

Mr. Cunek left Zbrojovka in August 1997. Zbrojovka filed for bankruptcy in 1998.

3 Ibid.
4 Karel Dancak, CEO Zbrojovka 1990 - 1995

Nova Spolocnost and Zeveta Bojkovice

Mr. Cunek had other ties to the arms industry besides Zbrojovka during the 1990s. In 1993 he was elected to the board of Zeveta Bojkovice, a Czech ammunition manufacturer which had been recently privatised. Kroll does not know what relationship, if any, Zeveta had with Zbrojovka.

Mr. Cunek was nominated to the board by Zeveta shareholder Nova spolocnost a.s. (“NS”). NS was a Slovak investment fund based in Kosice. It acquired Zeveta shares during the first round of the voucher privatisation.

Mr. Vybostok, a former NS partner and manager told Kroll that he knew Mr. Cunek “socially” from before 1989. It became clear they knew each other from church.

Mr. Vybostok told Kroll that in 1992 NS held “about a 10 percent stake” in Zeveta and that it was looking for a nominee for the board of directors. He said that he approached Mr. Cunek because he had “known him from before. He was active, he looked like a suitable type.”

The manager said that Mr. Cunek served on the board of Zeveta “until [the company] went into bankruptcy.” A review of Zeveta’s corporate filings shows that Mr. Cunek served as a director from August 1993 until August 1994, when he was appointed deputy chairman of the board. He held that seat until February 1995, when the company’s assets were liquidated. It appears that the company was later reorganised and is currently in operation.

Mr. Vybostok said that Mr. Cunek was not compensated by NS but that he was paid by Zeveta. He also said that Mr. Cunek travelled frequently to Zeveta meetings, which took place in Bojkovice, about 50 kilometres from Vsetin, as well as in Brno, Bratislava, and even Vienna - the company had “international shareholders” from Austria, the manager said. He said that Mr. Cunek was “reimbursed” for his travel by Zeveta.

Mr. Vybostok said that Mr. Cunek did not represent NS in any other company.

5 “Kdo uhasi plamen,” Tomas Sousek and Pavel Lang, June 2002, Czech Ministry of Defense, www.army.cz

In October 1997, after leaving Zbrojovka, Mr. Cunek joined a small securities brokerage firm called Akcie s.r.o. (6) Akcie was connected to Ruchstav Holding a.s., an investment and holding company co-founded by Mr. Cunek’s cousin Petr Kozacek.

6 The files from the Police investigation that relate to Akcie s.r.o. have not been located and do not form part of this investigation.

According to Czech corporate records, Akcie had just one director, Jan Lindovsky. Mr. Lindovsky was also the sole shareholder. The company had an address at Dolni Namesti 3 in Opava, in a building still owned by Ruchstav. Mr. Kozacek told us that he controlled Akcie himself along with his business partners.

Although Mr. Cunek was employed by Akcie s.r.o., he provided services and managerial support to other companies within the Ruchstav group, according to both Mr. Cunek and Mr. Kozacek.

Mr. Kozacek described Mr. Cunek as “an ordinary employee.” However he also said that Mr. Cunek was “helping [Ruchstav] with privatisation projects when we had problems with land.” He said that local real estate registries were “messy” and property titles were not clear. “For example, we would find that in the middle of a piece of land we wanted to buy [in privatisation] there would be 300 square meters that belonged to somebody else,” Mr. Kozacek said. “He would often travel to Prague, reach out to people at various ministries to get it sorted out.”

Mr. Cunek was also buying for Ruchstav “blocks of shares in companies,” and managed a farm in Belotin, a small town in Moravia.

Ruchstav Holding was established on 5 February 1996 in Bruntal, a small town in northern Moravia some 40 kilometres west of Opava. The company had an initial share capital of CZK 179.2 million, which was divided into bearer shares valued at CZK 100,000 each.

On 18 June 1996 the share capital was increased by more than half to CZK 285.2 million. The new capital was paid in by Mr. Kozacek, his business partners Frantisek Machan and Karel

Pavlik, and by Ruchstav s.r.o., Ruchstav Holding’s sister company. The increase was executed with CZK 100 million worth of shares held by Mr. Kozacek and his business partners in the building contractor Ingstav Opava and the industrial bakery Pekarny a Cukrarny Sumperk. (7)

Ingstav Opava and Pekarny a Cukrarny Sumperk were privatised during the first round of the voucher privatisation. Ingstav had a number of large infrastructure projects in the north Moravian region, including the Slezska Harta hydroelectric dam.

Ruchstav Holding also controlled a small stake in a local bank, Prvni Slezska Banka a.s., (8) and other property valued at around CZK 66 million. According to Czech Land Registry files, its real estate holdings included the offices at Dolni Namesti in central Opava and Trida Prace in Bruntal, the Andel Hotel in Andelska Hora in northern Moravia, and a holiday home in Sucha Rudna.

In September 1998, Ruchstav Holding disposed of its 67.87 per cent stake in Ingstav Opava for an undisclosed sum. (9) The stake was acquired by Prvni Hybernska, an investment company controlled by Jiri Baron. According to Mr. Kozacek, Mr. Cunek was not involved with any aspect of the Ingstav sale.

Ingstav rapidly collapsed following the sale. Roman Podgrabinsky and Svatopluk Mayer, Ingstav’s new managers, were investigated for financial crimes related to the collapse of Ingstav. Ingstav entered into liquidation and was subsequently acquired by the Tchas group.

Pekarny a Cukrarny Sumperk, the other large holding in Ruchstav’s portfolio, ceased to exist in 2004, Czech corporate records show.

On 15 October 1998, Akcie had its brokerage license revoked by the Czech Securities Commission. (10) The relevant decision was filed as 112/2 429/98, and states that the license was revoked because Akcie did not have any stockbrokers. Kroll has found no evidence at this time suggesting that Mr. Cunek was responsible for any breach of Czech securities trading laws.

Mr. Cunek had various transactions with Ruchstav during his association with the company. For example, the Czech media reported that Mr. Cunek borrowed Ruchstav Holding’s shares in late 1998. Mr. Cunek stated in the press that the shares were to be used in an unidentified transaction, but this transaction does not appear to have taken place. (11)

7 Ingstav a.s. was registered on 1 May 1992. The company was spun out of state construction group Ingstav Brno. Ruchstav Holding acquired 67 per cent of the shares in the first round of voucher privatisations. The remainder was owned by small investors.

8 Prvni Slezska Banka was founded in 1992. The bank increased share capital in March 1996, but this was not enough to prevent the Czech National Bank withdrawing their operating license in May 1996. Liquidation proceedings commenced in July 1996.

9 Hospodarske Noviny, 14 October 1998

10 http://www.kurzy.cz/zpravy/3998-komise-pro-cenne-papiry-rok-cinnosti-komise-pro-cenne-papiry/

11 Euro, April 2008

Mr. Cunek told Kroll he had no recollection of borrowing money from Ruchstav however he did recollect giving the Ruchstav group a personal loan. This loan had not been repaid by the time Mr. Cunek took up public office in Vsetin in 1998.

Mr. Kozacek told Kroll that Mr. Cunek started to worry about his loan and asked for guarantees in late 1998. Kroll notes that his actions to secure the loan followed the loss of his CZK 1 million savings in the collapse of Universal Banka. On a macroeconomic level, the Czech economy was experiencing a significant downturn in the wake of the 1998 Asian crisis and Russia’s sovereign debt default.

On 23 December 1998, Mr. Cunek acted unilaterally to secure his loan. Mr. Kozacek says Mr. Cunek used his notary powers at Ruchstav to sign over a one-third ownership of the holiday home in Sucha Rudna, and this has been confirmed by Mr. Cunek. This action directly led to a “falling out” with Kozacek.

Mr. Cunek told Kroll that he joined Akcie s.r.o. because the job “was not too time consuming” and allowed him to pursue his goal of starting his own business.

Starting in 1998, Mr. Cunek and his cousin Jan Machu started making plans for a computer and software company.

Mr. Machu told us he provided CZK 1.5 million in seed capital and Mr. Cunek started looking for suitable warehouse facilities in industrial zones between Brno and Ostrava. They were planning to sell computer hardware and software and provide IT support and services. Mr. Machu told Kroll that the cousins planned to sell brands like IBM, Dell, HP, and Lotus.

Mr. Cunek was using his contacts to identify properties and write letters of intent.

But the plans fell through after Mr. Cunek was elected Vsetin Mayor and Mr. Machu fell ill. Mr. Machu said that when Mr. Cunek was elected Mayor “[their] business was over.”

Mr. Machu told us he suffered from pulmonary embolism and spent two months in a hospital in early 1999 and another year on medical leave.

Mr. Machu said Mr. Cunek kept the seed capital and repaid it to him by 2003 “in instalments”.

Appointment as Mayor

Mr. Cunek joined the KDU-CSL party in 1994. He was briefly the Deputy Mayor of Vsetin between December 1995 and March 1996. He was elected as Mayor in 1998.

Local elections had been held on 13-14 November 1998 across the Czech Republic. In Vsetin, which had been controlled by ODS for eight years, no one party dominated the local elections. The 21 seat council was split, with no party gaining more than three seats. However, there was a general consensus that ODS should no longer remain in power. A new coalition was formed without ODS or Communist representation.

Mr. Cunek’s role in discussions to form a new coalition was not reported in the national press. As local party chairman, he is likely to have been involved in striking a deal. Mr. Cunek’s appointment was officially announced 5/6 December 1998.12

Vsetinske Byty

Mr. Cunek was elected as Mayor of Vsetin in December 1998.

Vsetinske Byty s.r.o. was a joint venture established in 1999 by the city of Vsetin and Petr Hurta’s real estate firm H&B Real. Events surrounding Vsetinske Byty lay at the core of Mr. Cunek’s bribery case. The Czech anti-corruption police started investigating Mr. Cunek after they learned from Mr. Cunek’s former secretary Urbanova that Hurta allegedly bribed Mr. Cunek with CZK 500,000 in exchange for selecting H&B Real as the city’s partner in Vsetinske Byty. The city later sold its majority stake in Vsetinske Byty to H&B Real. Mr. Cunek himself lived at an ex-Zbrojovka property that had been a co-operative since 1979.

When Czech prosecutor Arif Salichov dropped the investigation of Mr. Cunek on 16 November 2007, he wrote that his review of the case “completely refuted” allegations that Mr. Cunek “played any active role in giving H&B Real an advantage in securing a stake in the firm Vsetinske Byty and buying out the city’s stake.”