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Dirty fuels

Surprise decision by prosecutor to drop charges ends notorious biofuels scandal

By Markéta Hulpachová
Staff Writer, The Prague Post
July 25th, 2007 issue

ČTK
Former Social Democrat Ludmila Schwarzová was arrested in March 2006 for accepting bribes toward a biofuels tender.
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Tender trouble

Prosecutors acquit six accused of rigging 2004 state tender for biofuels production
One of accused, lobbyist František Vybíral, had mafia ties, investigation shows
Tapes of Vybíral's phone conversations incriminated Social Democrats in previous government, led to 2006 arrests
Former Prime Minister Paroubek says police forged tapes to discredit Social Democrats before 2006 election

The prime suspects in one of the Czech Republic’s biggest political fiascos have been acquitted. State prosecutor Jana Hercegová has halted the criminal proceedings against six individuals accused of distributing and accepting bribes to rig a 2004 state-issued tender for biofuel production. The controversial decision puts an end to the “biofuels case,” widely referred to as the most profound political corruption scandal in recent years.
According to prosecutors, who dropped the case July 11, the police failed to prove the illegal nature of a 15 million Kč ($736,000) transaction between government officials and the company Biopal Kolín, a bioethanol producer participating in the tender.
“The state prosecutor believes the investigation did not produce sufficient evidence,” said Martin Omelka, spokesman for the state attorney’s office. “The defendants’ argument that the 15 million Kč sum was a loan could not be disproved.”
Among the accused were former Social Democrats Josef Láznička, who served as head of the State Transportation Infrastructural Fund (SFDI), and Deputy Transportation Minister Petr Pospíchal’s chief secretary, Ludmila Schwarzová. The two were arrested in March 2006 for accepting bribes to alter the state’s eligibility requirements for companies participating in a November 2004 biofuels tender.
The central figure in the case is lobbyist and former Social Democrat František Vybíral, who allegedly acted as an intermediary in Láznička and Schwarzová’s deal with Biopal Kolín managers Jaromír Janata and Rostislav Polák, who were also prosecuted in the case. While acquitted from charges regarding the biofuels tender, Vybíral still faces prosecution in three other corruption cases.
Police investigators say Hercegová’s decision was unexpected.
“We respect the decision, but we don’t know the reason for it,” said Blanka Kosinová, spokeswoman of the organized crime unit (ÚOOZ), the police division investigating the case.
According to Kosinová, the state prosecution’s decision is counterintuitive.
“The police would have never initiated the proceeding without the support of the prosecution,” she said. “If they are now saying that there wasn’t enough evidence, it’s necessary to ask why they went ahead with the case in the first place.”
Omelka maintains the state prosecutor acted in accordance with criminal proceedings.
“A criminal proceeding has several stages. While the initial investigation indicated that the suspects may have committed a crime, it could not be proven in the proceedings that followed,” he said in response to Kosinová’s comment. “The ÚOOZ’s position on this matter is somewhat unfortunate.”
With Schwarzová and Láznička in the clear, Social Democratic Party Chairman Jiří Paroubek is now calling for the immediate dissolution of the ÚOOZ and the unseating of its chief, Jan Kubice, whom he accuses of cooperating with the ruling Civic Democrats (ODS) to discredit the Social Democrats before the June 2006 election. The ÚOOZ is “the police serving the ODS,” Paroubek told the Czech News Agency July 11.
In March 2006, Kubice publicized the “Kubice report,” a series of taped phone conversations that revealed Vybíral’s contacts in the government. The report incriminated high-level Social Democrats of collaborating with Vybíral to rig major state tenders for biofuels, health care and forestry.
While the Social Democrats agitate for his dismissal, the Interior Ministry, which governs the police, stands behind Kubice.
“Interior Minister Ivan Langer trusts Jan Kubice,” said ministry spokeswoman Hana Malá. The ministry did not comment on Paroubek’s July 16 allegation that fugitive businessman Tomáš Pitr, the former owner of the biofuels company Setuza, was responsible for the Kubice report.
“The ministry does not feel the need to express its opinion on the Social Democrats’ announcement,” Malá said.

Disputed tender

The biofuels case dates to November 2004, when the Environment Ministry launched a public tender to select five domestic companies to annually produce 2 million hectoliters of biofuel from 2007 to 2013. The tender was a reaction to an EU directive to curb fossil fuel dependence by requiring all EU gasoline and diesel to contain at least 2 percent biofuel by 2005. If successful in the tender, the selected companies were to receive a 5 percent discount on the excise tax — an estimated annual value of 2.25 billion Kč.
The government’s tender was widely criticized by the European Commission and field experts, who claimed that it discriminated against smaller biofuel producers and violated the EU’s free-trade laws.
In the tender’s initial rounds, eight of the 12 participating companies were excluded for what the ministry termed “technical reasons” — their technology was not supplied by the U.S. engineering technology company Katzen International.
Katzen was operated in the Czech Republic by Vojtěch Slówik, an associate of Jaroslav Palas, who was then agriculture minister. Faced with allegations of favoritism, the government picked two more companies, including Biopal Kolín.
Among the entrepreneurs participating in the tender were notorious cooking oil barons Pitr and František Mrázek. Linked to fraud and organized crime, Mrázek was murdered by a professional assassin in January 2006; Pitr currently faces an international arrest warrant for failing to serve an eight-year sentence for tax fraud.
When the government failed to include him in the tender, Mrázek began criticizing its methods in the media. In April 2005, Jiří Paroubek replaced Stanislav Gross as prime minister. Months later, Paroubek voided the tender process due to insufficient laws regulating biofuel production, placing Pitr and Mrázek back in the race.
In March 2006, police arrested the group around Vybíral, Biopal Kolín and the Transportation Ministry for attempting to rig the November 2004 tender. Later that month, police discovered contacts between Vybíral and the Russian mafia, which they suspected was responsible for Mrázek’s murder.
“During investigation, detectives came across the name of businessman and lobbyist František Vybíral,” Kosinová announced in a March 2006 report. “Aside from contacts with Russian organized crime, he had close ties with various businessmen and government officials.”
Upon publicizing the report, part of which linked Mrázek to the Social Democrats, Kosinová said Paroubek placed her under “house arrest,” ordering her not to publicize any information regarding ÚOOZ operations.
“I was told that Prime Minister Paroubek does not want me to speak for the [ÚOOZ],” Kosinová said on Czech radio in May. “Some of the people we arrested were Social Democrats. It didn’t matter to us what political party anyone was tied to, but to some, it did matter.”

Markéta Hulpachová can be reached at mhulpachova@praguepost.com


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