Orco's legal battle heats up

Real estate developer Orco has taken another defensive step against what it sees as unfair attacks from minority shareholders in the Czech Republic and abroad, as the company struggles to reorganize itself under the protection of French courts.

Orco Property Group, based in France, filed a complaint with the Paris public prosecutor and the Autorité des Marchés Financiers - France's independent financial market regulatory agency - that alleges "publishing false or misleading information and share price manipulation." The complaint requests an investigation to be launched in order to "put a stop to these campaigns," according to a press release from Orco.

The perpetrators have yet to be accused. However, Orco has made clear who it suspects, as evidenced by the defamation lawsuit filed in the Prague City Court by founder, CEO and President Jean-Francois Ott against Luboš Smrčka and his organization, SOS Orco, a minority shareholder organization that has challenged Orco's leadership. The company also submitted a request to the Czech National Bank to investigate the actions of Smrčka and SOS on the grounds of potential market manipulation.

"While Smrčka and SOS purport to represent the interests of a sizeable percentage of Orco's minority shareholders, Orco questions how many shareholders they actually represent, and whether their goals and interest are aligned with those of Orco's other shareholders," a press release from the company stated.

Also suspected by the company, according to a source connected to Orco, and reported widely in the Czech press, is James Woolf, a British entrepreneur and owner of Flow East, a company that owns three buildings on Wenceslas Square and claims to have more than 1,500 projects. Woolf has joined forces with SOS Orco, which currently claims to represent 14 percent of shareholders, and has been blunt about his aspirations.

"We are now looking for support among shareholders," Woolf told the daily Hospodářské noviny June 4. "We will seek changes in the management in which I could participate - let's say, [in] the post of chief executive."

Woolf added that the company will need to be downsized in order to bring back liquidity into the firm.

The actions filed by Orco in both the Prague and Paris courts are attempts to protect the share values on both the Paris and Prague stock exchanges on which Orco is listed.

"These repeated attacks are part of destabilization campaigns designed to put off potential investors while allowing the perpetrators to buy Orco shares at unusually favorable prices," the July 1 Orco release stated.

The company said that, in France, the alleged attacks have come from financial market Web sites and, in the Czech Republic, from published information that was "misleading."

Claire Compton can be reached at
ccompton@praguepost.com