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Billionaire Czech PM mired in corruption scandal

Aureliusz M. Pedziwol
June 25, 2019

It's the Czech Republic's largest protest since 1989. Some 250,000 people have taken to the street calling for Andrej Babis to resign amid a corruption scandal that intertwines his government and former business empire.

Protest against Andrej Babis in Prague
Image: picture-alliance/AP Photo/P. D. Josek

He's a wealthy entrepreneur — the second-richest citizen of the Czech Republic, in fact — and the country's prime minister. When billionaire Andrej Babis came into office two years ago, he garnered support by vowing to take on corruption and the country's political elite.

"Then it became clear that he had more problems than the politicians he was criticizing," Ladislav Cabada, a political scientist at the Metropolitan University Prague, told DW. "This hypocrisy is the main reason why so many people in the Czech Republic demonstrate against him."

Jiri Pehe, director of New York University Prague, identified three central grievances that drove thousands people to protest in the Czech capital's Letna Park. First, he explained, there was Babis' conflict of interest over allocating European Union subsidies, second, the criminal investigation into his alleged abuse of those subsidies, and third, his communist past, including collaboration with the former StB Czechoslovak state police.

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'Agent Bures'

Babis is mentioned in about a dozen StB files, where he is referred to as "agent Bures." According to documents published so far, he knowingly acted as an "informal agent" for the Czechoslovak secret police from November 1982 to 1985. Babis vehemently denies the accusations and has tried to get them dropped in the Slovak Constitutional Court. His complaint was dismissed, however, and the European Court of Human Rights in Strasbourg reaffirmed the decision in December 2018.

Andrej Babis
Babis has faced controversy over his business dealings and links to the former Czechoslovak state policeImage: Getty Images/D. Kitwood

But Babis' die-hard supporters could hardly care less, according to journalist Petr Honzejk of the Czech business newspaper Hospodarske noviny. They say the supposed collaboration happened a long time ago, Honzejk explained, at a time when almost everyone had to make compromises. The voters who still vote for the Communist Party have no problem with the StB as such, he said.

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One flew over the stork's nest …..

Before entering politics, Babis headed the Agrofert agricultural, food and chemical conglomerate. In 2017, the group employed almost 33,000 people in about 250 subsidiary firms, with a total turnover of more than €6 billion ($6.83 billion) and profits of about €190 million. Babis became the second-richest man in the Czech Republic, with the US magazine Forbes estimating his assets at roughly €3 billion. In 2013, he bought the Mafra media group , which owns two high-circulation newspapers, Lidove noviny and MF DNES. At that time, he was often referred to in the press as Babisconi, a nod to Italian media mogul and former Prime Minister Silvio Berlusconi.

Babis no longer formally heads Agrofert, but the political scandal he now faces dates back to his days as an entrepreneur. In 2006, Inoba, a subsidiary of the Agrofert Group, bought a run-down farm near Prague. Today the former farm is a recreation and conference center called "Stork's Nest," the construction of which was financed with EU subsidies intended to support small and medium-sized businesses. It was not until 2016 that Babis admitted the farm belonged to his two adult children and his partner's brother at the time the EU disbursed the funds. Czech police have been investigating Babis, while he in turn has called the probe "politically motivated" and all accusations against him "lies."

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"Stork's Nest" wellness resort
The Agrofert-owned 'Stork's Nest' was built using EU subsidy fundsImage: picture-alliance/dpa/V. Simanek

Still tied to business?

Although Babis became deputy prime minister and finance minister in 2014 — and thus was responsible for the distribution of EU subsidy funds — he only put Agrofert into trust in 2017 amid pressure to conform to Czech conflict of interest laws. Today he heads the very government that decides on how to allocate subsidies that end up supporting Agrofert subsidiaries.

"Under Czech law, he separated from his former assets," said Jiri Pehe, adding that if the scandal were a purely Czech matter, Babis would probably be able to wash his hands of it. But that is not the case. The European Commission has ordered an investigation to find out where the money from Brussels actually went.

The preliminary EU report was leaked to the media at the beginning of June, and reportedly finds that Babis still has great influence over Agrofert. Should the final report out of Brussels confirm these suspicions, Agrofert — or the Czech state — would have to repay a large part of the EU money the group scooped up.