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Stanislav Gross and his CZK 300 million

Mysterious stocks of a former prime minister

We have another puzzle for you. In this case, there exists a well-defined answer but only a few people in the world know it at this moment and they won't tell us. ;-)

Mr Stanislav Gross was born in 1969, worked as an engine-driver trainee for the Czech state railway company. He joined the social democratic party in 1989 and the Parliament in 1992. After some additional achievements, he became the prime minister in 2004. While he looked like a 16 years old boy, he was already 35 but it was still enough for him to be the youngest prime minister in Europe.

He had to resign in 2005 because he couldn't explain how he paid for his new luxurious apartment: it is something like USD 50,000 of suspicious money for a USD 200,000 apartment. Imagine how his socialist comrades had to be upset about such a huge amount, relatively to the salary of typical socialist voters. Also, their best family friend was a director of a brothel in Prague but that's not very important. While he was a prime minister, he completed a college to be a lawyer which won't be too important either.

Those USD 200,000 may look like a lot of money to the typical voters of the party that made him the prime minister except that two days ago, on Monday, the Euro weekly has revealed that Gross has bought stocks for 31 percent of a power company - Moravia Energo - whose value almost certainly exceeds USD 15,000,000. Just to be sure, I mean that Gross's stocks are worth fifteen million U.S. dollars or fifteen percent of Al Gore's assets. ;-)

Tomáš Chrenek is the majority owner of that company. Gross together with a Robert Sýkora visited Chrenek back in 1999. While Robert Sýkora was a second-league politician, it turns out that he was the owner of those 31 percent before Gross. Gross also claims that he bought the stocks from Sýkora cheaply, something like USD 1.5 million - essentially for 1 year of profits (the 2005 and 2006 profits of the whole company were 126 and 100 million, respectively). That's one order of magnitude below the conventional value (10 years of profits). Why would Sýkora sell it in this way?

If Gross had a loan, which is what he says, it would be a bad deal for him to be a minority shareholder, too. Why? Because the majority shareholder can make the dividends zero - which is what Chrenek is indeed doing - and these dividends can't be used to fund the loan. Also, Chrenek could marginalize Gross by raising the nominal value of the company, or what's the right term.

Gross's former socialist comrades want him to explain how he paid for the stocks - especially those who would never earn even 0.1% of that amount are really concerned :-) - and Gross tells them, fu-ck off, Gentlemen, I am now a private person who doesn't have to tell you anything and moreover, I must be silent to protect my business partners. Gross hints that he has borrowed the money from a financial institution that "offers this product as a standard one".

Meanwhile, all well-known Czech banks agree that he could only get a loan for 2/3 of such a large and risky transaction so he would have to own USD 5,000,000 before the transaction which still seems rather unlikely. Gross's wife says that she has nothing to do with the purchase. They only talk about their kids' hobbies rather than some irrelevant millions of dollars, she explained.

Not too surprisingly, the anti-corruption police has started an investigation. Well, the loan could be funded by a rich person or business and in that case, it seems rather likely that such a rich person or business would probably have to be pretty grateful to Gross for something. And maybe it was a gift and not a loan - so they would have to be really grateful. :-)

I kind of think that people shouldn't be required to prove how they acquired their huge assets. On the other hand, I think that when someone becomes suspiciously rich, it is very appropriate for some authorities to investigate, study money transfers, and try to deduce who funded what. If you care about my guess, I think that Gross is a typical representative of the "modern socialist" guys who always want to be very rich and who are ready to do many things to achieve their goals. Consequently, it would be a surprise for me if the transactions were clean. In fact, I also think that the ultimate explanation won't be sophisticated but rather naive.

There will be a rich subject behind it who has taken care of everything and Gross is just the lucky guy. If the ultimate answer is different, I will be immensely impressed by Gross's skills and intelligence. ;-)

Moravia Energo was created by the Třinec Steel Company, a corporation that received a CZK 2,000,000,000 subsidy from a former government where Gross was the minister of interior (while the previous Zeman administration refused to pay). Even though we have explained that Gross and Sýkora have visited Chrenek in 1999, you shouldn't overestimate this fact because there have probably been quite a few similar seemingly related big stories. The government that included Gross was also selling Unipetrol (an oil company) and Telecom (the main telecommunication company) to Telefónica O2, among other things, and rumors about corruption exist in each case. Alternatively, Miroslav Jansta, a lawyer close to social democrats, owned 23 percent of the company for some time after 2002. Today Jansta "doesn't know" whether he had bought the stocks.

What do you think?

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