Czech police, the special task force for uncovering financial crime, customs police, and the finance ministry’s experts tracking criminal funds have given details how a two year probe has broken up a sophisticated multinational gang which shipped in and sold hundreds of millions of untaxed motor fuel with the state losing out on billions of crowns as a result.
When Czech police gather a lot of top brass around a table and invite the press they are not usually dealing with petty crime. And Tuesday’s press conference about the break-up of a sophisticated and significant tax fraud ring did not disappoint on that count.
Police gave details of how last week they pounced on 15 individuals, 13 who have been detained in custody, who played various roles in a long running tax avoidance scam that is alleged to have defrauded the Czech tax man at least 2.3 billion crowns, and probably a lot more.
The tax scam spanned Germany, Slovenia, Austria, and Slovakia, with the ringleaders behind a network bringing in around 400 million litres of transport fuel into the Czech Republic for resale. Around 70 companies were used for selling on the fuel with the front companies quickly disappearing after taking the money and failing to pay up any, or just a minimal portion, of the billions in Value Added Tax that was due. Some of the untaxed fuel was even sold on through normal petrol stations.
Police say some of their investigations are still continuing, such as those in Austria, although last week’s searches of around 25 homes and business premises appear to have resulted in a sizeable haul of ready cash, documents, and some of the fuel earmarked for future sale.
The identities of those detained has not been revealed, police would only confirm that 14 were Czech with another a foreigner holding a Czech passport. Reports last week said that one of the ringleaders of the fuel scam is Czech-Iranian Shahram Abdullah Zadeh who was apprehended in the presidential suite of Prague’s Hilton Hotel. According, to some Gulf newspaper reports Zadeh fled Dubai when his links in major oil deals with the Iranian Revolutionary Guard Corps were uncovered. Zadeh, who reportedly married a Czech woman, had been contesting the appropriation of a Dubai-based real estate company, in which his partner was a relative of Dubai’s emir, before his flight.
The fact that transport fuel has been the subject of significant fraud should be no surprise. Polish based PKN Orlen, the owner of a majority stake in the Czech Republic’s biggest refinery company, Česká Rafinérská, has long complained of the size of the local illegal fuel market and managers at one stage threatened they would not invest in the country because of the underhand competition. PKN Orlen ignored that self-inflicted prohibition when a strategic stake in the Czech refinery stake came up for sale though the purchase was mainly motivated by the desire not to let it fall into other hands. The threat and their disgruntlement at lost profits appeared sincere.
The previous centre-right Czech government made some attempt to tackle illegal fuel sales when it introduced steep guarantees for retailers pointing out that many seemed to have a transient existence and disappeared without trace before their tax and excise duty payments to the state were due.
While happy with their detective work, police and ministry sleuths say their job tracking the complex flows of dirty money could have been considerably eased if a central registry of bank accounts had existed for them to probe. Finance Minister Andrej Babiš is keen to create such a one stop shop for police investigations but has encountered opposition from banks themselves and civic organizations that this could one more step towards and Orwellian future.