Conspiracy theorizing seems to me silly and intellectually lazy, though it can be fun when practiced in moderation. Sometimes it just does seem that this “strange mixed affair” called life can only be explained as some kind of vast practical joke, as Herman Melville wrote in one of his lighter moods. But in general, “theories” about shadowy conspiracies are paranoid projections of one’s own guilty feelings onto strangers, whether from another political party, ethnic group, or galaxy.

Maybe I’m in a Melvillean mood, or just sickened at the goings-on in Czecho this week, featuring a governor caught red-handed with a box full of cash, a pistol and a telescopic cosh*.

At this point, with new Czech political graft cases coming almost weekly, I’m ready to believe the skeptics who say the European Union is nothing more than a fiendishly complex mechanism for channeling taxpayers’ money into the pockets of crooks, elected or not, in the new member states.

However, despite the rumors and whispers, so far we haven’t seen hard evidence of systematic siphoning of EU funds at the highest political levels. EU sources have hinted at it to justify postponing Romanian and Bulgarian entry into the Schengen area, but the journalistic investigations and trials to prove it have been lacking. The alleged activities of Central Bohemia Governor David Rath provide a clue as to how these schemes might operate, with the proviso that very little is known for certain at this point, and of course the man and the other suspects are entitled to the presumption of innocence. It’s also necessary to warn that the scenarios appearing in the Czech media should be treated with a grain of salt, because of the local press’ tendency to mix up theory with fact, not to mention that the case is very tangled and will likely take years to sort out.

So with those caveats, this is how the Rath case may have played out: Police in Brno, in the south of the country, followed some leads in a case of suspected misuse of EU funds to the northwest, where local police were already looking into fraud involving EU money. A former head of the agency that divvies up EU regional development funds to projects in that part of the country is on trial, accused of demanding a 10-percent commission from grant applicants.

From there, police followed the threads into Central Bohemia, a fast-developing region
surrounding Prague. Rath, a snappy dresser with a sharp tongue, was elected governor of the region in 2008.** As the richest part of the country outside Prague itself, Central Bohemia has seen plenty of money flow in from Brussels, Prague and private investors.

Phone taps (according to Mlada fronta Dnes) revealed the two ringleaders in a devious scheme to skim off more than a million dollars of EU money: a hospital director in the town of Kladno, Kateřina Pancová, and Petr Kott, a former member of parliament whose excessive fondness for alcohol forced his own party to demand his resignation a few years ago. Both are close associates of Rath, who like Kott is a physician by profession. All three are under arrest.

Pancová and Kott’s scheme required a highly placed official to grease the wheels, Aktualne.cz hypothesizes. According to Aktualne, their plan was to overcharge for EU-subsidized reconstruction work on an old chateau in the town of Buštěhrad and divide up 24 million crowns (about $1.2 million) of ill-gotten gains. Who better to fix this up than their common friend, the governor?

Rath allegedly saw to it that the estimated cost of the work was inflated by 50 million crowns and then ensured that the main construction contract was awarded to a building firm, Konstruktiva Branko, which had previously done work at Pancová’s hospital. The company director is also under arrest.

This story is going to run for a good while yet. I predict, and would bet money on it, that it won’t be the last case of its kind. I’ve had an inkling for a long time that the very nature of the EU lends itself to graft of this kind, because of the volume of funds flowing in to poorer members, and for deeper reasons as well. Let me quote from an article published by the Open Society Institute’s Local Governance project back in 2004. It highlights the potential for fraud in the union’s most expensive program, agricultural support, but applies equally well to programs like regional development or transport which are vital to the economies of the eastern members:

“… the problem with irregularities and corruption with EU funds really highlights
structural and constitutional problems. First, throwing money at problems, i.e., creating
a wide range of subsidy schemes, which in the agricultural sector are coupled with extremely complex rules and regulations, creates continued opportunities for fraud and irregularities.

“This problem can only be countered by even more checks and bureaucratic procedures, hardly a recipe for getting the Union closer to its citizens or making it more efficient.

“Second, the corruption theme also sheds light on constitutional issues. The EU hovers between politics and diplomacy, between states and markets, and between government and governance. It is not a federal state but it is not an international institution either. It is
a hybrid and novel form of governance between international law and domestic order, a supranational institution of its own kind.”

It boils down to lots of juicy scandals for years to come. Don’t misunderstand me: I don’t say the EU should stop pumping money into Central and Eastern Europe or even, God forbid, set up more control mechanisms. What it could do is beef up the corruption-fighting agency OLAF, although that is fraught with difficulties stemming from the union’s constitutional setup, which gives EU institutions a limited role in criminal matters. It can continue to withhold funds from countries deemed to be fighting corruption too slowly (Romania, Bulgaria) or spending money too fast (Hungary). But mostly, all it can do is wait, and hope.


*That cosh would have come in handy during this infamous incident. Rath is the one sitting down.

**As of 4 p.m. CEST on 18 May, Rath’s official website www.davidrath.info had been infected by a graphic video – not for the squeamish.


Photo of the notorious chateau in Buštěhrad: CTU Prague, Faculty of Architecture

Ky Krauthamer

Ky Krauthamer is a senior editor at Transitions Online. Email: ky.krauthamer@tol.org

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