God’s Mills

One of my favorite sayings in Czech says that “God’s mills grind exceedingly slowly, but they grind exceedingly fine.” This saying has to be running through Viktor Koženy’s head these days as efforts to bring him to justice step up.

Today the Prague 4 district court issued an international arrest warrant for Koženy, who in the early ’90s ran one of the great scams of the post-Communist era. The story is a bit complicated, but it goes something like this:

State assets were supposed to be handed over to Czech citizens through a system of coupon vouchers, which could then be used to buy shares in companies. But the plan didn’t count on the invention of mutual funds, most successfully the one started by Koženy, Harvard Capital and Consulting.

If you’ll recall, coupon privatization wasn’t going anywhere when it first started. It was considered too complex, too difficult and too much of a pain for the average citizen.

Then came Harvard, whose sponsorship of Czech TV’s reruns of “Dallas” gave Czechs a glimpse of what wealth could be like. Soon thousands of Czechs were signing over their coupon books to Harvard, who promised a 1000% rate of return on investment.

What then happened was that Harvard bought shares in a number of companies, stripped assets and transferred the money abroad to offshore tax havens like the Bahamas. Koženy promised he would return Czech investors’ money, just as soon as he completed his next asset strip – of the state-run oil company in Azerbaijan.

Maybe it was hubris that drove Koženy. But he managed to convince American investors to invest $182 million in the Azerbaijan deal, which went south in a big way.

In addition to his Czech arrest warrant, Koženy faces a serious legal action by famed Manhattan district attorney Robert Morgenthau, who has filed an indictment in New York.

Koženy lives in the Bahamas with his mom and wife. In recent interviews with the Czech media, he has said he would like to return to the Czech Republic to a career in politics. He believes he can run on an “outsider” platform like the one that worked for Arnold Schwarzenegger in California.

Somehow I think the biggest concerns Viktor Koženy will have in coming months will be 1) to find a cellmate who didn’t invest his coupons in Harvard and 2) not dropping the soap.

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