Czech secret service says firms distorted results

...

Some state-owned Czech companies that may soon be privatised, have distorted their results, the country's counter-intelligence service BIS has revealed in its 2006 report.

"Our Service collected and evaluated information on companies of strategic importance for Czech economy, currently still owned by the state, but possibly to be privatised in the future, such as the Czech Airlines, Prague Airport, CEZ and CEPRO," said in its annual report.

"The intelligence gathered gives reasons for suspecting that in the past their economic results were distorted with the purpose to prettify their true status," the report, posted on the agency's Web site www.bis.cz, said.

The Czech version of the report said that the distortions were only found "in some cases".

Officials from most of the companies named said they were not aware of any suspicions against them.

Electricity producer CEZ, the largest central European company with a market capitalisation of $45 billion, is 66.37 percent state-owned. The government is in the process of selling a seven percent stake through the capital market.

"We have never encountered any such suspicion from anybody, and we are under the supervision of tens of supervisory bodies," CEZ spokesman Ladislav Kriz said.

The government is planning privatisations of the fully state-owned Prague Airport and Czech Airlines next year.

The airline said in a statement the BIS information did not relate to the company, adding it had an unqualified audit, while Prague Airport said it was not aware of any investigation. A spokesman for fuels pipeline operator Cepro was not immediately available for comment.

Finance Minister Miroslav Kalousek told the daily Hospodarske Noviny in its Wednesday edition that he did not believe the companies would cook their books.

"I would rather see more logic in someone wanting to damage the companies by releasing such news," he told the daily.

The secret service said that some of the distortions may only become apparent during, or after, privatisation.

Asked about details, BIS spokesman Jan Subert declined to elaborate but said the agency was not currently investigating CEZ, the only listed firm among those mentioned by name.

"In the case of CEZ, and I stress this, it is not the subject of our intelligence interest and we are not developing any intelligence activities around CEZ," he said.

Czech media reported that anti-corruption police were looking into the firms but a police spokeswoman declined to confirm or deny any police activity. (Additional reporting by Petra Vodstrcilova; editing by Elaine Hardcastle)

Keywords: CZECH COMPANIES/DISTORTIONS

[PRAGUE/Reuters/Finance.cz]