by Peter Kysel
“Most importantly, I have the support of president Václav Havel for this privatisation process. The British government sent me here at the request of the National bank governor, Tošovský. I am all in favour of the voucher privatisation programme and delighted that it has been adopted. I am ready to do the job, together with you. We’ll make it happen.” This last bit, and all the name dropping clearly impressed them. They were now leaning forward in their chairs. Even Mr Ptáček registered my powerful contacts in high places and offered me a big smile of appreciation.
Mrs Fisher came back in, with a stack of papers. I was still in this haunted boardroom, but by now I was feeling more confident. I clenched my fists and continued.
“You will find it helpful to read my articles in the Ekonom magazine. They are compulsory reading for KB’s directors.” With that I motioned to Mrs Fischer to distribute copies.
“Our job is going to be tough. It has never been done before. You will have to work twelve-hour days and often over weekends. Some of you may find this unacceptable, in which case this might not be the right job for you. Think about it now, before we begin. You can ask for a transfer to another part of the bank, but you will need to do this before we start. Please relay this message to your teams.” It was an unexpected challenge to them.
The boardroom curtains appeared to twitch, and I smelled the odour. Could there really be ghosts of the departed presidium members?
“Our morning meetings will begin at eight o’clock, to discuss these articles.” The presentation ended without incident. My knees were trembling, and I needed to sit down, pretending to sort out my papers as my colleagues filed out of the room.
Fortunately, IBD was located in a separate building, away from this haunted place. I looked around, after everybody had left. Bitter thoughts returned and I became quite emotional.
They hatched their crimes here, against my family and against the nation. I wiped an unexpected tear of sadness and then punched the air in defiance.
I paused to savour this moment of reflection. It was an occasion of both elation and absurdity. I am launching my crusade to reverse the communist legacy in the same boardroom, from which they enslaved the nation on orders from Moscow.
Nearly three years had passed since my first visit to Prague. On the advice of my family I asked for my university degree and for the restitution of our villa. I had plenty of time to write these requests and filled in application forms and waited. I brought my family to show them our family house in Prague. It was locked. It was a modern villa, built in the art deco style just before the war and stood in five acres of orchards and woods. During my absence abroad, four apartment blocks had been constructed on one of the orchards.
The first response came from the Czech Technical University, which regretted that they had lost my thesis and due to the length of time since completing my studies, they could not recognise my exam results. They refused to hand me my degree. I understood the message Red wolves are in charge of the university. They won’t tolerate demands from emigrés, like me. The State Veterinary Institute ignored my correspondence about the restitution of our property. Other state bodies demanded documentation which I, as an exile, had never received. The state was going to keep the house they had stolen from our family. I considered my choices.
I could sue the state and dedicate my life to the restitution of family assets. This would take years and I would become bitter and obsessed about the unfairness of the system. Alternatively, I could accept the state theft, step back and lead a normal life.
When I was a child of thirteen, the regime had labelled me an enemy. When I was eighteen, they sentenced me to one year of re-education by manual labour, When I was thirty, they sentenced me to five years in prison. When I was forty-five, the old regime disintegrated, but its red wolves still ruled the country.
I’ ll sidestep these battles for personal justice and concentrate on the big reward – my revenge will be to drain the economic swamp.
On one of my subsequent visits I managed to gain access to our villa and my heart sank. The formerly smart and light building was now dark and dilapidated, overshadowed by apartments blocks. The walls were damaged, the staircase had collapsed, the built-in wall to wall bookcases had been ripped out and replaced by a formica bar and posters. The original cork floors were patched up with mismatched linoleum. The villa was being used as a training centre. I had come full circle, to see our villa after seventy years, and I was devastated by what I found.
Should I try to rescue our villa? I could offer to buy it from the Veterinary Institute and restore it. No, they had also ruined the gardens and orchards by building those apartment blocks and constructing a noisy motorway flyover nearby. Our once fabulous glass house, floating above its neighbourhood, screened by mature silver birches and surrounded by flowerbeds, was mortally damaged. I patted the original door into my parents’ suite, said goodbye to my childhood friend, held back my tears and left.
#
Revenge
My list of grievances was long. I could not return the family businesses to my father and my stepfather. I could not give farms back to my grandparents. I couldn’t reclaim our villa or prosecute anyone for harassment and unjust criminalisation. I couldn’t even get my degree. The administrators and judges, who persecuted our family, remained in their jobs after the Velvet Revolution. Individual justice was way beyond my reach.
I have to suppress my emotional involvement. My actions need to be hard headed. I’ ll erase the communist legacy by making privatisation a success.
I forced myself to be positive looking at the bank’s board room and reflecting on the breath-taking changes. Three years earlier I could not have returned to my homeland without being arrested. Now I was sitting in the communist party’s inner sanctum. I felt lightheaded and excited.
Revenge against them ranks above my personal struggle for justice. I’m taking a class action, on behalf of all victims. This battle has to define my life. I must ensure that people will benefit from the economic reforms.
The key was to open up the country to western investments. I was confident that foreign ownership would limit any undesirable side effects of privatisation and stimulate the economy.
The hard work was about to start. I gathered my papers, thanked Mrs Fisher for her help and left the building. I expected that my presentation was being digested by my new colleagues in the surrounding pubs. Informers would be reporting it to their masters, the red wolves at head office and elsewhere.
#
First Full Day at KB
The investment banking division (IBD) was housed in a nondescript apartment block in Bolzanova Street, facing Vrchlického Park. The building had been converted into offices for 130 staff. I was allocated a senior and two junior secretaries who occupied a suite leading to my vast office on the first floor, formerly the drawing room of a wealthy merchant family.
The office had two massive windows overlooking the park and high ceilings. The double doors were tall enough to enter this room on horseback! My deputy occupied an equally prominent office next to mine but was only entitled to a single secretary. Rank privileges were important at KB.
The morning meeting began with organisational changes. There were no takers for transfers to other parts of the bank. The division was divided into three front office departments: corporate finance, stockbroking and investment management and three back office operations: administration, settlements and information technology. I now have the same position in Prague that Lloyds Bank refused to give me in London. Lloyds Merchant Bank was wound up under Axten. Let’s do a better job here. Operations began smoothly, with staff seemingly committed to their jobs. The first problems turned out to be elsewhere.
Our subsidiary IKS (Investiění kapitálová spoleěnost), responsible for the management of privatisation funds was housed in a separate building. It was controlled by a hostile group of people who operated unsupervised. The previous British advisers, Simon and
Nigel, had warned me that the lack of transparency was intentional. There was a real danger of fraud.
Coincidentally, Dr Salzman asked to see me about the organisational changes at the bank. My friend from the Old Town Square who had found it so hard to comprehend basic corporate concepts, was now confidently dismissing my objections.
“We will not be slaves to your Anglo-Saxon practices, Mr supreme director. When in Prague, you will accept our rules.” The decision was made. I was informed, not consulted. I understood the message. Dr Saltzman’s red wolves will rule this bank. I raised the issue of IKS and decided to be blunt.
“I request that they report directly to the IBD. My division and IKS are co-investors in many companies. The IKS privatisation funds have almost a million shareholders and a high public profile. They pose a risk to the reputation of the KB. If the IKS causes a scandal, a million people will come out to smash up KB branches for stealing their money. There will be street riots. Politicians and the media would blame you Mr General Director. Exco will be held responsible and receive a jail sentence.” Dr Salzman didn’t like that. It was his turn to be shocked. He could bully me, but he wasn’t prepared to take me on professionally.
“I will pass your report to the Exco and support your recommendations.”
“We will be monitoring all IKS’s transactions through our links to the stock exchange computers. Any unorthodox trade will be publicly exposed to protect the bank.” I warned Dr Salzman that the people who trusted KB with their savings, had to be protected. I left and walked back to my office to consider my position.
Whilst my pride was hurt, at the same time I was aware that KB’s restructuring wasn’t aimed directly at me. The bank was about to be privatised and the five red wolves were determined to control it. They had seized power before the bank’s ultimate owners had emerged, but as former government bureaucrats, they had zero commercial experience. They didn’t realise that their positions would not be protected after the new owners had taken the remaining government stake.
I found an empty bench in Vrchlického Park, next to a statue of ‘Befriended’, representing the Czech partisan passionately embracing and kissing the Soviet soldier. Surrounded by blooming lilac bushes, I weighed up the arguments for staying, or resigning.
Dr Saltzman’s Exco controls the commercial division, which carries huge risks. Non-performing loans could bankrupt the bank within five years. In the meantime, I’ ll be free to manage my own division because the red wolves have no understanding of investment banking. I will only need a year or two to complete my job. In the worst-case scenario, I’ ll be long gone when their commercial loans become toxic. I’ ll keep IBD operationally autonomous and shield it from contagion by the rest of the bank. I will sanitise the privatisation funds by closely monitoring them. My job is doable. This last thought cheered me up. I rose from the bench and, with a curious look at the homoerotic statue, I crossed the park and went back to my office.
Gradually, my game plan evolved. I’ ll concentrate on the job and set a time limit on my involvement. I’ ll stay clear of politics and any financial or personal entanglements. I’ ll be perceived as a cold and remote anglický bankéř, but I won’t be compromised. This is going to be a lonely job.
It didn’t feel much like a homecoming.
#
Hotel Paris
I had lunch with Pavel to celebrate our reunion in Prague. We met at the Sarah Bernhardt restaurant in the Hotel Paris, conveniently located around the corner from the head office of KB.
The hotel is an art nouveau building from the beginning of last century and its restaurant is one of the prettiest examples. The hotel was made famous by Bohumil Hrabal, who set part of his book, ‘I Served the King of England’, in its dining room. Our friend the owner, Tony Brandejs welcomed us.
“We are starting a jazz club in the Cafe Paris on Thursday evenings. Drinks will be half price for members. Would you like to join?” We decided to take him up on the offer.
“Can we have a table for three? We are expecting Nigel to join us,” asked Pavel and turning to me, he asked
“How was your meeting with the red wolves?” At that point Nigel joined us. He was an estate agent from England, who had come to Prague to make his fortune in the emerging property market. His smart blue suits and polite English manners made a strong impression. Nigel had teamed up with a Czech partner and their complementary skills worked well together. Expatriates and foreign developers became their main clients. Nigel, proudly showing off his local knowledge, ordered
“A glass of Grey Rutland, please,” a grape similar to the Pinot Grigio, and specified,
“I prefer the late harvest from Mikulovice” then turning to me, he asked
“So, what were your first impressions?”
“Lingering odour of stale sweat.” Pavel and Nigel looked at each other and sniggered
“Welcome to central Europe. The smell of sweat will follow you everywhere.”
“Why?” I was confused.
“The clothes here are made of synthetic fibres, which although durable, make you sweat. They only change their shirts twice a week and only own one suit,” explained Nigel.
“I have to open my office windows before every meeting,” added Pavel
“I never noticed that before,” I said defensively
“You used to fly in and out. They would probably put on a clean shirt for your meetings and I suppose you didn’t make people sweat. Now that they actually work for you, and barely understand what’s expected of them, they are excited and scared. They sweat. It’s natural,” said Pavel
“One day, when you increase their wages, they’ll buy pure wool suits and wear a fresh cotton shirt every day. They’ll become just like you” concluded Nigel and changed the subject
“Tell me about your red wolves”. Pavel started by drawing the Olympic flag on a napkin
“Imagine a pattern of concentric circles, just like the Olympic flag. Under the previous regime there was a principal communist, the red bear, in the centre of each circle. On the periphery were red wolves who served him in return for privileges.” I quickly added, “My deputy was one of the minor red bears at the state bank. His red wolves have become directors of the newly formed KB. They brought him into KB in a middle management role. Under the Lustration Acts the bears are banned from holding top positions in the state hierarchy. The red wolves protected him. In return, they rely on his loyalty.”
“The concentric circles on the flag overlapped, like the networks of red wolves throughout the country,” Nigel was impressed.
“The red wolves control the government, state companies and the legal system. Pavel is safe at Volkswagen, but you should expect a limited existence. Within a couple of years, the red wolves will have learned enough from you and will attack.” Pavel and Nigel looked for my reaction with interest. I agreed.
“I’ll need to get on with my job. The changes I make must be irreversible by the time I leave. I will leave before I get shredded by the red wolves.” They chuckled.
“That’s about it. Alternatively, you could join them,” said Pavel. I shook my head
“I wouldn’t fit in,” I said primly, appalled at the possibility. Pavel turned to a more serious topic.
“Business is ruthless here. Last week two enforcers handcuffed Tony Brandejs to his bed in the night, until he signed a business deal.” We paused, until Nigel added,
“He was lucky. Unwanted people are sometimes bundled into body bags and dropped into the lake behind the Orlík dam.”
We parted subdued.
Will I get any warnings if I step out of line? How can I be permanently on alert? What security precautions would prevent handcuffs at night, or body-bags?
Driving to my apartment, I considered the business risks within investment banking.
We have three front line departments. In corporate finance our risk is largely based on reputation. The scope for fraud is limited. The deali
ng department has to use computers. Its transactions will be monitored by our software.
The main scope for fraud is in investment management and in the IKS. Our asset managers could embezzle the bank. The IKS’s managers could fleece individual investors. We’ ll need to put several layers of control over them and keep their managers under surveillance.
Personal dealings and external benefits will be banned, performances monitored, and telephones tapped. The new rules were built into all employment contracts.
#
White Knights Club
Vojta came with me to the Thursday club at the cafe Paris. The members were mostly businessmen, a mix of former Czech exiles and foreigners based in Prague. During the jazz concert Vojta studied the audience and asked me about them. Tony came over and sat down with us.
“My life moves in circles. Before I emigrated, I went to jazz concerts in the Old Town. After twenty years I am back, listening to jazz in the Old Town.” Pavel thought about it.
“It isn’t quite a life circle. It feels more like a spiral. We are in the same place, the local people are the same, but we are different. We have learnt abroad and returned to make a change.” Tony nodded.
“It’s more like a spiral. I have an overview that I didn’t have last time.”
After the performance Vojta, pointing at the audience, said,
“This evening I feel optimistic. You people can improve our economy. With you, we have a chance.”
“Yes, we are here to drain the swamp” laughed Pavel and Vojta added,
“I never thought I would experience this moment. It’s like living a legend.”
“What legend?” asked Nigel when Vojta added
“This is a club of white knights,” Nigel looked puzzled, but Pavel continued
“Blaník is our spiritual base, but we come from all over the world. There are many more of us in the country. We’ll succeed in draining the swamp.”