Polish privatisation scandal drags CRH into the fray: ThePost.ie


TCH Archives > Sunday Business Post > 2005/07/03 > Polish privatisation scandal drags CRH into the fray

Polish privatisation scandal drags CRH into the fray
Sunday, July 03, 2005 - By Iain McMenamin
Allegations of bribery by the building materials giant, CRH, in Poland may seem sensational by Irish standards, but they form just a small part of Poland's 'Orlengate' scandal.

A parliamentary commission to investigate Orlengate has uncovered a bewildering story that makes Irish tribunals of inquiry look as unremarkable as a poor weather forecast. The central event took place in 2002 when the president of Poland's largest oil firm, Orlen, was arrested by the Polish equivalent of the FBI.

Polish ministers had discovered he was about to sign over substantial control of Poland's oil distribution infrastructure to a Russian company.

This mysterious firm is rumoured to have been created by Russian intelligence. The investigation into the arrest has revealed such surreal events as a tryst between a politician and a businessman in a monastery and a drink-sodden lunch between a businessman and a spy in Vienna.

It has led to frenzied speculation about the connections between business, politics and the intelligence community.

One popular opinion is that there is no difference between the three.

At a recent hearing of the Orlengate inquiry behind closed doors, some allegations concerning CRH seem to have been made and then repeated afterwards by members of the commission. It is undoubtedly true that many large bribes were paid in return for favourable privatisation deals in Poland, although CRH said last week that the allegation, if made, was “without foundation'‘.

The hands-on Minister of the State Treasury, Wieslaw Kaczmarek, finds himself at the centre of the affair. While never shown to be corrupt, Kaczmarek has been involved in a number of conflicts of interest. Several years ago, he admitted being the consultant and representative of a number of companies.

Jolanta Kwasnieska, the Polish First Lady, has said that, in 1997, two years after the alleged bribe was paid, CRH made a large donation to her charity, Understanding Without Barriers. While the fund has genuine charitable intentions, opponents of the Polish president, Aleksander Kwasniewski, have accused him of using it to further his interests. Kaczmarek and Kwasniewski have been leading members of the Democratic Left Union (SLD).

The source of the allegation is someone in a position to know about such things. Since the early 1990s, Marek Dochnal has mixed in the highest circles of Polish business and politics. Dochnal has more recently become infamous as a professional facilitator of corruption. Last year, he was jailed for trying to bribe a Polish deputy with a Mercedes.

He does have a definite connection with CRH and its purchase of a giant cement plant in central Poland.

Many privatisations involving foreign firms were based on joint ventures with Polish companies. Even firms without local partners hired local experts to help them understand the chaotic and opaque world of Polish politics. In retrospect, it turns out Dochnal was perhaps the most suspect of these individuals. Many of his competitors have gone on to form legitimate partnerships with western public relations firms. As a former academic who claimed to have advised the World Bank, Dochnal may have seemed eminently respectable.

The plausibility of the details may be simply due to the fact that Dochnal's CV has equipped him to lie convincingly about such matters. But he also seems to have an incentive to lie.

Members of the parliamentary commission, political enemies of Kaczmarek's, have offered to intercede on Dochnal's behalf, if he provides satisfactory testimony. This is an invitation to sling mud. Dochnal may also be out for revenge against the politicians who now deny ever having met him.

The allegation that Kaczmarek got some money from an Irish cement company, which has been the mainstay of a small town, is relatively innocuous when compared to the earlier allegation that he received a bribe from Russian spies who were trying to gain control of Poland's oil business. This allegation has already been proved false.

Furthermore, some of Dochnal's associates have also had to withdraw sensational testimony.

True or false, these allegations add to the perception that Poland is part of a bizarre and lawless ‘Wild East', where only the dirtiest businesspeople can survive. This is misleading. The crazy world of Orlengate is not a singular aberration in an otherwise saintly and sensible country.

Neither is it representative of the reality of doing business in Poland.

Admittedly, Poland is viewed as one of the most corrupt countries in the EU, along with Italy and its fellow post-communist states. But, by global standards, Poland is relatively clean and it is in a completely different category to the true ‘Wild East', as exemplified by Russia.

In that country, it is impossible to do day-to-day business - or even live from day to day - without getting involved in substantial corruption.

In Poland, corruption is avoidable. It is neither the norm, nor the exception. Some firms are involved in regular and substantial corruption, while many others have never paid bribes and, indeed, have no reason to do so.

Up until the 1990s, the cafe of the Deputies' Residence in Warsaw, and the nearby Sheraton hotel, were full of politicians and businesspeople openly wheeling and dealing together. Now, because of scandals like Orlengate, most politicians are loath to be seen meeting businesspeople alone.

In addition, many laws and regulations have changed in the direction of greater transparency and less individual discretion. If these and other changes are not reducing corruption, they are at least making it much more difficult and costly for both businesspeople and politicians.

The stream of scandals exemplified by Orlengate are obviously damaging to Poland's image. However, survey evidence indicates that most foreign investors do not see corruption as the most serious impediment to business in Poland. It comes a long way behind infrastructural deficiencies, labour market rigidities and administrative inefficiency.

There seems to be a similarly marginal impact on Poland's international political position.

In the French campaign on the referendum for the European Constitution, the problem with Poland was not its supposedly corrupt politicians, but the honest hardworking “Polish plumber'‘ who was prepared to undercut his French counterparts.

Iain McMenamin is a lecturer in the school of law and government at Dublin City University.