IS SORRY FOR THE CORRUPTION AFFAIR
(HN, 30th April 1996)
Westinghouse Electric Corporation, an American supplier for Temelin Nuclear Power Plant (NPP), does not reject future cooperation with Jan Vadlejch, who accused a member of CEZ Board of corruption. Because he did not prove his claims, CEZ informed the police. The police are now investigating the case. "We are sorry for the situation, but we know nothing about it," said the director of Westinghouse's main projects division, Raymond Sero. However, he did not exclude the possibility of future cooperation with Vadlejch. "We cooperated with him for years. When we have a job for him, we pay him, if not, he gets nothing." According to Sero, the same approach will be maintained with Vadlejch in future. Westinghouse uses Vadlejch as its translator and advisor during meetings with CEZ representatives. According to Westinghouse, Vadlejch is an employee of a respected US consulting company, CDI. Vadlejch also uses business cards with CDI International as his employer. But according to the law firm Tanger, CDI is not registered in the US database of companies. It is also not registered in Czech Republic. "Mr. Vadlejch did not keep secret that he is being hired for dirty jobs. He was literally carrying thousands of crowns with him," said an informed source from nuclear industry.
CEZ ORDER WAS
PROBABLY INFLUENCED BY INDUSTRIAL ESPIONAGE: WESTINGHOUSE BENEFITS FROM
THE DISCLOSURE OF COMPETITOR'S PRICE
(MF DNES, 9th May 1996)
One of the most important orders of CEZ, which was to buy a unique information system for all the utility's power plants, was done incorrectly. During the bidding, one of the top CEZ officials leaked to one of the bidders information about its competitor's price. CEZ internal documents related to this bidding, that are owned by the utility's headquarters, prove that it was Westinghouse who benefitted from the disclosure of this business secret. Westinghouse finally won the bidding in October last year. Westinghouse originally offered its information system for 21.8 million dollars. The offer made by its biggest competitor, the French EdF, was 5.6 million dollars cheaper. These price offers, that were to be kept in secrecy, were made to CEZ by both companies on 31st July 1995. Some of the CEZ board members, who were inclined to Westinghouse, after understanding that EdF was much cheaper, decided to run one more step of bidding. During this step the bidders were given an opportunity to modify their price offers. In less than one month, on September 14th, both companies provided final budgets of their systems. While the French EdF kept the original price of 16.2 million (with some minor shifts in the magnitude of tens of thousands), Westinghouse came with an offer for 14.8 million dollars. Thus, Westinghouse decreased its original price by 32 % and succeeded in becoming cheaper than its French competitor. An internal audit focused on this bidding was finished less than one month ago, in order to evaluate the recent stage of the whole project. This audit has condemned the proceedings managed by CEZ top headquarters. "The protocols for negotiations do not contain any reasons that led to such a decision [to organize an additional step of the bidding], although such a procedure is very unusual and does not follow the rules for international biddings," says the internal audit report finished on April 11th 1996 and submitted to CEZ headquarters. No Westinghouse official was willing to answer the question, what was the basis for decreasing their price offer in such a magnitude, that it became cheaper than the French one. Mr. Jan Valdouch, a fellow worker of the American company, has detailed information about the whole case, but he refuses to comment on it. Also CEZ top officials deny to comment on the case. The utility's spokesperson, Michal Kacena, only said he has no information about mis-manipulation of the bidding. The sources from CEZ however claim that there is a serious suspicion that one of the members of CEZ's board, who is not in his function anymore, leaked the documentation about the prices. "There is a written evidence of this in the CEZ archives," claims one of its high positioned employees. He refused to supply more details, but only confirmed that it is a correspondence between the former board-member and one Westinghouse employee. The whole project of information systems ran into problems in the meantime. It is seriously delayed now, although the start-up of Temelin nuclear power plant, scheduled for September 1997, depends on it. The information system is to unify the working procedures in 10 coal fired, 2 nuclear and several water power plants owned by CEZ utility.
OF INFORMATION IS TO BE INVESTIGATED BY POLICE
(MF DNES, 10th May 1996)
The headquarters of CEZ utility decided to ask for police assistance in order to verify the suspicion that the bidding on a unique information system was mis-manipulated. One of the most important contracts made by CEZ is surrounded with doubts whether one of the members of CEZ board leaked important information on the project price offer. Westinghouse corporation benefited from this by using the data for winning the contract. According to CEZ spokesperson Miroslav Novak, the utility has decide to forward the case to the police after it received a copy of the key letter from a MF DNES reporter. The letter was written by a Westinghouse fellow worker and was addressed to the former member of CEZ board. The letter contains discussion about strategy, how to help Westinghouse win the contract. According to Novak, this scenario was not known by any other board member. "The board chairperson Karas saw the letter for the first time today", he said. "If the letter is real, it is very significant. We would have to take some action then," said Novak. In the letter dated 17th August 1995, author and addressee are not fully named, there are just initial letters JV and JK. The Westinghouse fellow worker stresses the necessity to postpone the decision about the contract winner According to the letter, an American corporation needed to have more time in order to have a chance to modify its price offer. Its original price offer was much higher compared to its main competitor, EdF from France. "We will decrease our price by 15 million dollars", writes the Westinghouse worker in the mentioned document. He also recommends the addressee to use an argument that the French price is unrealistic, as is also their organizational background. The scenario proposed by Westinghouse worker was fully followed: all suggested arguments were used, the decision about the bidding winner was postponed, and during that time Westinghouse decreased its price to 14.8 million dollars. Finally, Westinghouse won the contract. The fact that the bidding was organized unfairly was confirmed during an internal audit finished less than a month ago. The audit condemned especially the postponement of the bidding last August, which was done by the board without any reasonable explanation. The audit was initiated in order to evaluate the progress of the Temelin Nuclear Power Plant's construction, because of its recent delay beyond schedule.
CONTRACT WAS DISCLOSED AT CEZ
(MF DNES, 11th May 1996)
The CEZ utility had problems to keep in secrecy information about strategical contracts for nuclear fuel for Temelin Nuclear Power Plant (NPP). Similar to the contract for an information system (ISE), one of the members of the CEZ's board leaked secret information about prices offered by other bidders. This time, the bidding was organized to supply nuclear fuel for Temelin NPP. An internal classified document, prepared several months ago by the so-called Temelin Control Team (TCT), revealed that the company which finally won the bidding - Westinghouse - manipulated its price for its own benefit. The Temelin Control Team was established in order to evaluate the work done so far at the Temelin construction site. In September 1991, when the bidding was started, Westinghouse came with a price offer for the first reactors's fuel at the level of 22.6 million USD. The other competitors - Siemens and Framatome - were more expensive. Siemens made an offer at 36 million, Framatome at 34.5 million USD. After this information was leaked, Westinghouse increased its price for own benefit. A month later, Westinghouse's offer was made for 33.6 million USD - a price increased by 11 million in comparison with original number. The one who was harmed by this was CEZ utility, and the state respectively, because the state still owns the majority of CEZ shares. CEZ had to pay much more for the fuel that it would had to if the leak of information did not happen. "Such an increase is hardly to be explained reasonably and according to TCT's opinion, it may be linked with the disclosure of a business secret with negative impact for CEZ," says the utility's internal classified document. The TCT came to a conclusion that CEZ made a contract which was disadvantegous for it. It was not able to negotiate with Westinghouse with the aim of getting a cheaper fuel. The American corporation knew it was already the cheapest and it would win the bidding anyway. "The Temelin NPP lost an option to push Westinghouse to lower its price by threating that the bidding may be won by Framatome otherwise," says the audit team in its report.
MAN DENIES HE HAS LEAKED ANY INFORMATION
(MF DNES, Tuesday 14th May 1996)
Jan Krenk, former vice-chair of the CEZ utility, is suspected of playing the main role in the case of mis-manipulated bidding for a unique information system. This man decided yesterday to come out from anonymity and denied all accusations. Krenk doubted the main piece of evidence in the whole case - the letter between him and a fellow worker of Westinghouse Corporation. The letter contains only the first letters of both men: JK and JV. "It is a false document, and I have seen it for the first time just few days ago," claims Krenk. The CEZ headquarters decided to forward the whole case to the police. The utility's chairperson Karas said he cannot confirm nor deny the disclosure of strategical information. According to Jan Krenk, the letters JV - an author of the letter - could stay for Jan Vadlejch, a Westinghouse fellow worker. Vadlejch is missing these days, as no one knows where he could be contacted. Already at the end of last year, CEZ accused him officially of spreading lies. According to CEZ, Vadlejch was claiming that the top CEZ official was corrupt.
CONCERN DENIES CHEATS MENTIONED IN CONTROL REPORTS OF CEZ
(MF DNES 15th May 1996)
American concern Westinghouse denied yesterday that it committed fraud during public biddings for strategical contracts with CEZ and Temelin nuclear power plant. The Westinghouse spokesperson from Pittsburgh said yesterday that his company won the contracts in a open and ethical way. The suspicion about manipulation was raised by internal documents of CEZ control bodies. According to these materials, in both contracts (information system for CEZ power plants and nuclear fuel for Temelin) important information about competitors' prices was leaked. Westinghouse, after allegedly receiving this information, modified its price offers and won the contracts. Although the suspicion originates from CEZ control bodies, the utility denies any manipulation of the bidding on nuclear fuel, and the case of the information system already passed on to police investigation. On Monday, at an extraordinary press conference, the CEZ chair Petr Karas dissociated from the conclusions of control bodies and doubted the objectivity of their work. Karas says that an internal audit elaborated on the order from CEZ's board of directors, as well as Temelin control team report, is partly not objective. The internal audit points out especially the fact that CEZ board postponed without reason announcement of the final winner in the bidding for the information system. This postponement was then supposedly misused by Westinghouse, who lowered its price in order to become cheaper than its main competitor, French EdF. "This is an auditor's mistake. He started to write impressions without consulting members of our board," says Karas. The Temelin control team stressed uspicious changes in the prices demanded by Westinghouse for its supply of nuclear fuel for Temelin nuclear power plant. According to the team's report, Westinghouse modified its price for its own benefit, after information about prices demanded by its competitors from Germany and France was leaked from CEZ. "This is a mixing of pears with apples," said Karas, as a reaction to the team's report submitted to the CEZ oversight board.
BOARD STARTS TO EXAMINE DOUBTED CONTRACTS
(MF DNES 17th May 1996)
The twelve-member CEZ oversight board started an inquiry to the doubts raised recently about some CEZ contracts with Westinghouse. The board wants to examine statements from the main players of the scandal, including former vice-chair of CEZ board of directors Jan Krenk and Westinghouse worker Jan Vadlejch.
REVEAL MISTAKES IN ANOTHER CONTRACT: The I&C System was contracted
with company that was only second
(MF DNES 20th May 1996)
Internal documents from CEZ revealed mistakes in another strategical contract - the bidding process for the I&C System to be used with Temelin Nuclear Power Plant (NPP). The report finished several months ago was ordered by the CEZ oversight board. The report found that during the bidding, the rank of companies was modified without stating any reason. During the bidding, which results were confirmed only in May 1993, the first company was Siemens, and the second and third were Westinghouse and ABB. After another round, when companies answered additional questions, the rank was modified: first ABB, second Westinghouse, third Siemens. It means that the contract should have been signed with ABB. Despite being second, Westinghouse was finally chosen as a supplier. Originally first, Siemens, whose offer was best from the technical point of view, ended us as third. "It is worth attention," says the Temelin Control Team (TCT) of experts. The TCT was established as an expert body by the CEZ oversight board. In the end of its report, TCT also says that the changes in the rank of offers is not adequately explained. Also the CEZ chairman was not able to explain these shifts. When being asked directly, why the companies whose offers won were not selected for the contract, he answered: "Because they were not selected, but simply Westinghouse was." Karas also says he does not understant the evaluation of TCT. "Mr. Rajchman, who has been leading TCT, was at that time working as a specialist with the Ministery of Industry and Trade. He thus had an apportunity to know all the facts he is now discovering under very strange relations," added Karas. The I&C System for Temelin represents already a third contract that was put in doubts. The TCT report has also found mistakes in the contract for Temelin nuclear fuel. Serious doubts were also raised in the internal audit, focused on the bidding for the ISE system. All these mentioned strange biddings were finally won by Westinghouse. Experts in nuclear energy claim that in all important contracts related with Temelin, the strategical rather than economical interest of Westinghouse played the most important role.
EMPLOYEE CONFIRMS INFORMATION ABOUT CORRUPTION INSIDE CEZ
(MF DNES, 24th May 1996)
Westinghouse fellow-worker Jan Vadlejch confirmed during the police investigation that there were some bribes among CEZ officials linked with construction of Temelin nuclear power plant. According to his testimony, the bribes were given by general Temelin supplier Skoda Praha to Vojtech Kotyza, a vice-chair of CEZ board of directors. Vadlejch was not able to identify the motivation behind this bribery. "He promised to supplement us with additional information within several days," said one of the police investigators. Director of Skoda, Stanislav Svoboda, repeatedly denies he attempted a bribe. Police were asked to intervene by CEZ at the beginning of this year. CEZ wanted to clarify the accusation spread by Vadlejch among CEZ top officials. By repeating his accusation to the police protocols, Vadlejch put the whole case into more serious light. Representatives of both CEZ and the police expected that Vadlejch would not have enough courage to confirm his words. Contrary to this, Vadlejch said to police that he had been informed about corruption directly at the office of Skoda headquarters. "During negotiations there, I have heard something about an amount of thee hundred thousand crowns," said Vadlejch. It is not clear from the protocol, in what currency this amount was offered.
OVERSIGHT BOARD DOES NOT HAVE ANY EVIDENCE FOR MANIPULATION OF BIDDING
(MF DNES 29th May 1996)
The CEZ oversight board did not succeed in gathering evidence of manipulation of strategical biddings, and closed its one week long inquiry yesterday. The chair of CEZ oversight board Ladislav Petrasek denied to make any comments on this case, saying that a press release will be prepared by tomorrow. According to sources close to the oversight board, the investigation could not have been fully finished because of lack of information. "The board relied only on the statements made by CEZ representatives and on the document dated from the time around bidding. In case of a suspicion leading to the corruption, it is necessary to pass it on to the criminal police, and establish an independent, in the best case parliamentary investigation committee," says the source from CEZ who had an opportunity to read through the inquiry protocols made by CEZ oversight board. "Some people confirmed suspicions, but there are no direct pieces of evidence," he added.
BOARD KEEPS COMPROMISING FACTS SECRET
(MF DNES 15th July 1996)
The CEZ oversight board started to inquire into an accusation of manipulation of CEZ bidding in May this year. Now, the oversight board keeps statements of evidence made by top CEZ officials secret. These statements bring evidence that the bidding on the information system was misled. The sources from CEZ agree that both Vojtech Kotyza, vice-chair of CEZ board of directors, and Stanislav Svoboda, general director of Skoda Praha, stated that a Westinghouse employee, Jan Vadlejch, was influencing part of the CEZ board during the bidding process. It is not, however, clear from the statements what tools were used for this influence. This is in contradiction to statements of the CEZ oversight board that, after closing up its internal investigation, reported to the public that no facts about manipulation of the bidding were found. The statements of the scandal's key players are stored in a safe and are never to be published, because this would lead to the need to re-evaluate the results of the whole bidding. None of the oversight board members wanted to comment on this fact, saying that any questions are to be directed to board chair Ladislav Petrasek. He was, however, on a holiday last week. The CEZ oversight board consists of representatives of government, banks, worker unions and also the wife of Czech Prime Minister Vaclav Klaus.
ARE CONTRADICTING CLAIMS MADE BY CEZ OVERSIGHT BOARD
(MF DNES 16th July)
CEZ oversight board keeps saying that its inquiry into the CEZ biddings did not bring any evidence of their manipulation. However, a copy of some top CEZ officials' statements made during this inquiry in May contradict this. "You are looking for something that does not exist," claimed the chair of CEZ oversight board Ladislav Petrasek. He maintains his position despite the fact that the original copy of the statements made by some top CEZ and Skoda officials prove he is wrong. All these records are kept secret by CEZ oversight board. "Do you think that companies make public their internal documents? Where do you think you live?" reacted Petrasek.
Jan Kotyza's statement (MF DNES 17th July 1996)
Part of the original record of Jan Kotyza's statement in front of the CEZ oversight board inquiry. Jan Kotyza is a vice-chair of CEZ board of directors.
Q. Were you offered, or did you accept as a member of CEZ board, a bribe?
Q. How do you respond to these allegations?
A. Last year, after my return from Tokyo, Mr. Krenk (former vice-chair of CEZ) informed me about it. Subsequently, I met Mr. Toth (chief of Westinghouse Czech republic) and I blamed Jan Vadlejch. At a meeting with CEZ chair Karas, Vadlejch repeated his claim face to my face, but he did not bring any evidence. In December 1995, the police were asked to intervene. In January 1996 I said to the police examinator that I never took any bribe, and that I only received a fee from Skoda for being a member of its oversight board. I think that the interest about my person originates from the fact that I voted against Westinghouse during the ISE (Unique information system) bidding.
Q. What do you think about the bidding on ISE?
A. It was a strange bidding. Westinghouse managed to get the price of the French, and I did not like that. Mr. Vadlejch probably visited personally all CEZ board members and said to all of them separately that he already has three votes and needs to get the fourth one.
CEZ OVERSIGHT BOARD HAD TO RE-INVESTIGATE THE DOUBTED CONTRACTS (MF DNES 18th July 1996)
Minister of industry Vladimir Dlouhy yesterday asked the CEZ oversight board to once more inquire into the doubted contracts between CEZ and Westinghouse. The board should now check whether the bidding went on in a proper way.
INVESTIGATE CZECH CONTRACTS OF WESTINGHOUSE
(MF DNES 26th July)
Police have started a wide investigation this week that is focused on American company Westinghouse. Westinghouse was accused of manipulation of bidding run by CEZ and Temelin nuclear power plant. One of the biggest world corporations became subject of police attention because of scheming organized by its employee Jan Vadlejch. Police started to investigate Vadlejch this Tuesday, because he is suspected of slandering CEZ representatives. However, it is now clear that the investigation will grow much wider. "The whole case is not closed by Vadlejch's investigation. In the opposite, it starts with it," said vice chair of the Investigation office of Prague, Pavel Just. According to police, Vadlejch slandered CEZ officials by accusing them of bribery. Police are now testing their theory that it might have been Vadlejch who manipulated a half-a-billion strategical contract to supply a unique information system to CEZ power utility. According to information gathered so far, Vadlejch accused CEZ vice-chair Vojtech Kotyza. He was the only member of CEZ board who did not vote in favor of Westinghouse during the bidding for information system. For this reason, he became an obstacle for Westinghouse and a part of CEZ management. At CEZ headquarters, some of the top officials attempted to get rid of him. An accusation of bribery should have been one of the main arguments. But by the end of 1995, Kotyza accused Vadlejch of slandering his person. Only afterwards the manipulations of Westinghouse became visible. Kotyza succeeded in keeping his position within CEZ. According to police, also other Westinghouse - CEZ contracts will be subjected to investigation. Besides the information system, there are even bigger contracts related to Temelin nuclear power plant. Vadlejch already had been followed by a secret federal police in 1992. The Czech secret police was verifying, whether Vadlejch was a agent of a foreign intelligence service. In the middle of 1993, this investigation was suspended without giving reason. According to materials gathered by that time, Vadlejch was suspected of cooperation with American intelligence agency CIA. He was to be hired by Westinghouse for so called "dirty jobs". He did not even hide his intelligence agency links to some of CEZ officials, or among people from outside of CEZ. For example, the general director of Skoda company [general supplier of Temelin nuclear power plant; all Westinghouse supplies must go through them] Stanislav Svoboda even said in front of the CEZ oversight board that Vadlejch is professional intelligence agent whose aim is to get all possible information to the benefit of Westinghouse. Aged 52 years, Vadlejch emigrated from Czechoslovakia in 1970 to France. There he obtained a priority immigration right, and immediately moved to USA.
MAY LOSE ITS CONTRACT
(MF DNES 29th July 1996)
American company Westinghouse is under threat of losing one of its most important contracts with CEZ utility. The contract is about the supply of a unique information system for power plants. Westinghouse has serious problems with fulfilling its supply. CEZ spokesperson Novak has confirmed that his company appealed to Westinghouse to follow the conditions signed in the contract. If it will not do so by end of August, its contract may be canceled. CEZ denied that its step is linked with recently revealed doubts around the bidding process from last year, won by Westinghouse. It is not clear what problems caused the delay in Westinghouse's supply. It is expected that the reason is the fact that Westinghouse has underestimated the whole contract and did not estimate correctly how much money it will have to invest. The Czech office of Westinghouse denied to make any comments on the case. So did its headquarters in Pittsburgh.
EMPLOYEE RETRACTS HIS ACCUSATION OF CORRUPTION
(MF DNES 14th August 1996)
An American of Czech origin, Jan Vadlejch, a Westinghouse consultant, retracted his claim that he owned pieces of evidence of corruption related to Westinghouse's supply of information systems to CEZ. In his apologizing letter to CEZ chair, Vadlejch writes that his words about bribes to one of the CEZ board members were very unhappy and rash. "Only afterwards I understood that the accusation was false. I am sorry that this case came," wrote Vadlejch. His accusation initiated a snowball of investigation. Police started to follow the potential manipulation arranged by Westinghouse during the bidding process.
POLICE WILL NOT STOP ITS INVESTIGATION OF WESTINGHOUSE'S PRACTICES (MF DNES 15th August 1996)
Although Vadlejch retracted his accusations of corruption last week, police will not interrupt its investigation of the whole case. "We do not plan to stop the investigation at all. On the contrary, we are interested in the reasons and circumstances under which Vadlejch retracted his statements," said Pavel Just, a vice-president of an investigation police office in Prague 1, yesterday. Police are now checking whether Vadlejch canceled his statements because he did not have evidence to prove them, or because he wanted to stop the police investigation that started to turn against Westinghouse corporation.
WANTS TO SEND WESTINGHOUSE'S CONSULTANT TO COURT
(MF DNES 17th September 1996)
Police presented a first result of its investigation of the complicated case of doubted multibillion contracts between CEZ and Westinghouse. The first person to be sent to court is Jan Vadlejch, for the crime of slandering CEZ representative Vojtech Kotyza. For this, Vadlejch can be sent to jail for one year. Although this is only a minor fraction of the whole case, it reveals practices used by an American concern in our republic to intervene with CEZ and Temelin nuclear power plant decisions. The police stated that the main reason for Vadlejch's slander was to get rid of Vojtech Kotyza, who was the only member of the CEZ board of directors who did not vote in favor of Westinghouse during the bidding for an information system (ISE). "Kotyza was also an obstacle because he refused to sign an amendment to another contract, related to I&C (instrumentation and control system) for Temelin nuclear power plant. In this amendment, Westinghouse demanded a price for its supply as 16.5 million USD higher than was originally contracted," added police source. The fact that this was really a planned attempt to discredit Kotyza, is also confirmed by the way in which Vadlejch presented his accusations. Unlike normal procedures - ask police for investigation - Vadlejch was spreading his accusations all around CEZ top officials with the hope that Kotyza will be replaced. However, the CEZ chair Karas asked Vadlejch to prove his claims, and after he was not able to do this, Kotyza reported the whole case to police. This initiated a wide investigation. Although Vadlejch sent a letter to Karas a month ago, in which he retracts his accusations of corruption, this did not stop police. Instead, police set up an inquiry into the manipulation of other multibillion contracts for supplies to Temelin nuclear power plant, also won by Westinghouse.
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