Czech Property Tycoon Braces for Hit from €500mn Freezing Order
Radovan Vítek, the billionaire owner of CPIPG, one of Europe’s largest property groups, is preparing for the ramifications of a €537 million asset freezing order issued by a Cypriot court. This legal action arises from a complex dispute involving two convicted money launderers, Marek Čmejla and Jiří Diviš, who claim they privately financed Vítek's ventures and allege that he cheated them out of a significant early investment in his company.
The Cypriot court's freezing order, granted in favor of Čmejla and Diviš, has not yet been enforced due to ongoing legal disputes. However, the recent ruling increases the likelihood that the core claims of the dispute, which have shifted between various jurisdictions over the years, may finally be addressed in court. The investors have been pursuing legal action against CPIPG and Vítek for several years, alleging manipulation of corporate structures to exclude them from property assets they believe they have legal rights to.
Vítek, who resides in Switzerland and is the majority shareholder of CPIPG, has consistently denied the allegations. Previous cases brought against him in the Czech Republic, Luxembourg, and the U.S. have all been dismissed.
The claims made by Čmejla and Diviš center around the assertion that a "parity partnership" was secretly established with Vítek, which they argue was necessary due to their criminal backgrounds. In 2013, they were convicted in Switzerland for a large-scale money laundering scheme involving the Czech coal company Mostecká uhelná společnost (MUS). Their conviction raises questions about their credibility and the legitimacy of their claims against Vítek.
The investors allege that a complex series of corporate shells and trust arrangements were manipulated to prevent them from accessing property assets. CPIPG's legal team contends that the investors' criminal history should significantly impact the ongoing legal dispute.
In light of the court order, CPIPG executives are developing contingency plans to segregate the €537 million in assets. The company believes it can meet the court's requirements by pledging unencumbered liquid assets from its €20 billion portfolio, rather than cash. However, the investors' lawyer, Marek Stubley, has expressed skepticism about whether the proposed arrangements would satisfy the Cypriot court's asset freezing order, suggesting that cash should be held in segregated bank accounts.
Despite the legal challenges, CPIPG maintains that the freezing order has not materially affected the company or its operations. The group asserts that it has transparent communication with creditors regarding the legal situation and that its real estate portfolio continues to perform well.
The ongoing legal battle comes at a time when many large European commercial property investors are grappling with liquidity issues due to declining portfolio values amid rising interest rates. CPIPG, which has €4.9 billion in outstanding bonds, claims to have ready access to capital and liquidity.
The appeal process regarding the Cypriot court's ruling could take up to two years, during which CPIPG will continue to navigate the complexities of the legal landscape while executing its business strategy. The company has also faced scrutiny from short sellers, including Muddy Waters, which accused Vítek of asset overvaluation and "asset stripping." An independent review commissioned by CPIPG's board found these allegations to be unfounded.
As Radovan Vítek and CPIPG brace for the potential impacts of the €537 million freezing order, the outcome of this legal dispute could have significant ramifications for the company and its operations. The case underscores the complexities of corporate governance and the challenges faced by property developers in a volatile market, particularly when entangled in legal controversies involving past criminal activities.
