Poland's squeaky clean image post-communism threatened by secret tape

Wed Jun 18, 2014 1:16pm EDT

* Furore over leaked remarks by central banker, minister

* Businessman Zbigniew Jakubas mentioned in the tapes

* He says tape shows officials plotted against him

By Adrian Krajewski and Christian Lowe

WARSAW, June 18 (Reuters) - The furore over a secretly recorded conversation between two senior Polish officials has so far focussed on comments that call into question the independence of the central bank.

But businessman Zbigniew Jakubas says he is more upset about another part of the tape: a section in which, according to a transcript, Interior Minister Bartlomiej Sienkiewicz and central bank governor Marek Belka discuss how they can pressure Jakubas's company to charge less for the coins it was proposing to mint under a state contract.

According to the transcript published by the Wprost magazine, Belka talks about the possibility of wielding a state "truncheon" against Jakubas's mint, Mennica Polska, and Sienkiewicz then alludes to organising various branches of the government - such as the tax authorities and the central bureau of investigation - in the effort. The transcript does not contain details about what exactly the agencies would do.

Jakubas, 62, says that reading about the conversation made him recall Poland's days under communism, when the party imposed military rule and officials ordered his business destroyed.

"I'm not a vindictive person. But this hurts me," Jakubas, ranked 14th among the wealthiest Poles by Forbes magazine, told Reuters in an interview.

"I thought that after 25 years of freedom .... things had moved on from martial law. But it seems some people still have it in their heads that they can do anything," he said.

Asked to comment on Belka's remarks on the tape about the mint, a central bank spokesman referred Reuters to an earlier bank statement dealing with the tapes in general. That statement said Belka's remarks had been taken out of context, and that Belka has not stepped beyond the bounds of his authority.

Reuters contacted an interior ministry spokeswoman by phone and email requesting comment about Sienkiewicz's remarks about the mint. The spokeswoman did not provide a comment.

In a television interview, Sienkiewicz, when asked about the mint conversation, questioned the accuracy of the transcript - without saying which parts may be inaccurate - and said some of the phrases he used sounded worse than they were because they were a kind of shorthand used among friends.

Polish politics have been in an uproar since Saturday when Wprost published excerpts of the tape transcript and posted part of the audio on YouTube. In it, Belka is heard telling Sienkiewicz he would be willing to help the government out of its economic troubles if the finance minister were fired.

Prosecutors say they have no evidence Belka or Sienkiewicz broke the law in their conversation, which Wprost said took place in July last year. Prime Minister Donald Tusk says he sees no reason to fire Sienkiewicz, and Belka also remains in his position.

Neither Belka nor Sienkiewicz has denied the conversation took place but both have said their comments were misinterpreted and they did nothing illegal.

But many Poles - and foreign investors - are concerned about what the tape says about Poland's standards of governance, and wonder if the country is as upstanding as they believed it had become since Tusk's pro-market government came to power in 2007.

Poland has attracted huge investment since, partly because it is viewed as having better and cleaner governance than other emerging markets.

Peter Attard Montalto, emerging markets economist with Nomura, said the revelations have compelled Poland-watchers to think about political risks they had not considered for some time.

"The next steps will determine if we can settle back to such old ways or not," he wrote in a research note.

"TRUNCHEON"

At the time the conversation took place, the central bank was inviting bids from firms to manufacture Poland's lowest denomination coins, the 1, 2 and 5 groszy coins.

Mennica Polska, which was already minting those coins under a prior contract, was invited to bid along with mints from Britain, Finland and Canada.

According to Belka's remarks in the transcript, his preference was to award the contract to Mennica Polska. There was public pressure for the contract to go to a Polish firm.

The contract was awarded in October last year to Britain's Royal Mint. The central bank said at the time that Britain's bid was lower than Mennica Polska's.

In the transcript, Belka talks about the difficulties of getting the Polish mint to lower its bid and says it was negotiating with an unnamed person who "already believes that we have robbed him." Jakubas says the unnamed person was him, and Sienkiewicz later names him in the exchange.

According to the transcript, Sienkiewicz replies: "Perhaps we need to tell him how we can rob him more. Maybe he'll understand."

Belka is quoted as saying that the person in question is taking advantage of a weakness in the position of state institutions.

"Even though at the end of the day the state does have this truncheon ... Here, what's needed is close cooperation with that truncheon," Belka is quoted as saying in the transcript.

At this point, Sienkiewicz describes his experience bringing together the central bureau of investigation (CBS), the tax inspectorate (UKS) and the state treasury's intelligence arm to work on joint projects.

"It seems to me that at some point this will also be a very useful tool in our games with the kind of fat cats who believe they can act with impunity," the transcript quotes Sienkiewicz as saying, referring to the mint's tough negotiating position.

He said when those agencies tried to act alone against Jakubas, whom he identified by name, they got nowhere. But, he said: "All together, collected into a pile, that is completely different, a completely different story."

Asked specifically about his remarks on the mint by broadcaster TVN24, Sienkiewicz said: "I have never in any respect, either in my words or actions, stepped beyond the law and truthfully speaking I was acting to the benefit of the Polish state."

Jakubas told Reuters he found the transcripts chilling.

In the 1980s, after quitting a job as a teacher in a technical college, he ran a network of clothing boutiques in Warsaw and a business in eastern Poland making clothes.

At the time, the Communist authorities tolerated some modest private enterprise. But he said that, on "orders from the top of the party," tax inspectors tried to wreck his business in the eastern Polish town of Biala Podlaska.

They failed. His holding company, Multico, now includes the mint, train manufacturer Newag, a gas pipeline maker, a publisher and a film production company. Forbes magazine estimated his wealth at 1.3 billion zlotys ($425.20 million).

He said of the leaked tape: "It's not just a question of the personal damage, but it's the fact that in our country, which we believed already to be a country ruled by law, this situation can happen where a minister talks about taking a truncheon to someone." ($1 = 3.0574 Polish Zlotys) (Additional reporting by Marcin Goettig; Editing by Sonya Hepinstall)