A Croatian district court has found former Ivo Sanader guilty of taking a bribe of € 10m from between 2008 and 2009, Bloomberg reported. In exchange, he arranged with a “highly positioned” manager to give the Hungarian company controlling rights over INA in a January 2009 shareholding agreement, Judge Turudic said. Sanader was also found guilty of taking a bribe of € 3.6m from an Austrian bank between 1994 and 1995, when he was deputy foreign minister. Judge Ivan Turudic sentenced Sanader to 10 years in prison. Both the defendant and prosecutors have the right to appeal, in which case the Supreme Court would deliver a final verdict. As has happened several times in the past, denied any wrongdoing and categorically rejected the accusations.
Our view:
Although the final verdict has yet to be reached by the Supreme Court (and we are in the dark about how long this might take) there are some conclusions we can draw. First, we have little doubt that MOL’s accusations will have some implications in high-profile politics between Croatia and Hungary, with the outcome being unpredictable and hence unfortunate. Second, even if is found not guilty, the firm’s reputation could be tarnished as it has been forced into a defensive position, which is never positive for an investment case. Third, given the strong political headwinds and surrounding uncertainty, may be less inclined to commit significant capital in Croatia and thus the much awaited and badly needed efficiency improvements may be introduced more slowly than originally expected. Obviously, if is found guilty, shareholders may face severe consequences: the shareholder agreement could be modified in a way that MOLloses operating control over its flagship entity INA, which generated roughly one-third of the group’s clean CCS EBITDA in 9M12.