Former ČEZ supervisory board chairman Martin Kocourek was asked at the time if he knew who owned Škoda Power. He replied that ČEZ was not a detective agency. Apparently it is now.

A few weeks ago, I compared the cases of Michael Woodford, ex-CEO of Olympus, and that of Martin Roman, ex-CEO of ČEZ. To remind the reader, Woodford was dismissed for threatening to expose what he described as a “catalogue of calamitous errors and exceptionally poor judgment which has resulted in the destruction of shareholder value of $1.3 billion.” Roman was dismissed apparently for failing to report alleged conflicts of interest over ČEZ contracts with a value of some $1 billion placed with Škoda Power, a company that Roman it seems might have owned.

Since the scandals broke in late 2011, both companies have conducted audits, though with an important difference. In the case of Olympus, the statutory auditors had outside experts, hired by Olympus itself to establish responsibility for wrongdoing, breathing down their necks. ČEZ’s majority shareholder, the Czech finance ministry, asked Roman’s successor as CEO, Daniel Beneš, to conduct an internal audit.

It is very hard to accept that the majority shareholder is interested in an objective assessment of the facts. Beneš and Roman, who remains chairman of the supervisory board, are in effect investigating themselves. In their former roles, Roman as Chief Executive Officer and Beneš as Chief Operating Officer, they negotiated and signed the very contracts that are now at the centre of allegations over related party transactions.

And they signed other contracts that may yet become problematic, such as that with CEEI, the firm contracted by ČEZ to build a nuclear waste storage facility at Temelín five years ago at a value of some $75 million. To this day, no one knows who owns CEEI. Public records reveal that early last year, CEEI’s registered owner was transferred from UBIE, a nominee shareholder based in Liechtenstein and directed by Markus Buechel, a lawyer who appears to act on behalf of investors from Russia and the Ukraine, to Panweco Limited, a nominee shareholder based in Cyprus and owned by another nominee shareholder based in Cyprus....and so on. I wonder how long it will be before ČEZ is asked to audit its transaction with CEEI.

Both Olympus and ČEZ have now concluded their investigations. Based upon the findings of the panel of external experts, the company’s audit committee has recommended that Olympus sue 19 current and former company executives, including its president and three of his predecessors, for $50 million in damages. The Tokyo Stock Exchange will now likely allow Olympus to keep its listing, and the share price has rebounded to about half the level before the scandal, due to the expectation that legal action will lead to a thorough overhaul of the firm’s management.

Meanwhile in Prague yesterday, ČEZ announced that everything is as it should be, with the finance minister declaring that the results of the audit are “absolutely credible and sufficient”. ČEZ itself states that “the contractual relationships between ČEZ and Škoda Power have been at arm’s length”, which legally-speaking means that ČEZ believes it can demonstrate in a court of law that all transactions with Škoda Power were conducted no differently than they would have been with an arbitrary third party. This statement amounts to a declaration that ČEZ (unlike its external auditors apparently) has examined the ownership structure of Škoda Power and established that the relationship between the parties can withstand legal scrutiny of its adherence to the arm’s length principle. Roman’s predecessor as ČEZ’s supervisory board chairman, Martin Kocourek, was asked at the time whether he knew who owned Škoda Power and replied that ČEZ was not a detective agency. Apparently it is now.

We knew the conclusion of the audit already some weeks ago because Beneš, pre-empting the findings of his own internal audit, told us before Christmas that no wrongdoing had been committed. And in any case, the Prague Stock Exchange, on whose supervisory board Roman continues to sit, had already dismissed the whole affair as nonsense. Like Beneš and his board, the board of the Prague Stock Exchange appeared to know all along that everything would be fine. ČEZ’s minority shareholders are quiet and its share price remains stable, presumably due to the expectation that there will be no legal action and no thorough overhaul of the firm’s management.

I cannot help thinking that, in the end, it is the absence of a highly-placed whistle-blower in the case of ČEZ (Woodford was essentially an outsider in Olympus, a statistical outlier if ever there was one), not the determination –or lack of it in the Czech republic, of local regulators, auditors and shareholders to expose wrongdoing, that is the most significant difference between these two affairs.

You might know the nursery rhyme, “For want of a horseshoe nail, a kingdom was lost”. In relation to Roman and Škoda Power, we might say that for want of one whistle-blower, an entire political establishment has been saved –at least for the moment.