Most frequent myth circulated in the Czech media
The main reason CSOB sued in the Németh case is the fear that the contract between attorney Németh and the former IPB existed and that, under it, CSOB will have to pay the attorney billions of koruna. It will then have to pay back the government approximately CZK 10 billion plus 33 percent interest. Mr. Németh is not that interested in the money, but more interested in proving he was right and enforcing the contractual conditions to which the former IPB agreed.
CSOB quote
CSOB has already received several rulings enforceable by court that deny the legitimacy of JUDr. Németh's claims against the bank. According to the rulings, the contract between the attorney Németh and the former IPB, if it existed, was evidently in conflict with the Czech Law and is therefore invalid; in addition, it did not contain the claimed know-how on which the attorney bases his claim. The not-guilty verdict in favour of JUDr. Németh in the criminal case over his defrauding the bank is in no way legal confirmation of his claim against the bank (i.e. the existence of the Németh claims/receivable). They are two quite separate and unrelated disputes,” said Jan LuCan, CSOB director of legal services.
Press releases issued until now:
Even after acquitting JUDr. Németh, his claim remains invalid 
(46 kB)
Final decision in the case of so-called Németh’s claims (31 kB)
Upozornění na obchodovaní s fiktivními pohledavkami za IPB (61 kB)
Outline of the problem
JUDr. Věslav Németh claimed a financial penalty from CSOB on the grounds of an alleged breach of contract that was said to be embedded in Legal Service Agreement he had concluded with the former IPB. The object of this Agreement with IPB was to be, among others, the provision of legal services connected to the implementation of ‘Project for reducing portfolio of classified assets of the Czech banks with an option to use this project for all financial and industrial institutions’ and the use of the layer’s (Dr Nemeth) know-how by the client (IPB). Németh says that IPB used his know-how without his knowledge and agreement in autumn 1999, in connection with the creation of ‘Cayman Funds’ and secured thus its assets according to Nemeth’s know-how.
It is interesting in this context that Németh only claimed the financial penalty on CSOB after the takeover of IPB, and moreover a full year after the alleged breach of the Agreement by IPB. Németh initially claimed CZK 3.35 billion, with the sum being increased in time, to today’s sum of CZK 7.58 billion in total. It follows from the foregoing that a there is a threat of further increase of the sum without explanation at any moment.
Without attempting to claim this sum from CSOB first or without presenting a demand for its payment to the bank, Németh created an ‘account receivable from IPB/CSOB’ from this alleged financial penalty and began to trade it. He ‘transferred’ (in legal terminology, ‘ceded’) a portion of the financial penalty (CZK 3.35 billion) to the firm Goldfund Financial LLC, which had probably been set up for this purpose, registered in the tax paradise of an American state. Goldfund Financial LLC then ‘sold off’ (ceded) portions of Nemeth’s alleged account receivable from IPB/CSOB to various firms in the Czech Republic, to former debtors of IPB for the most part. These Czech firms then offset the account receivable, apparently obtained with a large discount (discount from alleged nominal value) against their own accounts payable to IPB, namely they tried to settle their own debts with Dr Nemeth’s alleged account receivable.
Several judicial disputes over validity of the offset of Németh’s account receivable, concerning the very existence of the Agreement between Németh and ex-IPB as well, have been and are taking place. Since the legitimate rulings denied the existence of the account receivable, the offsets cannot be regarded as legally binding. Besides, Németh was accused of fraud by the public prosecutor in the case of creation of the account receivable. Although he was acquitted in the criminal proceedings, this ruling has no effect on and no connection to the legitimate rulings of the commercial matter of the existence of the account receivable. Being cleared in the criminal case is frequently interpreted by the media as, ‘proof that Nemeth’s account receivable was not fictitious and actually exists’.
Background information
- Money is definitely behind this case. The attorney was alleged to “sell knowledge” to the former IPB about how to take assets out of the bank to tax havens, thereby de facto taking depositors' money out of the bank. This was the reason for the “Németh contract”.
- After the fall of IPB, somebody evidently thought that the contract could be used to wipe out the debts of the former IPB's old debtors. The alleged financial claims resulting from the sale of the “Németh knowledge” were sold, via a foreign middleman, to a couple of minor debtors of the failed IPB and they set them off against their debts.
- CSOB took and is still taking all legal steps in this matter because it is under such duty not only because of the contract with the government, but also because of the statutory rules dealing with the financial management of entrusted assets. If we set aside speculation about to what extent Mr. Németh's activities are criminal and to what extent merely commercial, the following facts are kept quiet, doubted or misleadingly presented in the case:
- Mr. Németh paints himself as a wronged individual being pressured by a large, strong bank, but the opposite is true. Some of the attorney's steps bear the hallmarks of extortion of which large companies in other countries have experience. As a legal expert, he should know that he didn't offer the former IPB any exclusive knowledge that went beyond textbook theory and would have entitled him to a fee for the provision of know-how. In addition, he should have known that by applying the theory he submitted the former IPB would have committed a breach of Czech National Bank regulatory measures, or even circumvented the law.
- The Németh case is another item in the total cost for the failed IPB that documents what the managers of the former IPB were willing to agree to and what sort of contracts the bank was willing to enter.
- Debtors remain debtors even when, “in good faith”, they buy or otherwise obtain claims that have never been acknowledged by a court. The deduction of such receivable from a debt is invalid. It's no coincidence that these are companies and entrepreneurs who, even when the former IPB still existed, were decidedly not keen on paying their demonstrable debts. In a case that did not have so much attention from the media and politicians, they clearly would not have tried this.
- As the courts are gradually taking a clear line on the non-existence of the Németh claims, CKA can easily recover the debts from which the “Németh claims” were deducted by legal means. Evidently, however, it is not willing to do this, possibly not only because – given the speed of Czech courts – it would take a long time. But not even this can be a reason to claim that the assets burdened by these disputes have been damaged by CSOB and that the “deductors'” debts should therefore be paid by CSOB.
- In 2001 CSOB repeatedly drew attention to the fact that the economically bad and legally complicated state of a number of assets left by the failed IPB prevented their premature assignment to CKA. Their assignment to CKA was, however, forced in 2002 by then-minister of finance Jiří Rusnok (partly by unscrupulous attacks against CSOB in a number of media). CSOB fully intends to meet the obligations it undertook regarding the government and whose main content is safeguarding clients' deposits. However, the government, as the other contracting party, also has to meet its obligations.