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Friday, January 27, 2012

Czech Coal uncovers extensive fraud in sized coal trade

Friday, 27 Jan 2012

An extensive internal investigation in the Czech Coal Group has helped to uncover fraudulent sales of sized coal. Some of the employees in Czech Coal’s coal purchase and sale department were illegally selling coal to companies that market brown coal. Czech Coal has suffered loss of at least CZK 100 million in this way.

The investigation, which lasted for almost a year, has helped to detect an organised group of Czech Coal employees who were selling large quantities of sized coal for much lower prices without the Board of Directors being aware of this. These prices were set on the basis of agreement between the buyers and certain Czech Coal employees, who had their own personal financial incentive to engage in such deals.

During the investigation, a large amount of evidence was gathered; this evidence mainly includes extensive findings of internal audit. The investigation also helped to reveal fundamental differences between documents approved and documents signed, and also advisory co-operation between the buyers and certain Czech Coal employees’ relatives, including the financial flows between the ‘befriended’ individuals and companies and these Czech Coal employees.

Because of this situation, the company’s entire coal purchase and sale department will be dissolved. A criminal complaint will be filed in connection with the above findings, and security measures designed to prevent this situation from recurring will be adopted.

The Czech Coal Group includes Czech Coal a.s., a trader in energy commodities, mainly brown coal and electrical energy, which also provides shared services within the Group, and Litvínovská uhelná as, which manages the largest coal deposit in the Czech Republic, Vršanská uhelná as whose coal reserves within the currently existing mining limits will last until around 2055 and a number of other service companies.

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