Czech property tycoon braces for hit from €500mn freezing order

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One of Europe’s largest property groups is bracing for the impact of a complex legal dispute between its billionaire owner and two convicted money launderers who say they privately bankrolled him. 

Senior executives at CPIPG, the Frankfurt-listed group run by Czech billionaire Radovan Vítek, are preparing plans to segregate €537mn of assets following a freezing order from a Cypriot court.

The court made the order in favour of the two litigants, Czech investors Marek Čmejla and Jiří Diviš, earlier this year. But legal wrangling has until now meant that it has not been enforced.

The investors’ victory increases the likelihood that the central claims at the heart of the dispute — which has bounced from jurisdiction to jurisdiction due to technical legal challenges over the past few years — could finally be heard.

Čmejla and Diviš have been unsuccessfully pursuing CPIPG and Vítek through the courts for several years, alleging the billionaire developer cheated them out of a huge early investment in his group. Vítek has denied the claims and cases in the Czech Republic, Luxembourg and US have all been thrown out.

Vítek, CPIPG’s Swiss-resident majority shareholder, built his property empire through a series of audacious and sometimes aggressive takeovers, swooping on underpriced property companies — often using complex financial structures to secure control.

In their application for the asset freeze seen by the FT, Čmejla and Diviš claimed that a complex series of corporate shells and trust arrangements were manipulated to lock them out of access to property assets to which they had legal title.

Vítek denies that he had any clandestine arrangement with the pair.

At the centre of the investors’ case is the accusation that a “parity partnership” with Vítek was established in secret because, as convicted money launderers, it was felt by both themselves and the property tycoon that any publicly-known investment might have had a detrimental effect on the group’s access to future sources of capital and banking services.

In 2013 Switzerland’s central criminal court found the pair guilty of a “massive” criminal scheme to plunder Czech coal company Mostecká uhelná společnost, or MUS, in which money was laundered through a network of more than 100 Swiss bank accounts.

CPIPG and Vítek’s legal advisers argue the conviction should have significant bearing on the legal dispute.

Although CPIPG executives dispute the allegations, the group has been forced to develop legal contingency plans to comply with a notice expected from the court in Cyprus, people familiar with the matter told the Financial Times.

The group believes it can easily pledge unencumbered liquid assets from its €20bn portfolio to meet the court order’s requirements, the people said, and will not have to pledge cash.

But the lawyer for the investors, Marek Stubley, has cast doubt on whether “ring-fenced” property assets pledged by legal means from CPIPG would fulfil the Cypriot court’s asset freezing order. He said his clients expected cash to be held in segregated bank accounts.

Many large European commercial property investors are still facing a liquidity squeeze after portfolio values nosedived due to rising interest rates over the past two years.

Executives at CPIPG, which has €4.9bn of bonds outstanding, say they have ready access to capital and liquidity, and have been completely transparent with creditors over the legal challenge to the company.

“The plaintiffs have repeatedly tried, and failed, to ‘forum shop’ these allegations across courts in various jurisdictions,” CPIPG said in a statement.

“The ruling in Cyprus, which CPIPG has appealed, has had no practical impact on the Group or any bank accounts or assets belonging to CPIPG or Vítek. CPIPG’s real estate portfolio continues to perform well and we remain focused on executing our strategy.”

The appeal process could take up to two years to complete. The Cypriot courts have held that a full complaint must be filed by Čmejla and Diviš by the first week of December.

The 53-year-old Vítek is a combative figure, who, in a 2018 dispute with the local municipality for the luxury Swiss resort of Crans-Montana, turned off the ski lifts which he then owned. The move choked the town of the winter sports enthusiasts that were its most valuable source of money.

Vítek sold his investment in Crans-Montana’s ski lift operator last year.

CPIPG has also been targeted by the prominent short seller Muddy Waters, which in November 2023 accused Vítek of overvaluing assets and “asset stripping” companies in the group.

An independent review into the group’s financial affairs by law firm White and Case, commissioned in response by CPIPG’s board, concluded in September that the allegations were unfounded.