Billionaire Czech Premier Runs Afoul of EU in Subsidies Probe

(Bloomberg) -- The European Union found the Czech Republic's billionaire prime minister in conflict of interest over EU funds, piling pressure on a leader facing anti-government protests and potential criminal fraud charges.

A preliminary report from an EU audit found Andrej Babis, the ex-communist country's second-richest man, in conflict for maintaining ties to businesses he founded while influencing decisions that could affect subsidies they receive, the Hospodarske Noviny newspaper reported Friday. Babis said he'll contest the report.

The probe thrusts Babis into a group of leaders from the EU's post-communist wing entangled in confrontations with the EU's executive commission. Governments from Warsaw to Bucharest are clashing with Brussels over erosion of democratic principles and the bloc's migrant policies.

Babis, a media, agriculture and fertilizer magnate who rose to power by attacking the political establishment and campaigning against Muslim refugees, has repeatedly rejected the conflict-of-interest allegations.

“I strictly reject this opinion and I will fight for it to be changed,” Babis said, arguing that the Czech legal opinion differs from the audit's. “The Czech Republic certainly won't have to return any subsidies. There's no reason for that, because I'm not violating any Czech or European legal norms.”

Read more: How a Sprawling Farm Empire Put a Billionaire Premier in a Bind

The report had no immediate impact on Babis's minority ruling coalition, although the junior member, the Social Democrats, said it can't be taxpayers who bear the cost if the country needs to return subsidies.

The commission's audit concluded that companies Babis put in trusts before he took power in 2017 must return subsidies they received from the bloc's budget last year, according to Hospodarske Noviny, which cited two ministry sources who saw the report but it didn't identify.

The Finance Ministry refused to comment on the content of the report, saying it “can be amended based on further information from national authorities,” the ministry said.

Babis is also facing accusations at home that one of his former companies illegally received EU funds more than a decade ago. Czech prosecutors are deciding whether to press charges against him after police recommended he be tried.

He has vowed to stay in his job even if he goes to court. The premier, who remains the most popular politician, was defiant on Friday as the opposition said it will consider triggering a no-confidence vote in his cabinet.

“We have Babis hysteria again,” the prime minister told lawmakers. “Try to do something for the people instead, don't just take a swipe at Babis.”

--With assistance from Krystof Chamonikolas.

To contact the reporters on this story: Peter Laca in Prague at placa@bloomberg.net;Lenka Ponikelska in Prague at lponikelska1@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net, Michael Winfrey, Andrea Dudik

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