The news that Jean-Francois Ott, the CEO of Orco Group which holds a 55.5 percent interest in the Suncani Hvar hotel company, was detained for police questioning in Zagreb, brought into the limelight questions and disputes about the privatisation of the hotel company on the southern Croatian island of Hvar, once cited as a successful example of public-private partnership.
Orco Group, headquartered in Luxembourg, is the biggest shareholder in Suncani Hvar, and the Croatian Privatisation Fund (HFP) has a 31.7 percent stake. The Hvar-based company with 356 people on its payroll has accumulated losses in the amount of HRK 400 million.
Although the Suncani Hvar management and workers recently appealed for salvaging their company, a general shareholders' assembly, held on Monday, ended inconclusively.
HFP president Vedran Duvnjak told reporters after the seven-hour meeting on Monday evening that the HFP would not allow Orco Group to do whatever it wanted in Suncani Hvar.
The shareholders' meeting accepted only one out of nine items on the agenda. That item, moved by the HFP, was about reducing Suncani Hvar's capital stock in such a way to decrease the value of the company's shares from HRK 100 to HRK 40 per share, instead of HRK 10 as previously proposed by Orco Group via the company's managing and supervisory boards.
In his televised statement late last night, Orco CEO Jean-Francoise Ott, on the other hand, accused the HFP of failing to do anything to resolve the problems of the Hvar company over the recent months.
In 2005, the HFP and Orco Gorup concluded an agreement on establishing public-private partnership in Suncani Hvar.
The agreement envisaged that in the following five years, not any party to the agreement could manage the Suncani Hvar property independently and without consent from the other side.
In the meantime, Suncani Hvar's business results deteriorated, with constant disputes with the local authorities over ownership relations in some of the Suncani Hvar facilities.
On 13 July 2010, the HFP unilaterally decided not to renew the agreement with Orco Group for the next five years. Deciding to terminate the agreement, the Fund accused Orco Group of having increased Suncani Hvar's losses from HRK 105 million to HRK 580 million.
Findings of an audit showed that the hotel company had turned insolvent and over-indebted, being unable to cover liabilities to creditors and workers. This was cited as one of the reasons for the cancellation of the agreement.
Opposing the cancellation of the agreement, Orco Group announced complaints against the HFP. The HFP proposed a 30-day period for conciliation, suggesting arbitration in the event of conciliation failure.
The HFP Steering Board chairman, Agriculture Minister Petar Cobankovic, said the unilateral termination of the deal was made in order to protect the interests of the state and its citizens.
On Tuesday evening, Orco Group issued a statement condemning Ott's detention for police questioning in Zagreb.
Orco accused the Croatian government of using a tactic of force against Ott and Orco.
Chief Executive Director Ott and Orco will not allow to be forced into giving up their legal business interests in Croatia and they "refuse to be the victims of such a totalitarian approach to the judiciary", read the statement, signed by the group's managing board members Ales Vobruba and Nicolas Tommasin.
Orco Property Group "is a leading investor, developer and asset manager in the Central European real estate and hospitality market, currently managing assets of 2.2 billion euros," it said on its web site.
"Operating in Central Europe since 1991, Orco Property Group is a public company, based in Luxembourg, and listed on the Euronext in Paris and on the Prague, Warsaw and Budapest Stock Exchange," the statement said.
