Friday, August 01, 2008

State-owned firm embroiled in shady dealings
WBJ has learned that state-owned military equipment producer PCO used suspicious methods

A construction project for a gleaming new zl.70-million headquarters facility for military optical-equipment producer Przemyslowe Centrum Optyki (PCO), a member of the state-owned military equipment giant Bumar group, has led to allegations of corruption and mismanagement after subcontractors claimed that they were never paid for their work.

Two main players were involved in the project - Mirbud, which constructed the company's new headquarters, and Warmet, which was responsible for renovating several of the older buildings within the complex. Subcontractors hired by Warmet claim that they were never paid, and are now holding PCO responsible.

An investigation by WBJ has shown that Warmet was a strange choice for the large project. It is an extremely small company, consisting of just five people, according to a source close to the case. Additionally, documents obtained by WBJ indicate that the firm has not submitted financial statements to the National Court Registry (KRS) since 2004.

Why Warmet?

How Warmet came to be the lead contractor for the renovation portion of the project is something of a mystery. Public companies are legally required to grant construction projects worth more than zl.5 million through a tender process, but there is no evidence to indicate that any such tender was ever held. Several of the subcontractors in the case claim that PCO's technical director and a member of the board, Robert Wrona, has a close relationship with Warmet executives.

In initial conversations with WBJ, both PCO and Mirbud claimed that Mirbud was the general contractor for the entire project, and that Warmet was only a subcontractor, hired not by PCO but by Mirbud.

However, WBJ has learned that PCO came to an agreement with Warmet itself for the renovation services. Ryszard Kardasz, the president of PCO, admitted as much when confronted with the accusations, telling WBJ that "Warmet won the competition because it quoted the lowest price." Kardasz referred to PCO's selection process for Warmet numerous times, calling it a "competition" but never using the term "tender."

"Instead [of a tender], what happened was that the project was divided into several smaller parts, and each part had its own selection process," said Jaroslaw Kowalczyk, president of Kowalczyk Incaso, a vindication company that is representing the subcontractors.

According to Kowalczyk, Warmet's bank accounts have been blocked and it has previously been sued a number of times for not paying its subcontractors.

"It looks like PCO did not check any of Warmet's financial details, otherwise they would not have signed a contract with [them]," said Kowalczyk.

When asked for specifics about the selection process, PCO's Kardasz pleaded ignorance, and placed the blame squarely on the shoulders of Wrona. "If you want any details, call Wrona, because he is responsible for this," he said. "I do not know any details. The first time I was informed about the case was when Kowalczyk Incaso sent me the case description and payment requests," he added.

WBJ attempted to contact Mr. Wrona, but was told he was unavailable for comment.

Did PCO know?

Now that ignorance is coming back to haunt PCO, as Warmet's subcontractors are threatening to take PCO to court. But records show that PCO long ago became suspicious that Warmet was not paying the firms it hired. Records show that in May of last year, PCO asked Warmet for confirmation that it had paid its subcontractors.

Kardasz told WBJ that the firm had taken action against Warmet. "Warmet did not fulfill its contract with its subcontractors. That was why we forced them to leave the building site in August 2007 and Mirbud finished the construction," said Kardasz.

However, legal documents submitted by the subcontractors claim that Warmet was the main contractor throughout the entire project, until its completion in December 2007.

Warmet did sign an agreement to slightly reduce its role in the project in December 2007, after Kowalczyk's vindication company had contacted PCO with the complaints. Still, there is no evidence that Warmet's involvement altogether ceased.

Show me the money

Komvix, one of those subcontractors hired by Warmet, claims that it is owed as much as zl.1 million, and says that it has been unable to pay its own subcontractors because it has not received payment.

Records show that PCO regularly paid Warmet for the work being carried out. Why Warmet's subcontractors never got their share is unclear.

However, the subcontractors say PCO is ultimately responsible for the late payments since it chose Warmet to complete the project. According to Polish construction law, a project's investor is responsible for payment for all work on the construction site, including work carried out by subcontractors.

Taking responsibility

Still, in conversations with WBJ, Kardasz maintained that his company was not responsible for Warmet's delinquencies.

"[PCO is] not responsible. Warmet did not report that it had any subcontractor ... on paper," Kardasz told WBJ.

But documents provided by Komvix show that PCO knew about Komvix, since the three companies (PCO, Warmet and Komvix) held meetings to discuss the project's progress every week. And a letter written by Wrona in July 2007 shows that he, at least, was aware that Warmet had hired Komvix, and that this information was indeed "on paper."

"For general renovations of buildings C, D and E, we have signed the contract with Warmet, which informed us in writing that the ... subcontractor is the company Komvix," Wrona wrote.

Moreover, in two prior phone conversations with Kowalczyk and in a letter written to Warmet dated September 21, 2007, Kardasz admitted that PCO felt obligated to take responsibility.

According to letters it sent to Warmet, PCO has decided to hold back Warmet's last payment of zl.804,829 until the whole case is resolved. But in talks with WBJ, Kardasz said the money PCO owed Warmet had all been paid.

PCO, Warmet and Kowalczyk Incaso are expected to meet today to try to hammer out a resolution. If none is found, PCO may be forced to pay Warmet's subcontractors, despite already paying Warmet.

The new PCO headquarters is due to open as scheduled on September 4 of this year.