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. Last Updated: 07/27/2016

Czech Official Quits Over Hotel Scandal

A senior official in the Czech government has been forced to resign amid accusations that he used the Czech Embassy in Moscow to help a private management company avoid paying Russian taxes and customs duties.

Karel Srba, Prague's top Foreign Ministry civil servant, stepped down Tuesday as public pressure mounted over his involvement in the awarding of a contract to run the Czech House Hotel, a former diplomatic residence in Moscow still owned by the Czech government.

Czech House Hotel general manager Gajane Hfijan said Wednesday that the Czech police have launched an investigation into the matter and are expected to issue a report next week.

Czech law requires that all management contracts for all of its non-embassy foreign property holdings be privatized through open tender.

But the management company, also called Czech House Hotel, was given the contract to run the hotel with no tender, according to Mlada Fronta Dnes, the Czech Republic's largest daily newspaper.

The newspaper reported that the management company has been importing goods and conducting business in Russia under the umbrella of the embassy — a scheme that unlawfully exempts it from paying taxes and tariffs.

Foreign Ministry spokesman Ales Pospisil said Wednesday that Srba had agreed to accept full responsibility for the case.

A growing chorus of critics in the Czech media, however, are not satisfied and are calling for the resignation of Czech Foreign Minister Jan Kavan, who signed the contract.

Kavan rejected calls for his resignation and was quoted as saying that he allowed the deal to go ahead based on Srba's recommendation and "to insure the continuation of supplies of goods and services to the hotel."

Kavan admitted to "formal shortcomings" in the contract, but maintained that "not a single loss has been caused to the Czech state or to the budget," according to reports. Kavan made no comment as to whether or not Russian laws had been breached.

The Czech Foreign Ministry said that the contract was based on the official recommendation prepared by Srba and a lawyer named Jiri Teryngel. Pospisil told reporters in Prague that Kavan had no knowledge when he signed the contract that Teryngel was representing both the management company and the ministry.

Both the current Czech Ambassador to Russia, Jaroslav Basta, and his predecessor, Lubos Dobrovsky, have criticized the deal.

Teryngel could not be reached for comment.

The Czech Embassy in Moscow referred the matter about the hotel to the Czech Foreign Ministry in Prague, which did not reply to faxed questions.