The Risks of Doing Business in Poland

04/12/2015 04:04 pm ET | Updated Jun 12, 2015

Doing business entails certain risks. You make a big investment of money and time, and you hope that your gamble pays off. Maybe people will come to your restaurant. Maybe they will buy your product. Maybe they will contract for your services. But you can't be sure. You've taken out loans on the expectation that if you build it, they will come.

Polish businessman Lech Jeziorny was willing to take those risks. He and his partner had acquired two parcels of land. The one in the middle of Krakow included an old slaughterhouse from the 19th century that was still functioning, though at a loss. They decided to move the production to a new facility they established on the outskirts of the city on their other parcel of land. And they sold the slaughterhouse to make way for an upscale mall called Galeria Kazimierz.

"It was an interesting way to combine old buildings with new architecture," Jerziorny told me. "The facility was near the place where the management had residential apartments. So, these offices and apartments make up a very nice complex."

But there was an entirely different risk that Jeziorny was taking, one that he didn't even know about. Nor did he find out about this risk until he and his partner were about to bring in another investor for their modern food processing facility. "The restructuring took four years," Jeziorny explained. "It was quite complicated for many reasons. At the end of this process we were very tired, and we needed a new investor. We finally found this investor, we established all the conditions, and then, when we established the date to sign the agreement with this investor, we were arrested."

Arrested. On the suspicion that Jerziorny and his partner were engaged in a criminal conspiracy involving money laundering. The tax authority also also hit them with a fine of 4 million zlotys. Even worse, they were thrown in jail for nine months - without any evidence. I learned later that such detentions are not unusual in Poland. Some people spend several years in pre-trial detention.

During the time spent in jail, the business went bankrupt. "We had leased the machinery, and now everything's gone," Jeziorny said. "This was probably the most modern meat processing plant in Poland at the time. Everything was completely new, with the latest technology. And everything was destroyed."

After nine months, he was released without being charged - for lack of evidence. Eventually the courts cleared the two men of all charges. "It's difficult to talk quietly about all this, especially in English because it's hard to describe my emotions," he told me. "This was like an atomic bomb that fell on my life, my business life, my family, my friends, my partners."

Jeziorny had been arrested before - during Martial Law because of his Solidarity activities. He considers it a supreme irony that he spent eight months in jail unjustly under Communism and an even longer time unjustly in the post-Communist era.

"After the end of the Communist system, many important people remained in place in state institutions, and their impact is so big," he argues. "We probably made a mistake in not removing these people from the state institutions. We thought that, okay, now we have capitalism, so everybody will be free market people. Many crazy Communist guys with Communist mentality were the directors of tax offices, directors in the prosecutor offices, and so on. They killed many businesses and destroyed many people."

He has helped create an organization to work on behalf of businesspeople destroyed by the state. They have 200 members and have collected 2,000 stories similar to his own.

I asked him how these stories square with the narrative of Poland's economic success in the post-Communist era. "But imagine what kind of success we could have here without the Polish bureaucracy?" he said. "Our success would probably be 15% greater. If you are an entrepreneur in Krakow or in Poland more generally, you have to fight against bureaucracy every day. Every day you're not thinking about how to grow your business but about how to protect your business from the bureaucracy. It takes maybe 20 and sometimes 50 percent of your energy to go against the bureaucracy. It's crazy."

The Interview

After your experience with the slaughterhouse project, would you consider doing it again? Investing in a business?

No, it's probably too late. After this experience, many things changed during this time, and now it's too late to organize something by myself. But I'd like to be more active. I'm the co-organizer of the movement of businessmen destroyed by the state. We organized our movement one year ago to publish our dramatic stories and to connect politicians to this side of economics, which sometimes is not very popular.

How many people are part of this group?

We have about 200 members. But in our computers we have 2,000 cases. And these are not all the cases, maybe only 10% or 20%.

When did these cases start? In 1990?

Yes, the first problems with Polish bureaucracy began in the middle of 1990s. Of course, I didn't see this problem. Roman Kluska was the first very famous guy to be arrested and destroyed by the state. He was one from the most talented Polish businessmen and entrepreneurs. He established a computer factory, Optimus, in a small town in the south of Poland, a hundred kilometers from Krakow in New Sacz. Optimus had good relations with Microsoft and with Lockheed Martin. They planned to make a joint venture, and now everything is gone.

Outside of Poland, everybody says that Poland is a success story, economically and also for entrepreneurs.


Yes. But imagine what kind of success we could have here without the Polish bureaucracy? Our success would probably be 15% greater. If you are an entrepreneur in Krakow or in Poland more generally, you have to fight against bureaucracy every day. Every day you're not thinking about how to grow your business but about how to protect your business from the bureaucracy. It takes maybe 20 and sometimes 50 percent of your energy to go against the bureaucracy. It's crazy.

Most business people complain about taxes and about state regulation. But most of them don't worry about being thrown in jail.

Yes, but if you talk with Polish businessmen, they very often have experiences with state systems, structures, institutions. Of course, they're not as dramatic as my experience. But they've had to fight against the tax offices or another prosecutor office. Of course, they don't speak about it very often. But if you have more time and more contacts, you can meet many people who have experienced this crazy face of Polish capitalism.

Is there corruption involved? In other words, do the bureaucrats ask for bribes?

Yes, of course. After the end of the Communist system, many important people remained in place in state institutions, and their impact is so big. We probably made a mistake in not removing these people from the state institutions. We thought that, okay, now we have capitalism, so everybody will be free market people. Many crazy Communist guys with Communist mentality were the directors of tax offices, directors in the prosecutor offices, and so on. They killed many businesses and destroyed many people.

You said you have 2,000 stories in your database. Are there other dramatic stories you can tell me?

To read the rest of the interview, click here.