The Cooking Of Agrokor’s Books

Agrokor Headquarters Zagreb Croatia

Croatia’s government claims that the results of the financial audit (first audit report released Thursday 5 October 2017) of key companies within Croatia’s ailing concern Agrokor justify the adoption of special law on extraordinary administration, which saw the state take control of the privately-held concern in April. My blogpost at that time emphasised an analysis that “when the government of a former communist country (Croatia) brings about and takes over with forced administration a calamitously failed private company (it subsidised and helped along the way as did the communist Yugoslavia regime via nationalisation of private assets and borrowed money injections) the gut tells you, regardless of the threat of thousands of job losses if that company sinks, you’re more than likely dealing with attempts of cover-ups of major incompetence, possible embezzlement come thefts and politically driven paths to sell and hand over the company or notable parts of it to a new entity.”

The extraordinary law rushed through the parliament then, commonly known as Lex Agrokor, has preserved jobs and contained the spread of systemic risk across the economy, the government said in a statement late on Thursday 5 October, after the Agrokor receiver unveiled the results of the audit conducted by PriceWaterhouseCoopers LLP. The government had said and still maintains that Agrokor is a company of systemic importance for Croatia and its collapse could have a catastrophic impact on the economy.

The audit revealed enormous discrepancies between 2015 financial results of nine key companies within Agrokor reported earlier and the audited figures. Inflated value of assets, understated claims towards group members, over-estimated inventory and undocumented costs were some of the markers for the discrepancies.

UK based branch of PriceWaterhouseCoopers LLP was named as auditor of the concern’s financial statements after preliminary probes revealed possible or likely accounting errors.

The revised financial report for the troubled Croatian retail, food and agriculture giant Agrokor, issued on Thursday, showed that the former management, led by company’s owner and founder Ivica Todoric, did not show the company’s full losses in its financial accounts. State extraordinary manager for Agrokor affairs Ante Ramljak presented the revised financial report for 2015 and 2016 which had been put together by the PriceWaterhouseCoopers audit agency.

Thursday’s report only included Agrokor’s major subsidiaries in the retail, wholesale, agriculture and food industries – Konzum, Tisak, Belje, PiK Vinkovci, Vupik, Ledo, Jamnica, Zvijezda and PiK Vrbovec.

The full consolidated report, including mother company Agrokor d.d., will be unveiled on Monday 9 October 2017 and then the government is expected to comment in detail

The revised report for the subsidiaries in 2015 showed 250 million euros more losses than Todoric’s management showed in its financial records. The state management’s figures showed that the subsidiary companies finished 2016 with 442 million euros in losses. The former management also inflated the capital worth of the subsidiary companies in 2015 by some 1.2 billion euros.

According to Thursday’s report, the subsidiary companies are worth 1.8 billion euros less than they were before 2015.

I will not say that any [legal] irregularities [in the previous management’s financial records] occurred. I won’t speak about this until we have the figures for Agrokor [d.d.]. Accounting irregularities occurred,” Ramljak answered when asked if there was criminal wrongdoing involved.

DORH [Croatian state attorney office] investigators are familiar with all these numbers,” he added.

Chief state attorney Dinko Cvitan had said in the past week that the full report will be important for DORH’s work.

The company’s role in the economy of Croatia is massive, with revenues of 6.5 billion euros in 2015 – almost 16 per cent of Croatia’s total GDP – and around 40,000 employees.

Agrokor employs another 20,000 people in neighbouring Bosnia and Herzegovina and Serbia, while it is believed that suppliers and companies for the Slovenian retailer Mercator – which Agrokor bought in 2014 – employ around 70,000 people in Slovenia as well.

Croatian news agency HINA reported on Friday 6 October that Maxim Poletaev, deputy chairman of the management board of Russia’s Sberbank – a major creditor of Agrokor, has suggested that Croatia should service the debt of the food-to-retail concern. Poletaev has told Russian news agency Interfax that the debt of Agrokor to the Russian bank is now debt of the Croatian government, which it should pay. Poletaev also said that Croatia should use government bonds to pay back Sberbank, according to HINA. Agrokor owes Sberbank some 1.1 billion euro ($1.3 billion). In August, the bank filed a complaint against Agrokor owner, Ivica Todoric, and, according to media reports, it now plans to sue the auditor which had previously verified Agrokor’s financial statements.

Charging Croatia’s government – that is, Croatian taxpayers and people in general, as debtor for corruption that went on in Agrokor and its subsidiary companies would add to the already calamitous plummeting of Croatia’s economy and living standards.

The web upon which depends a final outlook and solution regarding Agrokor and its possible crushing and devastating effect upon Croatia’s economy that could create a new army of poor, unemployed and devastation is currently in the finishing “touches” stages and nervousness and jitters are felt all the way to the parliament. Whether this nervousness hides attempts to cover up the identification of individuals in past echelons in power who have amassed wealth through theft is yet to be revealed. However, that matters have reached a sticky and nasty point is perhaps clear from Friday’s events in the parliament that saw the parliament’s meeting come to a stop due to inability to reach the needed quorum for the voting on appointment of three constitutional judges. Friday’s sitting of the parliament was geared for voting on appointment of three constitutional judges and on the establishment of a parliamentary inquiry commission for Agrokor. The needed quorum to vote for constitutional judges is two thirds of parliament members while the one needed to vote in the inquiry commission is the normal majority of half plus one. The Social Democratic Party/SDP refused to enter the parliamentary chamber and thus no voting was held on either of the two matters with the announcement by the ruling Croatian Democratic Union/HDZ that they hoped an agreement can be reached with SDP by Wednesday 11 October when it hopes to return the voting to agenda. The agreement relates to SDP’s insistence that former ministers can be appointed into the inquiry commission for Agrokor while HDZ disagrees on grounds of conflict of interest in the event that members of such commission could be called upon as witnesses in the unraveling of Agrokor dealings that has brought the country to its knees.

HDZ and SDP being at loggerheads is of course nothing new, but on this issue of investigating Agrokor’s dealings, obvious corruption, theft that appear to have been going on for decades while enjoying government support and significant financial subsidies and injections, the engaging at loggerheads becomes a marker of attempts to cover up serious past criminal dealings among powerful individuals. There are indications also that in order to achieve an agreement that would bring SDP back sides  on parliamentary seats, so that the voting in of constitutional judges can go ahead, HDZ may compromise and permit that certain category of former ministers may be appointed onto the inquiry commission for Agrokor! This, of course, would spell a disaster for independence of the commission’s dealings and deliverance – after all, all government ministers, regardless of their portfolio, are and always have been members of a tight club in which one covers for the other. 11th October 2017 is set to be a yet another stormy day in Croatia’s parliament on the matter of the establishment of the inquiry commission for Agrokor and its member composition. Monday 9th October when full audit report is expected for the whole Agrokor concern may indeed see the rats running in and out of parliamentary chamber, stalling the establishment of its inquiry commission for Agrokor. Ina Vukic

 

 

Comments

  1. Splithead says:

    Ina, It seems the HDZ Finance Minister Maric must have known about the rubbish or most appropriately named fraudulent accounts. Any first year accounting student could recognise the irregularity in the accounts as basic entries did not follow international financial accounting rules. MOST Bozo Petrov is vindicated. It seems the only thing Croatian Communists are good at is lying, cheating and not working for a living!

    The term “Croatian Communists” is a very broad church, getting bigger every day.

    Again, the people will pay for this fraud and there will be no repercussions for any individuals, as recent history has shown.

    After all “why dwell about the past, we should look to the future” typical quotation from SDP and HDZ representatives……Look over there !!!!

    Like

    • Splithead, I just hope the thieves will get their just deserves and that Croatian taxpayers will not have to foot the bill of debt! What a horrible situation – a mirror image of how tycoons were made in communist Yugoslavia!

      Like

  2. Splithead says:

    Ina,
    It shows more than just how tycoons where made, it illustrates how Croatia is being governed, it’s obvious SDP and HDZ are happy to agree on the make up of the parliamentary committee on Agrokor. No independents required, wouldn’t want that would we!

    It also shows the harder issue of Lustration, will never occur in Croatia. Even Macedonia has undertaken Lustration and good luck to them.

    If approximately 5.5 Billion AUD can go missing in a major firm (nearly 15% of Croatia’s GDP), over years, in both SDP and HDZ governments, with such obvious accounting fraud, then there will be no justice for the Croatian People.

    We as Australian Croatians need to recognise this reality that’s all, “the writing is on the wall”!

    My parents had a dream for Croatia to have the same standard of living and values, as they have had in Australia. Unfortunately that dream will not even be realised even in my life time.

    Like

    • It could be reached Splithead – but a metal broom needed at least that cleans up well. The composition of the inquiry committee into Agrokor is scandalous, raketerring of some in power – legalised. What a shame!

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Disclaimer, Terms and Conditions:

All content on “Croatia, the War, and the Future” blog is for informational purposes only. “Croatia, the War, and the Future” blog is not responsible for and expressly disclaims all liability for the interpretations and subsequent reactions of visitors or commenters either to this site or its associate Twitter account, @IVukic or its Facebook account. Comments on this website are the sole responsibility of their writers and the writer will take full responsibility, liability, and blame for any libel or litigation that results from something written in or as a direct result of something written in a comment. The nature of information provided on this website may be transitional and, therefore, accuracy, completeness, veracity, honesty, exactitude, factuality and politeness of comments are not guaranteed. This blog may contain hypertext links to other websites or webpages. “Croatia, the War, and the Future” does not control or guarantee the accuracy, relevance, timeliness or completeness of information on any other website or webpage. We do not endorse or accept any responsibility for any views expressed or products or services offered on outside sites, or the organisations sponsoring those sites, or the safety of linking to those sites. Comment Policy: Everyone is welcome and encouraged to voice their opinion regardless of identity, politics, ideology, religion or agreement with the subject in posts or other commentators. Personal or other criticism is acceptable as long as it is justified by facts, arguments or discussions of key issues. Comments that include profanity, offensive language and insults will be moderated.
%d bloggers like this: