Dinko Cvitan – Croatia, the War, and the Future

The Cooking Of Agrokor’s Books

October 7, 2017 by inavukic 11 Comments

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. 11^th 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 9^th 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

Filed Under: Uncategorized Tagged With: Agrokor, Ante Ramljak, corruption, Croatia, Dinko Cvitan, Ivica Todoric, Lex Agrokor

Croatia: First Year Of Kolinda Grabar-Kitarovic Presidency

February 24, 2016 by inavukic 24 Comments

Kolinda Grabar-KItarovic
President of Croatia

When in November 2014 Kolinda Grabar-Kitarovic drove her stake into the election campaign and candidacy for the president of Croatia she had five central points to her program and election promises. She was the victorious candidate albeit not by a sweeping margin but a solid one nevertheless. Her inauguration as President of Croatia was on 15 February 2015. So what has been achieved with the five central election promises in her first year as president? Here’s a brief analysis:

First Point:Calling of an extraordinary meeting of the Government due to the weak social and economic state in Croatia. “We need to create favourable conditions for economic development with the aim of opening new jobs,” she said.

Not much has been achieved on this point, but if anything could summarise the events it’s the constant rejection to accept and work with president Grabar-Kitarovic by Zoran Milanovic’s Social Democrat led government that was in power at the time of Grabar-Kitarovic’s start as president, until January 2016. Milanovic evidently had no intention of collaborating with her and was at all times going to make her life difficult as leader of the country whose effectiveness depends much on being able to work with the government. Milanovic’s government kept rejecting and avoiding a meeting with the president on issues of economy especially. Nevertheless, a meeting on national security did occur on 12 March 2015, after which Milanovic was still avoiding a meeting on matters of economic reform and other areas of state governance, saying that the president has no Constitutional role to have input in those matters etc. It was a most unfortunate stand to be taken by a Prime Minister for Croatia because the President does have directional influence powers and powers to call for government’s accountability and the like.

Now that Croatia has a new government, a conservative one, the first point of her election promise to meet with the government and work on social and economic matters jointly has better prospects of succeeding.

President Kolinda Grabar-Kitarovic
and Croatia’s Prime Minister
Tihomir Oreskovic
January 2016
Photo: HINA/ Damir SENČAR /ds

Second Point: Calling for social stability towards achieving living standards people deserve. “I don’t accept that in Croatia today even one child could go hungry. That’s impermissible,” she said during her election campaign, adding that she would promote the implementation of demographic renewal. Again, given the Constitutional powers she as president has it’s questionable as to how much she could achieve with a government that kept pushing her off in her first year in office. However, there’s no doubt that she as president can influence progress in this area through coordination with her advisers working in synergy with the new government to realise a better living standard. Having Tihomir Oreskovic as Prime Minister, who does not delve into political feuds but sticks to professional administration and strategies towards economic reform and growth the Second point of her election program has a much better chance than under the former government which decided to play deaf, blind and mute as far as the President and her ideas for economic growth were concerned.

But despite Zoran Milanovic’s refusals and obstacles she had systematically worked in this field as evidenced bt her creation of various “teams” and committees whose goals include solving economic, social, demographic and other matters of priorities for Croatia. Especially noteworthy, and given Zoran Milanovic’s government’s rejection of to work on matters of economic development with the President, is the work of the Economic Council made up of authentic professionals in the field that Grabar-Kitarovic established in June 2015.

President of Croatia
Kolinda Grabar-Kitarovic
with the members of her Economic Council
July 2015

Third Point: national security and defence – investing in further modernisation of military forces. Furthermore she stated that “modern Croatia was created through the Homeland War under the leadership of Franjo Tudjman and the backs of war veterans defending Croatia. I will reinstate and protect the dignity of the veterans and the Homeland War,” she promised. The strongest achievement with this point of promise, to my view, is the removal from the foyer of the Office of the President the bust of Josip Broz Tito and placing there, among Croatia’s greats, the bust of Franjo Tudjman on the day she marked the end of her first year in office. This act announces a successful realisation of all her goals in this area including the rehabilitation of some 100 Homeland War generals forcefully retired in 2000 when the pro-communist Stjepan Mesic rose to the presidency after Tudjman’s death. Given the still persisting ideological divide in Croatia, with one side still hankering for the days of communist Yugoslavia this move by Grabar-Kitarovic is indeed politically courageous.

Croatia’s geopolitical reality in which a new cold war between Russia and European Union is entirely possible, Grabar-KItarovic’s achievements in this promise go beyond just modernising the military and the purchase of fighter helicopters etc. Her efforts and achievements within the first year in office as President are notable with the changes to general worldly as well as Croatian views as to where Croatia belongs. From the start of her mandate she advocated for and adopted the initiative “Baltic – Adriatic – Black Sea” and re-orientation towards Central Europe – where objectively Croatia belongs. The “Baltic – Adriatic – Black Sea” initiative is all the more important not just in securing Croatia’s energy supplies and funnelling routes for Croatian energy exports (e.g. gas) but also because it assumes an active collaboration between Croatia and the Visegrad Group countries (Poland, Czech Republic, Slovakia and Hungary). United States and China have expressed support for this initiative.

Baltic-Adriatic-Black Sea initiative
National Security Meeting
February 2016 Munich Germany
From right:Andrzej Dude (Poland), Borut Pahor (Slovenia);
Kolinda Grabar-Kitarovic (Croatia);
Thomas Hendrik Ilves (Estonia);
Rosen Plevneliev (Bulgaria)

Fourth Point: rule of law and legal stability of Croatia. Kolinda Grabar-Kitarovic insisted and insists on zero tolerance when it comes to corruption. Indeed, to be effective in eradicating corruption all parts of the society must be involved in fighting against corruption. Series of meetings with the State Attorney Dinko Cvitan addressed eradication of corruption and organized crimes and the need to the state’s anti-corruption body to keep abreast of developments in that area within European standards and Croatia’s need to comply with those in future work. While Grabar-Kitarovic has no direct authority over the work of the state attorney she as president has the authority to require and check on compliance with EU standards in fighting against corruption and organized crimes and, hence, within her first year she has taken positive steps in keeping her eye on progress and work in this area. Unlike her predecessor she has become a part of anti-corruption battles in Croatia and that is a significant achievement that would not have seen the light of day were she not astute and assertive for her role as president.

President Kolinda Grabar Kitarovic
met for first official meeting
with State Attorney Dinko Cvitan
in March 2015
Photo: HINA

Fifth Point: Foreign policy and diplomacy for Croatia’s reputation.
”We need to renew our strategic partnerships with our allies, reposition ourselves and strengthen our positions within NATO and EU frames,” she said. Solving of all open questions with our neighbours, the special question of the missing (from the war), the politics of clean accounts with Croatian interests as foremost importance… border issues on river Danube… Her first foreign visit as president was to Bosnia and Herzegovina where more than 500,000 Croats live, pledging her support. Of special importance in the achievement of her goal in this point is the support she received for the so-called “Brdo-Brijuni” process where she together with Slovenia’s Borut Pahor initiated a strong move to win over the U.S. to renew its interest in South-Eastern Europe; Jo Biden, U.S. Vice-President had as a result visited Croatia within her first year as president of Croatia and strengthen the platform for future relationships including investment opportunities. In her first year of presidency Grabar-KItarovic has made 31 foreign visits which all have contributed to a significantly raised reputation and awareness of Croatia on the international scene, creating a positive trend in strengthening trust in Croatia, which is a prerequisite for future investments into its economy.

From left: President of Croatia Kolinda Grabar Kitarovic
Jo Biden, US Vice-President
Borut Pahor, President of Slovenia
in Croatia November 2015
Photo: Zeljko Lukunic/PIXSELL

In summary, Kolinda Grabar-Kitarovic as president of Croatia has had the misfortune that her first year in office coincided with general elections for the government and election campaigns that often overshadowed her presidency and its ability to function unimpeded in its role. She has had to put up with an antagonistic and negative attitude of the centre-left government that rejected working with her but she persevered nevertheless and created her own teams or councils to begin tackling the important questions pressing Croatia for progress.

Her first year in office is a mixed bag of successes and obstacles within a political climate that did not lend itself to “Croatia first” but to political survival of centre-left government and political assertion of conservative centre-right opposition. Overall, she has triggered a positive energy for Croatia on the international scene and influenced a professional approach demeanour in solving the country’s economic woes especially. Her second year in office, with a government that is likely to collaborate with her better than the last, will be the real test for her skills as president; the real test for success or failure.

I am disappointed, though, to see that little or no real progress has been achieved at doing better in securing positive outcomes for Croatia that diaspora could bring. Same old rhetoric, same old points made as have been for the last twenty years. It’s to be expected that Grabar-Kitarovic will work much better with the new government, with which she shares similar ideological views – those of centre-right or conservative wing. At least there hopefully won’t be the situation where the president and the government are traveling along as separate islands, parallel but never to meet, each trying to prove the same thing alone, wasting energy and resources, doubling up on matters that should be joint efforts. Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)

Filed Under: Uncategorized Tagged With: Andrzej Dude, Baltic-Adriatic-Black Sea initiative, Borut Pahor, Brdo-Brijuni process, Croatia, Dinko Cvitan, Franjo Tudjman, Jo Biden, Kolinda Grabar-Kitarovic, Rosen Plevneliev, Thomas Hendrik Ilves, Tihomir Oreskovic, Zoran Milanovic

Croatia: Corruption And Bribery – Former President Stjepan Mesic Named In Finnish Indictment?

May 25, 2014 by inavukic 40 Comments

One of the largest bribery/corruption cases on the international scene are the Finnish State Prosecutor’s cases of corruption and bribery against managers of Patria armoured personnel carriers contracts that has already in its offshoots seen the Slovenian former Prime Minister Janez Jansa behind bars since June 2013.

Croatia’s former president, Stjepan Mesic, has for a couple of years or so been denying any involvement in the Patria Arms deal alleged corruption with Croatia during the years of his presidential mandate. He has consistently distanced himself from the deal and only too swiftly accused the media of underhanded malice and lies at any mention of suspicion against him. Indeed, he called it all a political witch hunt and work of a political intelligence!.

And now – during the past week – it looks as though something significant and criminal may truly have occurred because the Finnish Prosecutor, according to Croatia’s news portal Vecernji List, has just commenced with preliminary hearings at court against three Patria managers. The allegations against the three Patria managers reportedly include that Croatian former President and Prime Minister were given bribes and the Finnish indictment against Patria managers alleges that the bribery deal was reportedly as follows:

The former Croatian president Stjepan Mesic 1% (cca 630,000 Euro), to the former Croatian Prime Minister Franjo Greguric also 1% and to the director of Croatian company Djuro Djakovic, Bartol Jerkovic, 2% of the bribe for “helping” in the sales deal of Patria armoured personnel carriers to Croatia. The initial bribe amount was reported to have been 20 million Euro but as the number of vehicles purchased by Croatia had been reduced the bribery amount is reported to have ended up being 3.1 million Euro!

The claim against the three Patria managers is now a public document and Vecernji List writes that the Finnish Prosecutor Jukka Rappe emphasises, once again, that the Finnish side has not nor does it have the jurisdiction to confirm the guilt of Croatian citizens in the matter and that they have not confirmed yet as to whether the persons named in the claim (Mesic, Greguric, Jerkovic) had received the bribes and that the investigation into these bribes is in the hands of the Croatian Attorney General’s office (DORH). The trial in this case commences in Finland in September.

The Finnish Prosecutor Rappe has reportedly stated in public that this case is very complex because some accounts were falsified, and they do not know everything that was paid for!

Well, well, well – if these claims prove to be true, it does not surprise me at all that there seems to be a lack of records for what was paid for to Croatia where Stjepan Mesic is implicated. It all sounds to me very much like the “little” sad story of Stjepan Mesic and the obviously highly suspect trail of money for humanitarian aid to Croatia given to him in 1992 in Australia to take to Croatia and have the cheques for tens of thousands of dollars in the name of Croatian National Fund deposited in the bank in Austria. To my knowledge (and I have had access to the relevant bank account statements of the time), the cheques never got deposited in the bank, no one knows to this day where the money went, Mesic had claimed that he forgot about carrying the cheques, that when he discovered one in the pocket of his coat after one year from returning from a trip to Australia, then, some 15 years after the fact, he remembered giving that cheque to the then parliamentary speaker Zarko Domljan to use for the renovations of the Croatian government offices bombed by Serbs in 1992! I doubt that the cheque was given to Domljan or money spent for renovations, but even if it were the case one must ask the question: how was it possible for someone like him – who was NOT a signatory to the cheques’ beneficiary bank account – to actually cash the cheques or use them for another purpose than the one the funds were raised for among Croats in the diaspora!?

To my understanding and knowledge this could only have been done through corruption. And, of course, if the cheque was given to Domljan, then it would have been cashed by persons other than those who were signatories to the bank account to which the cheque was made (the Croatian National Fund bank account in Austria has been reported as not having processed the cheques in question at all!). Mesic never explained how this was possible, let alone the awful and corrupt reality (if it’s true that he gave the cheques to Domljan) in which he admits he decided to use other people’s money (donations for a specific and different cause) for purposes he himself decided upon without any reference whatsoever to those who donated the funds!

It is utterly gut wrenching to think that Croatian authorities may still not have taken it upon themselves to investigate these war profiteering allegations connected with Mesic, which have been in the public arena with what one could easily conclude a great amount of evidence for the past 15 years, at least.

I wonder if he saw to a similar scenario when it comes to moneys that came in from Patria arms deal, siphoning off the bribery cash into private pockets? Perhaps not, perhaps yes – in any case these are allegations that must be investigated regardless of any investigation’s outcome for they are within the public interest domain.

So, is the Croatian Attorney General’s office – DORH – going to investigate the allegations of bribery by the Finnish Prosecutor, or is it investigating it already? Certainly, the possible excuse for not doing anything in Croatia about these allegations in the form of “the Finnish courts have not finished yet…” would be utterly pathetic. Slovenia had investigated the alleged solicitation of bribes while signing a defense contract with the Finnish company Patria for a supply of armoured vehicles, its former PM went to jail for it so – where are the investigations in Croatia of allegations that former president Stjepan Mesic and former PM Franjo Greguric may have been involved in bribes from Patria, then!?

Of course, as usual, Mesic vehemently denies any wrongdoing! So, does Greguric. But that is no excuse for Attorney General’s office (DORH) to stay on the sides and not investigate these serious allegations of bribery now reportedly included in the indictment documents against three Patria managers put to Finnish court by the State Prosecutor. If Croatia’s former attorney general, Mladen Bajic, did nothing then perhaps the recently appointed Dinko Cvitan will?

The District Court in Hämeenlinna, Finland, had at end of January 2014, handed down the first decision in a Finnish court on the latest Patria bribery case. Patria, a majority state-owned defence contractor, was accused of paying bribes to Slovenian officials in connection with an armoured vehicles deal. The court rejected the charges, though it said a reasonable doubt remained. The Finnish State Prosecutor has lodged an appeal against this decision with a higher court, requesting the integration of the Slovene and Croatian Patria bribery cases into a single trial.

It’s high time Croatian office of state attorney – DORH – rolled up its sleeves on this matter and investigates it just as Slovenia investigated their part! Ina Vukic, Prof. (Zgb); B.A., M.A.Ps. (Syd)