http://www.guardianunlimited.co.uk/serbia/article/0,2479,464930,00.html
Ian Traynor in Belgrade
Thursday March 29, 2001
The Guardian
Search for the missing millions
The United States has set Belgrade a deadline of this Saturday for arresting
the former Yugoslav despot Slobodan Milosevic. The Guardian opens a
three-part investigation into the crimes of his regime. Today: the
plundering of Serbia.
Slobodan Milosevic, the former leader of Yugoslavia, lost three wars in the
disastrous drive to create a Greater Serbia. He is indicted at the Hague
tribunal for crimes against humanity. His legacy is still visible in
flattened buildings and destroyed communities from Kosovo to Bosnia and
beyond. Now he could be put in the dock - for buying himself a new back
garden.
Two days before Nato started bombing Belgrade two years ago last weekend,
Milosevic bought 8,000 square metres of prime land behind his Belgrade villa
in the elite suburb of Dedinje for around £3,000. He could face charges of
abuse of power for buying the plot at such a knock-down price.
"It's absurd," snorts Braca Grubacic, a veteran Belgrade analyst. "The
butcher of the Balkans goes on trial for illegally buying an outhouse and a
bit of garden."
A fortnight ago Milosevic received a summons to the investigating magistrate
looking into the alleged property fiddle. He ignored it. It was his first
brush with the law at home. It won't be the last, for the property affair is
the tip of an iceberg of allegations and indictments concerning the crimes
of the Milosevic era.
The former president is being hounded from several directions: from
inquiries into political assassinations of opponents under his regime, to
claims that he committed electoral fraud and probes into alleged war crimes
against Bosnia, Kosovo, and Serbs themselves. And then there are the
allegations of large-scale embezzlement, running perhaps to hundreds of
millions of pounds over the past decade.
"Financial crimes will be the main and the most promising charges against
Milosevic," says Goran Vesic, a lawyer, politician and chief aide to the
current Yugoslav interior ministry.
The Guardian has pieced together the jigsaw of Milosevic's missing millions.
Our investigation, drawing on interviews with many of his closest advisers,
including his personal banker and Serbian ministers, as well as with Hague
investigators and senior western officials, has tracked the labyrinthine
route in which money was gathered and then salted away.
The scale of the plundering of Serbia is awesome. Investigators at the
Yugoslav central bank have posited an overall figure of $4bn. Regime
insiders, including Milosevic's close relatives, are believed to have
hundreds of millions of pounds held abroad in private, numbered or alias
accounts in Cyprus, Switzerland, Lebanon, Russia, Greece, and Israel, to
name a few of the most favoured destinations.
Cyprus was the hub of an intricate money system. Through Cyprus, billions
were spirited out of Serbia in cash and redistributed around the world.
The banker masterminding the system was Borka Vucic, 73, retired, a
Milosevic family friend. Before returning to head Serbia's biggest bank,
Beogradska Banka, in 1998, she spent nine years in Cyprus as head of the
bank's offshore subsidiary.
Speaking in her elegant Belgrade flat around the corner from Milosevic's
villa, she admits managing a vast surreptitious exercise in cash dispersal.
"I am not authorised to say how much," she smiles. "All the banks did the
same to survive. A lot of people were taking money into Cyprus. There were
other people on airplanes carrying the money, but not with me. If someone
was taking money without the permission of the bank or the companies, it's
not my responsibility."
Milosevic's brother, wife and daughter have bank accounts, now frozen, in
Switzerland, according to Yugoslav government sources and western diplomats
in Belgrade. So do Mirko Marjanovic, the former Serbian prime minister who
controlled the lucrative grain export business to Russia throughout the
1990s, and Dragan Tomic, a Milosevic aide and former parliament speaker.
Two key Milosevic supporters, Nikola Sainovic, a former deputy prime
minister who controlled the precious metals trade and is indicted for war
crimes in Kosovo, and Dusan Matkovic, ex-deputy leader of Milosevic's
Socialist party and head of the giant Sartid steel works at Smederovo
outside Belgrade, have bank accounts in Beirut, according to a former banker
inside the regime. Mladjan Dinkic, the new central bank governor who is on a
crusade to recover the cash, estimates the overall sum at $4bn. The bulk was
used not for personal gain, but to keep Serbia trading through a decade of
United Nations economic sanctions.
"Milosevic does not have billions stashed abroad. The money was spent on
survival and some people got enormously wealthy," says a knowledgeable
Serbian source who asked not to be named.
So where did the money come from? Flawed privatisations have been suggested
as one important source. Vuk Obradovic, a Serbian politician, is heading a
commission of inquiry into what happened to hundreds of millions of pounds
that was never booked into government accounts as part of the proceeds from
eight privatisations in the 90s.
Vanished
Another common technique involved customs receipts. Boris Begovic, chief
economic adviser to the Yugoslav government, ordered an audit of the customs
service for last year. He claimed tens of millions of German marks in
government revenue had vanished because traders favoured by or working for
the regime were exempted from customs duties.
"I was stunned by the gap between the nominal customs burden and the
effective customs burden," he says. "And this had been going on for 10
years. They be came more greedy as time went on. The last two years were the
bonanza time."
There were preferential loans to crony companies and individuals plus
windfalls from manipulating the foreign exchange black market. Beobanka, an
offshoot of Mrs Vucic's Beogradska, was ordered to give "loans" to the TV
company owned by Milosevic's daughter Marija, and to the trading company
owned by his notorious son Marko.
Under Milosevic in 1993, Yugoslav inflation was at the inconceivable
annualised level of 286 billion per cent, with the central bank issuing
50-million dinar notes. More routinely in recent years the real value of the
national currency was a fifth of the official rate, with the regime
controlling the black market and using it to hoover up hard currency when it
needed it. State-controlled banks were ordered to provide unsecured D-mark
loans at the official rate to countless crony firms and individuals who
could then use the black market to make an instant 400% profit.
A regime insider and banker who helped orchestrate the 1990s operations and
had his own bank account in London frozen reckons that $20m has been
embezzled by Milosevic associates. Others put the figure much higher.
"We were never charged with taking private funds outside the country," says
the banker. "We were hiding government funds, preserving them from the
sanctions, playing games with the European Union and the US."
When UN sanctions were imposed on Yugoslavia in May 1992 because of the
Bosnia war, Milosevic had already anticipated the embargo and established
the infrastructure for exploiting the international banking and trading
systems to bust sanctions and keep importing vital commodities.
The elaborate operation was centred on Cyprus because of its banking
secrecy, offshore companies culture, and the sympathy of Greek Cypriots for
the plight of their fellow Orthodox Serbs. Cyprus was the conduit for
billions of dollars in cash from Serbia. The funds were then dispersed
globally or into the accounts of scores of anonymously owned offshore
companies registered in Cyprus.
In the early 1980s, Milosevic was president of Beogradska Banka and Mrs
Vucic was his deputy. She lays fair claim to being the most formidable
banker communist Yugoslavia ever produced. Shrewd and well connected, Mrs
Vucic boasts of knowing 4,000 bankers around the world and shows off photo
albums and a silver platter she received from Barclays Bank. If there is no
doubt that Mrs Vucic was the linchpin of the Milosevic money system, she
vehemently denies handling Milosevic family money or doing anything illegal.
She insists she was only doing her patriotic duty in helping her country to
evade sanctions.
"I know Mr Milosevic quite well and I know the family. He was a fighter, a
good banker and a good president," she says. "But we had no business at all
with the family. I believe they have some other banks but not Beogradska."
After the toppling of Milosevic last October, Mrs Vucic, by then overall
president of Beogradska Banka in Belgrade, declined to vacate her office. "I
refused to hand over the bank to those unauthorised men, five of them who
came with guns," she explains.
Serb officials and western diplomats in Belgrade tell a different story. Mrs
Vucic, they say, was evicted from the bank, returned with a team of armed
guards for a "midnight excursion", broke into her old office in the early
hours, and emptied the safe of documents. On Tuesday Belgrade prosecutors
announced they were opening an inquiry into whether some of Mrs Vucic's
activities as bank chief were against the national interest.
All through the 1990s she headed Beogradska Banka's offshore subsidiary in
Cyprus, the biggest offshore bank on the island, handling the accounts of
the myriad Serbian offshore companies established there, such as Yugometall,
the state company trading in metals.
Its shareholders secret, the company was managed in Nicosia by Edo
Alibegovic, now based in Zurich and running a different company which is
currently involved in a Swiss inquiry into alleged illegal Serbian gold
exports. Key clients of Mrs Vucic and Mr Alibegovic in Cyprus were the Bor
copper and gold mining complex in southern Serbia, a state enterprise that
is the fiefdom of Sainovic, and the Sartid steel works run by Matkovic.
A former Beogradska Banka executive and an authoritative Yugoslav diplomatic
source say Sainovic and Matkovic have private bank accounts in Beirut, where
Sainovic's son is a trader. Both men were frequent visitors to Beirut in the
mid to late 90s, as was Mrs Vucic. "I like Beirut. I've been there many
times," she says.
Mrs Vucic's bank in Cyprus and Banque Saradar in Beirut struck up a
cooperation arrangement in the late 90s when the Cypriots were coming under
strong US pressure to close down the Serbian operations. A typical scheme to
siphon off the money, sources say, was for Mr Matkovic to agree to sell
Sartid steel to a Lebanese client. The deal is financed through the Banque
Saradar in Beirut. The steel is delivered. The client complains falsely that
the steel is sub-standard. Both sides nominally agree to half the price and
the other half is split between them.
Lebanese banking secrecy laws proscribe divulging information on accounts
unless the funds are suspected of being involved in the drug trade. The
Yugoslav airline JAT was required to act as a courier for the shipment of
large volumes of US dollars and German marks, in cash in bags and suitcases,
from Serbia to Cyprus from where it was taken to Beirut, also in cash, or
transferred to Switzerland and other countries using accounts at Cyprus
Popular Bank, Serbian and international sources say. JAT's general director,
Zika Petrovic, was shot dead outside his Belgrade home in May 1999,
allegedly because he knew too much about how the regime used his airline to
ship the cash.
The airline is also said to have been used as a courier for drugs, with
Milosevic regime associates implicated in international drug trafficking.
This month Serbian police found more than 600kg of high-grade heroin
deposited in a Belgrade bank vault by Milosevic's secret police. When two
key Milosevic henchmen, Rade Markovic, state security chief, and Mihalj
Kertes, head of Milosevic's customs service, were arrested earlier this
year, police found drugs in their offices.
"There is considerable evidence indicating that Milosevic and his entourage
constitute an OC [organised crime] structure and are engaged in drugs
dealing, money laundering, and other criminal acts," said a confidential
German intelligence report leaked just after last October's revolution.
The hard evidence of corruption and embezzlement against the Milosevic
regime is mounting weekly. Seven former Milosevic loyalists were detained
this week in Belgrade on suspicion of property fiddles, fraud, and
profiteering in medicines. But given that most of the stolen funds are
dispersed internationally, the financial case against Milosevic is also
being hampered by the lack of a concerted international effort to pool
intelligence.
For example, every time Mrs Vucic or someone else took Serbian cash into
Cyprus, they had to fill in a Cypriot customs slip which was then lodged
with the central bank in Nicosia.
"The customs declarations would be very interesting," says a western
diplomat in Belgrade. "Some people at the Cyprus central bank want to
cooperate but they are being stopped by people higher up." Cyprus has
refused to turn over the customs slips to Serb investigators.
The Hague tribunal, too, has had a small team of financial detectives
working confidentially at the Cyprus central bank for the past year. They
report personally to Carla del Ponte, the chief prosecutor in the Hague who,
highly unusually, was recently given 25 crates of documents on Serbian
accounts by the Cypriots.
But Mrs Del Ponte is in a feud with the new Belgrade government and refuses
to share her information with Mr Dinkic, preferring to withhold it as
leverage to encourage Belgrade to extradite indicted war criminals, most
notably Milosevic himself.
If Cyprus was the main hub for the dispersal of regime monies worldwide,
there is not much Serbian money left on the island now. So where is it? It
is thought to be sitting in moderate amounts in hundreds of accounts across
the world, not one of them known to be bearing the name of Slobodan
Milosevic. One analyst in Belgrade said last week that more money will be
spent searching for the missing millions than is recovered.
'I don't expect much money back at all," says Mr Begovic. "We don't include
it in our budget calculations." The authorities appear to be struggling to
build a watertight case on the bigger charges, because for more than a
decade the hallmark of Milosevic's modus operandi was plausible deniability:
never leave a paper trail that might incriminate yourself and always shift
the blame for political, military, diplomatic and economic mistakes on to
hired-then-fired underlings.
Despite this hurdle, of all the inquiries now under way against Milosevic
the financial one looks most promising. Until last October, observers liked
to compare Milosevic to Saddam Hussein. Now the common comparison is Al
Capone. In the end, the FBI put the racketeer and murderer in jail but could
only nail him for financial crimes.
Slobodan Milosevic, meanwhile, is living out what look like his last weeks
as a free man, cushioned from the corruption and bloodshed he unleashed
throughout a decade of absolute power. Around the corner from Mrs Vucic's
flat, the former president of Yugoslavia enjoys the comforts of a government
villa at Uzicka Street Number 11, on millionaires' row in the elite Belgrade
suburb of Dedinje.
He is not paying his bills or rates, say government officials. He is,
however, funding a retinue of private security guards who patrol behind the
high metal fences along the street from Milosevic's private home, with its
new back garden.
