The Telecom affair: commission fees, bribes and secret accounts
by Miša Brkic
Six years ago, when 49% of Serbian Telecom was sold off, all those involved were paid their cut. Who actually got what is still being investigated in Italy. In Serbiait is public knowledge that by selling Telecom Milošević bought an additional three years in power, and that some of the money went to paying off pensioners and 'workers'.
Fabio Fabris, director for Eastern Europe of the Italian producer of pasta, biscuits and cakes Barillo, stated on 28 September after his firm's successful promotion in Belgrade, hosted by the famous skier Alberto Tomba: 'We shall not be buying any Serbian factory, since this is not possible in your current political and economic situation.' This commercial restraint on the part of the famous Barillo brand is undoubtedly based on an estimation of the risks involved when investing in Serbia; but it probably also reflects the recent experience of another large firm, the Italian Telecom, when six years ago it purchased a share of the Serbian telecommunication company.
Barillo's promotion of its products coincided with a visit to Belgrade by Italian parliamentary deputy Enzo Tarantino. Tarantino came at the head of a parliamentary commission of inquiry, whose purpose is to trace the ramifications here in Serbia of the bribery affair currently involving political and business circles in Italy in connection with the sale of Serbian Telecom in 1997 - i.e. at a time when, as Barillo director Fabrio Fabris would have said, the political and economic situation in FRY was not right for such a commercial undertaking.
With the arrival of the Italian parliamentarians having been authorized by the investigating magistrates, the Telecom affair has gained a new lease of life here. Spice was added to the meagre media meal by the Serbian minister of justice Vladan Batić, who boasted on his return from The Hague that he had finally got from chief prosecutor Carla del Ponte the proof of all Milošević's financial misdeeds - including, of course, the crooked deals surrounding the sale of Telecom. Apart from the 'list of Greek firms' which Batić waved on his arrival at Belgrade airport, however, none of the alleged 'thousands of crude data' regarding Milošević's shady financial dealings have been released.
Ever since June 1997, when 29% of Serbian Telecom was sold to Italian STET and 20% to Greek OTE, it has been suspected that a number of Italian and Serbian players made a lot of money out of a deal worth DM 1.5 billion ($922 million). The only serious investigation into this business is being conducted in Italy, though many are inclined to argue that there too it is being done in the interest of party politics, in the context of an acrimonious political struggle. In England a timid start at unravelling the Serbian Telecom affair was soon mothballed, even though Douglas Hurd, the highly placed representative of NatWest Bank and former UK foreign minister, could say a great deal about his commercial and private chats with Slobodan Milošević [see Francis Wheen, ‘Return of the gruesome twosome’, Bosnia Report new series 4, June/July 1998, and ‘How our politicians helped keep the Butcher of the Balkans in power’, Bosnia Report new series 19/20, October-December 2000]. One should not forget either the persistent silence of official Athens, intended to imply that, so far as Greece is concerned, the purchase of 20% of Serbian Telecom was wholly above board; there are those within the country's business circles who argue somewhat unconvincingly that, even if there was something funny about it, this is not to be publicly discussed - since every serious state should defend its national interests.
In Serbia itself there has been no serious official investigation into the sale of half the national telecommunication company. It is known that the Telecom trade union has tried to acquire documents and other evidence; that the Council for the Struggle Against Corruption has ambitiously announced its own investigation into the sale of Telecom; and that the defence minister of Serbia and Montenegro - Boris Tadić, former FRY minister of telecommunications - declared on 27 September that he had off his own bat collected data 'from all sides, including from the police and telecommunication inspectors'. However, it would be highly interesting if Miodrag Kostić, the proprietor of MK Komerc from Novi Sad and of several sugar factories in Vojvodina, were to testify. This is because, after the fall of Milošević in 2000, Kostić was asked by Serbian prime minister Zoran winđić to question Milan Bekić, who in 1997 had been minister for privatization in Marjanović's government and a key negotiator in the sale of Telecom. The hearing did take place, but it is not known what Beko said on that occasion, or which documents he showed to Kostić and to premier winđić, or whether the whole story has been shelved because the sale was entirely regular.
It is not accidental that on 26 September, after the hearings conducted by the Italian parliamentarians, Milošević’s former banker Borka Vučić publicly suggested that Milan Beko in particular should testify before the commission, since 'he was the key negotiator in the sale of Telecom'. Not all of the Serbian public may be aware that Beko has testified before the Italian courts, as have the former Telecom functionaries Milorad Jakšić and Aleksa Jokić, and the director of the CES Mekon institute Zvonko Nikezić.
The list of those whom the Italian parliament's commission of inquiry wished to question included, in addition to Borka Vučić, also Vesna Pešić, Boris Tadić, Radmila Anđelković, Mlađan Dinkić, Marija Rašeta-Vukosavljević, Ratko Marković, Ljubiša Ristić, Nebojša Maljković and Milomir Minić. Asked whether he would testify, the former governor of the national bank Mlađan Dinkić said he would not, on the grounds that he was not involved in the sale of Telecom. Ljubiša Ristić, however, could not resist the call of vanity. He told the Italian daily La Stampa that the sale of Telecom was quite untarnished, because he himself was the 'father' of the deal. The journalists failed to ask him whether he was paid as the Belgrade lobbyist and promoter of NatWest, which earned DM 28.5 million in its role as outside consultant for Serbian Telecom. According to those directly involved in the sale of Serbian Telecom, some individuals got onto the list of those to be questioned for no good reason - for example, Danko Đunić and Milomir Minić - while it is surprising that the current managers of Telecom Draško Petrović and Dragor Hiber, who thanks to their position should be well informed, did not. It would be important to learn, for example, whether either of these two is in possession of the opinions that the experts from the office of former FRY minister for foreign economic relations Miroljub Labus gave on some of the clauses of the two-inch-thick agreement on the sale of Serbian Telecom. It is said that one of these clauses states that the partners would share, according to mutual agreement, the earnings achieved by Serbian Telecom. In this interpretation, the partners would undoubtedly share the profit if the company did well, but if they agreed to share the earnings then they would be concerned only with fleecing a firm engaged in so profitable a business as selling telecommunication services.
The selection of Borka Vučić as the first witness in the investigation conducted by the Italian parliamentary commission is clearly not accidental, given her great banking experience and her detailed knowledge of Milošević's financial transgressions. The journalists and the Serbian public found difficult to understand, however, the euphoric delight on the part of deputy Enrico Nanno at the 'crucial information' supplied by Vučić - namely, that the sale of Serbian Telecom gave a financial boost to Milošević's regime - since this is common knowledge in Serbia. But everyone was excited by the 'hot' detail from the hearings passed on by deputy Giuseppe Bonfiglio, namely that Borka Vučić could not remember that she had visited Rome two days after the Telecom sale, i.e. on 11 June 1997, and had 'spent' DM 480 million there paying 'certain firms'.
A Vreme source has confirmed the information about Borka Vučić's stay in Rome and her financial transactions at the time. On 10 June 1997, i.e. two days after the sale of the Telecom shares had been signed, the sum of DM 1,213,425,630 in cash was deposited in an account opened at the Beogradska Banka in Cyprus (BB COBU Cyprus), together with DM 323,000,000 in letters of credit issued by the Swiss bank UBS and the National Bank in Greece: i.e. in total over DM 1.5 billion. It was Borka Vučić's view that some of this money should be dispersed, some stashed away, and the rest invested to earn dividends (earning DM ten million is not to be despised). She used her stay in Rome mainly for this purpose. Her other business in the Italian capital involved negotiations - for this was a time of great uplift induced by the sale of Serbian Telecom - with local partners who had been lobbied by the then FRY ambassador to the Vatican, Dojčilo Maslarović, about a great investment project linked to the tottering Smederevo steel firm Sartid. Why this deal was never completed will undoubtedly be explained by a new commission of inquiry. But this was the finale of the big deal, when the boss's most trusted operatives were spreading money about in order to plug the holes of Milošević's sinking empire.
Three days earlier, however, i.e. on 8 June 1997, it had seemed that the whole enterprise would come to nothing. The person mainly responsible (with Milošević's agreement) for potentially botching ‘the sale of the century’ was the chief negotiator Milan Beko, who decided at the last minute to change the bank in which the Italian buyer STET (the Dutch branch of Telecom Italia) was supposed to deposit the money. When he asked for - and got - from the Swiss bank UBS a diplomatically veiled confirmation that despite internationally valid banking rules the bank would not be able to guarantee security for the DM 683.9 million which STET was due to pay (since Serbia was then under sanctions), Beko decided to break the sale agreement by demanding that the money be placed instead in the small and largely unknown European Popular Bank S.A in Greece. This is confirmed by a document reproduced by Vreme conveying the decision not to pay part of the money into the German bank Trinkhaus und Burkhardt in Dusseldorf. Well informed sources state that the small Greek bank was recommended to Milan Beko by the then governor of the National Bank of Greece, and that before the transaction Beko had checked, just in case, that Beogradska Banka’s Cyprus branch had just DM 67,993 (plus 52 pfennig) in its account with the European Popular Bank.
Beko's ultimatum regarding the new banking destination practically led the director of Telecom Italia, about to leave for Belgrade to sign the agreement, to turn back from the airport. There followed feverish telephone consultations, skilfully managed by Dojčilo Maslovarić. It was only after Milan Beko had confirmed that he had 'black-on-white' confirmation of the high risk of holding money in western European banks that the director of Telecom Italia agreed to switch the money to the European Popular Bank in Greece. On 10 June this bank confirmed that two payments had arrived in the account of the Belgradska Banka’s Cyprus branch: one from STET, to the tune of DM 683,972,454, and one from OTE of DM 529,453,176. To avoid readers being confused by these money transfers being made one day by Milan Beko in Athens and the next day by Borka Vučić in Rome, it is necessary to explain that Beko had the primary task of shifting the money earned from the sale to the account that had been opened at Beogradska Banka's Cyprus branch for the [Serbian] republican Fund for development. It was only after the money had arrived in the Fund's account that Borka Vučić got down to her task of allocating, hiding, investing and increasing it.
As a result, the day after signing the agreement Milan Beko flew in the Serbian government's plane to Athens with just one piece of paper in his pocket: it contained a list of the accounts into which he was to distribute the money earned from the sale. Prior to his departure he was also assured by the chief of the state security service (DB) Jovica Stanišić that he should not fear for his safety, since he (Stanišić) had more agents in Athens than the Greeks themselves did. During the negotiations surrounding the sale of Serbian Telecom, Beko had complained to Stanišić that a car removal vehicle fitted with a satellite dish was circling around his house and frightening his family; the head of the DB had told him that these were certainly not his own people, and that at least another five secret services using all manner of devices were listening in on the sale negotiations.
The day after the signing of the agreement Beko was thus in Athens attending to his task and could not be present at the reception which, according to the Italian daily Repubblica, was organized by Slobodan Milošević to celebrate the successful completion of the deal, and at which he angrily complained to Beko that the 3% taken by the 'Italian mafia' was far too much. The reception in fact took place a few days later, and people who were present and are fully informed about the concrete details of the sale now argue that this version of the alleged conversation between Milošević and Beko was in fact 'creatively embellished’ by Serbia’s ambassador to the Vatican, Dojčilo Maslovarić. According to the official version of the conversation, Milošević complained to Beko only about the huge bill that the Serb side - and the Serb side alone - had to pay to the consulting firm NatWest. Maslovarić, it seems, embellished the story in order to send a message to the Italian public that someone had earned a huge commission fee on the side, thus setting off the Telecom affair which is still alive in Italy, although the investigation has thus far failed to discover who took commission fees on this deal, or whether any Serbian politicians were also paid via their Italian partners. The long reach of this affair across planet Earth is attested by the recent news that important papers linked to the Telecom deal were taken at Rome airport from two journalists who had just arrived from Thailand.
A key negotiator on the Serbian side (who has refused to be publicly named), when directly asked by Vreme whether Milošević took his own share of the spoils, answered with a counter-question: 'Do you think that Milošević would risk sharing a bribe amounting to, let's say, DM 50 million with some Italian, at a time when using Kertes and the state security service he controlled the whole of the black market in the sale of cigarettes, which made that much money every week?' The Vreme correspondent was not satisfied with that answer, of course, given the well known greed shown by members of Milošević's family.
During the past years the Italian public, politicians and justice system have been concerned solely with the question of whether they paid too much for 29% of the Serbian Telecom shares. If it were discovered that the price was unnecessarily high, it would become clear that some of the Italian negotiators had agreed to this in order to increase their own commission fees. The justified suspicion that the shares were overpriced is encouraged by a seemingly inconspicuous detail belonging to an earlier phase of the sale negotiations. It is said that at one point the Serbian negotiator Milan Beko, without any obvious reason or expert estimates, suddenly informed the Italians that their 29% participation in Serbian Telecom was going to cost an additional DM 100 million, i.e. another 7% of the total sale price. When asked by the Italian negotiators why he had raised the price, Beko told them casually that this was because the Greeks too had made an offer. Following this 'argument', the Italians immediately agreed to pay DM 100 million more. Whether this was a sign that someone's commission would be increased proportionately remains to be established by the Italian courts.
There is an important indication that a strategic move was made at the very start of the process of privatization of Serbian Telecom, which would later allow the partners to engage in various forms of machination, including the taking of bribes and commissions. The person who advised Milošević to avoid sale by international tender in favour of a bilateral agreement knew very well that bribery would be an unavoidable aspect of the sale negotiations. The foreign partners probably knew this too when they agreed to the initial rules of the game. What took place next was nothing but 'creative interpretation' of these rules agreed in advance. In the case of an international tender process, the possibilities for such 'creativity' would have been greatly reduced.
The Italian public would like to know about the role of people like Srđan Dimitrijević, Gianni Vitali, Igor Marini, the attorney Pauletti, the notary Boscaro, the businessmen Mares and the individual called Romanazzi. They would like to know whether the STET representative Tommaso Tommasi di Vignano had the permission of the Italian government to sign the agreement to buy 29% of Serbian Telecom. They take also as highly significant the recent statement by former Serbian opposition leader Vesna Pešić, now SCG ambassador in Mexico, in which she spoke of a highly unpleasant meeting in 1997 between the opposition leaders and the Italian foreign minister Lamberto Dini, during which the latter hid neither his sympathy for Milošević nor the financial help designed to keep him in power.
All this, however, is not enough for the Serbian public, politicians and judicial organs to insist that some Belgrade politicians or members of Milošević's family or smaller players have taken bribes during the sale of Serbian Telecom. According to the available information, it is difficult to argue that anyone from Milošević's circle or he himself took a cut. It is likely, though, that the deal was far from transparent, and that the individuals involved must have profited from it. People who understand this kind of business argue that even if some on the Serbian side were paid out of the commission fee, this would have come from individuals on the Italian side of the deal.
To judge solely from the ‘Report on the use of foreign currency of the Fund for development of the Republic of Serbia in the period 13 June 1997 to 31 December 2000' (the Report is dated 31 December 2000!), it would seem that all the Telecom money was squandered to buy social peace and allow a painless continuation of Milošević's government. For him and for his camarilla this was worthwhile, since the sale allowed them another three years in power from the time of signature in September 1997 (Milošević fell in September 2000). During that period most of the money was used by the republican fund for pensions and disability insurance (DM 721.5 million) and by the republican fund for health insurance (DM 180.4 million). Up to DM 490 million, i.e. a third of the total money made by the sale of Telecom, was spent by Milošević and his premier Marjanović to pay wage arrears and other forms of financial sedation to the Serbian working class. These were the black bags which Marjanović took to Zastava, Bor, Niš, Kruševac and other places to silence the intermittent social dissatisfaction of the 'working class'. The Serbian radio and TV station was also 'rewarded' with DM 1.5 earned from the sold shares.
The Italian parliamentary commission continued its investigation on Monday 29 September, when it questioned the former president of the Serbian Telecom management committee Radmila Anđelković and the former FRY minister for telecommunications Boris Tadić. On Tuesday the Serbian minister for telecommunications Marija Rašeta-Vuković and the former federal vice-premier Danko Punić were also heard. Since at the start of the investigation it was said that the public would be informed on a daily basis about its progress (as demonstrated on 26 September in the case of Borka Vučić), the journalists got themselves installed in the First Municipal Court on Monday and Tuesday - but, as it turned out, to no purpose. The spokesman for the court Miodrag Majić told the public that they would remain uninformed. In the interest of the investigation. The end of which is probably being awaited by Fabrio Fabris too, in order to be able to open a Barillo factory in Serbia.
This report has been translated from Vreme (Belgrade), 2 October 2003