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Croat Gov’t Cracks Down on Tycoons

April 7, 2000

ZAGREB, Croatia (AP) _ Miroslav Kutle had it all: an empire worth billions, a lifestyle befitting royalty and friends in high places to look after him.

Now, Croatia’s most notorious instant-billionaire is in jail, along with a former Cabinet minister and more than a dozen once-untouchable politicians and tycoons, all high-profile victims of the new government’s campaign to weed out corruption.

Although none has been convicted, they are suspected of amassing fortunes through their ties with the party of the late president, Franjo Tudjman, which ruled the country from 1990 until parliamentary elections in January.

``It appears corruption developed out of the alliance between politics and business and flourished from there,″ new justice minister Stjepan Ivanisevic said.

Croatia’s crony capitalists were allegedly granted favors, including monopolies, licenses and generous loans during the privatization of state assets.

Instead of being engines of reform in the transition to a market economy, Kutle and the others allegedly drained the cash from the companies, bankrupting them and forcing tens of thousands of workers out of their jobs.

``It’s a fact that the privatization process was another name for crime″ and corruption, said Hrvoje Vojkovic, the new head of the state Privatization Fund. ``The process largely served the interests of political groups to the detriment of public interests.″

It is a pattern that was repeated throughout Eastern Europe following the end of communism.

In Croatia, however, the new government decided to hold the oligarchs accountable after the old order crumbled with Tudjman’s death in December and then the ouster of his party.

The crackdown has extended beyond high profile cases. A series of recent arrests turned up a university lecturer accused of taking bribes and a city clerk who collected fees while posing as the head of the construction permit issuing office.

But the arrests in the last couple of months of widely known figures such as Kutle, former tourism minister Ivan Herak and Stipe Gabric, the mayor of Metkovic, seem to be an attempt to send a clear signal to Croats that the government is serious about its anti-corruption campaign.

A restaurant owner in 1991, Kutle gained control of more than 150 companies in the mid-1990s. He was arrested last month for allegedly embezzling $25 million from Tisak, once the country’s most profitable media distributor.

``The facts are true,″ said Ante Nobilo, Kutle’s attorney. ``But we claim that he did not break the law. He just exploited loopholes in it.″

At a recent preliminary hearing, Kutle dismissed the case against him as a ``political trial″ and a ``marketing ploy by the new government.″

Other accused crony capitalists are suspected of looting state monopolies while setting up their own companies to supplant them, and using political ties to win exclusive contracts to supply the Croatian and Bosnian Croat armies, which they then grossly overcharged.

Former deputy transport minister Zvonimir Vedris allegedly pocketed $2.5 million from funds while an adviser for development projects that existed only on paper.

Former tourism minister Ivan Herak allegedly embezzled $1.5 million in government funds, some of which were budgeted to pay the wages of workers at government-owned hotels. Prosecutors claim the money was used to finance his wife’s real estate business.