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Failed Privatizations had Ćopić in Common

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1-entrance-ZmajBy OCCRP
When the Serbian government privatized ZMAJ, a maker of farm equipment, they said it was a way to bring investment to an important sector of the economy. Economists saw the sale as a next step toward modernizing the strategically important company.
And a group of accused criminals, respected businessman and a former cabinet minister saw it as an opportunity to make a lot of money.

The sale of ZMAJ to a group including accused money launderer and cigarette smuggler Zoran Ćopić, and its subsequent dismantling, is a stark example of how the privatization process has been corrupted. The company that once produced combines that were used to harvest 95-percent of all crops in the former Yugoslavia is now deserted, its 38.5 hectares of land occupied by two hypermarkets – one built by a member of the consortium that was supposed to revive the company.

An Organized Crime and Corruption Reporting Project (OCCRP) investigation found that Ćopić was the common tie between a group of businessman and criminals from Serbia, Bosnia and Herzegovina and Montenegro who formed partnerships that privatized a dozen companies in the region. And the state agencies established to protect the public and monitor investments did nothing to stop them, according to documents from the privatization and other state agencies, and corporate records obtained from local registries and offshore havens around the world.

In an interview with OCCRP, representatives of the privatization agency said the company never stood a chance. Although the sales contract clearly called for ZMAJ to continue production at the same pace or greater, representatives said in a tape interview that wasn't true.

"Let's be straight, the state's is certainly not committed to the production of harvesters and tractors. We work towards the EU. Do you think that it is a strategic interest for us to have three tractor factories in Belgrade?" said Ivan Paligorić, an agency employee.

At the heart of ZMAJ and several other high profile privatizations is Ćopić, who was charged in August 2010 with laundering drug money for accused narcotics kingpin Darko Šarić. OCCRP reporters found that Ćopić has partnered with, and sometimes fronted for, some of Serbia and Montenegro's top businessmen and crime figures, according to business registry records, court documents and an interview with Ćopić. The privatization purchases, funneled through offshore companies, made millions for the partnerships but destroyed companies and ruined lives of workers.

Novakovic_Goran_04
Goran Novaković


Among Ćopić's partners: brothers Pavle and Gordan Bašić, the Stanaj family of Montenegro, former Energy Minister Goran Novaković and one of Serbia’s most well-known businessmen, Bogdan Rodić.

The Stanaj family, based in Podgorica, owns Audi and Volkswagen distributorships, real estate holdings, a large network of newspaper and cigarette stands, and is Montenegro's largest cigarette wholesaler. A Belgrade District Court convicted Anton Stanaj of cigarette smuggling in late May, handing him a 6.5 year prison sentence and a €100,000 fine.

The police charged Bašić for abuse of office for privatization fraud.

Ćopić was charged with money laundering last year in Serbia, part of an indictment that included Šarić and seven others. He fled to Bosnia and Herzegovina, and was arrested in April by police in Banja Luka, also on charges he laundered money for Šarić. In 2004, he was charged with cigarette smuggling in Serbia. He was initially found not guilty but then the verdict was appealed and a judge ordered a retrial. The case is pending. Members of the Privatization agency said they had no idea Ćopić and the others were involved in ZMAJ until informed by a reporter from OCCRP. Still, they said they don’t have the ability to search for offshore ownership or monitor money laundering, saying that task belongs with the National Bank of Serbia and the anti-money laundering agency.

Between 2005 and 2008 Ćopić privatized at least 15 companies in Serbia and BiH. Nine of them went bankrupt, often after selling off property. Two were seized due to suspicion of money laundering. Others are worthless, Ćopić said in an interview with OCCRP.

In some cases, he obtained mortgages using the state property as collateral in a violation of privatization rules, police and prosecutors said. In an interview with OCCRP, he acknowledged that he and his partners usually bought the companies only for the land value. His real goal, he said, was to take several companies he brought and combine them into two larger, stronger entities.

Several of Ćopić's largest purchases, including ZMAJ and Mitrosrem, a major land owner, were bought in tenders through the privatization agency. The agency had no control over other high-profile companies that Ćopić took private by bidding on the open Belgrade Stock Exchange.

The ZMAJ Deal

zmaj2In 1946 the new socialist government of Yugoslavia re-established ZMAJ, by then a two decade old company, as the largest maker of agricultural equipment in the country. At its height it produced around 1,200 harvesting machines yearly and employed 5,000 workers. Its productivity slipped over the years, but still churned out 34 tractors in 2005.

Since 2006, when Ćopić and his partners took over, the company has produced nothing. Financial reports filed with the Serbian Business Registry showed that the number of employees has dropped from 647 before privatization to 73 in 2010.

A recent tour of the factory showed no workers on site and a 36,272 square meter building empty and in disrepair. Glass from its windows littered the lot. A couple hundred meters away, also on ZMAJ property, are two brand new large supermarkets, including RODA, built by Ćopić partner Bogdan Rodić and since sold to Slovenian giant Mercator. The other is the company DIS.

In December of 2006, a consortium that included Ćopić and Pavle Bašić, a businessman who police charged with privatization fraud in a separate case, bought ZMAJ. The group paid €1 million for the company, and pledged to invest an additional €6 million over the five years. Instead, production stopped soon after.

The consortium used a series of offshore companies based in the British Virgin Islands, Delaware and elsewhere to gain control, further tangling the ownership, according to records in BVI, Serbia and the United States

According to Central Securities Depositary and Clearinghouse, a Serbian government agency that tracks shareholders on the Belgrade Stock Exchange, the partnership that bought ZMAJ included the following:

++Agrocoop of Belgrade, 31 percent. Agrocoop is 50 percent owned by Ćopić, Bašić brothers, and the Stanaj family of Montenegro through their companies DSD Tobacco, and Novi Sad-based Tandem Financials and Europamont.

++ Figra of Belgrade, 50 percent. The company was founded by ERG International from the British Virgin Islands. Registration documents show that Goran Novaković, former Energy Minister in the Zoran Đinđić government, was a director and representative of the company.

++D’Arcy & Platt, of Belgrade, one percent. The company was founded by Red Plate of BVI, with Novaković as director. Asked by an OCCRP reporter in a telephone interview if he was a member of partnership as the owner of this offshore, Novaković said "yes." Later, he contradicted this admission in an email. He also said he sold out the shares after one year.

++ Finpro, of Delaware in the US, 18 percent. Finpro's legal representative is Zoran Koprivica, who is the legal representative for Serbian businessman Rodić.

Finpro bought 50 percent share from Novaković. Koprivica is the president of the board of directors of ZMAJ, and three other senior employees of the Rodić family holdings are also directors.. In a taped interview, Ćopić confirmed that Rodić is his partner in ZMAJ.

Rodić could not be reached for comment and did not return a series of phone calls to his office over the previous four weeks.
Novaković responded by e-mail to questions from OCCRP. He said Rodić put him in touch with both Ćopić and Bašić, and presented them as Rodić partners. Novaković said he needed "strategic partners"' to gain privatization agency approval, and Ćopić qualified because of other businesses.

He claims that in his one year of ownership ZMAJ complied with the contract. Privatization agency documents contradict that assertion and say it didn't continue producing machines as required.

The Contract

Roda-market-behind-abonded-Zmaj-command-building-1Serbian authorities put ZMAJ up for sale through privatization with the idea that it was strategically important and could increase the production of harvest and other agricultural machines, according to experts in the agricultural field interviewed by OCCRP.

According to the sales contract, the buyer is obligated to "in a period of 5 years ... make every effort to … maintain the current round of production."

The contract would be cancelled if the "buyer does not provide continuity in carrying out basic activities registered."

But, OCCRP’s investigation showed the contract was not fulfilled. Production of harvest machines stopped immediately after the sale and the company no longer produces anything.

OCCRP obtained internal documents of the Privatization Agency - reports which shows the agency was aware that production decreases, but did nothing. For instance, an October, 2007 agency report said that "there was no organized production" and that the source of company’s income was sale of spare parts, material, renting and subsidies.

A May 2008 report showed that the company had essentially stopped operating and that sales revenues "accounted for only 9.40 percent compared to sales revenues in 2005." Today, ZMAJ produces nothing, but it still controls the contract, and with it millions of Euros worth of valuable land.

Ćopić, in a taped interview, said "ZMAJ was not purchased for agriculture" and confirmed that it was bought for its property.

Controllers for the Privatization agency found that in the first year of ownership, the partners mortgaged 24 percent of the company assets to Metals Bank of Novi Sad to, among other things, help win bank guarantees of €2.7 million for other companies owned by Rodić but not connected to ZMAJ.

The guarantee did not help ZMAJ but rather Vršački vineyards, a company privatized by Rodić. Another portion of ZMAJ was mortgaged to the same bank so that Rodić’s company M&B Invest could get €3 million, the records show. The president of ZMAJ’s board of directors, Bašić, said the money was to pay off a ZMAJ debt.

When Privatization agency officials asked Bašič to submit the contracts explaining the relationship between the ZMAJ and M&B Invest, he said that such agreements do not exist, agency records show. He could not explain why the money was paid.

The general director of ZMAJ, Vesna Miljković, was arrested in January 2011 for abuse of office costing the company €800,000. She is in detention and could not be reached for comment.

Privatization: from Montenegro to Serbia

zmaj3Most of the companies Ćopić was involved with had a similar fate. Besides Agrocoop and Zmaj, another Ćopić Company, DSD Tobacco of Niš, purchased Mitrosrem, for €15 million. Sremska Mitrovica-based Mitrosrem has, among other assets, 8,518 hectares of land in Vojvodina. In 2008, Ćopić tried to sell the company to Šarić, named by Argentinean and Serbian police as an international cocaine smuggler. They agreed on a price of €27 million to be paid over time through various Šarić front companies, according to business registry records, prosecutors and an interview with Ćopić. (See accompanying story on Ćopić’s Bosnian dealings). Ćopić said he was never fully paid for the company before police seized it after a warrant was issued for Šarić.

Other privatizations involving Ćopić or his affiliated companies included Mlinpek, a company producing bread in the town of Knjaževac. Mlinpek was bought by a consortium including Ćopić's DSD Tobacco and Agrocoop, along with Stanaj’s Europamont.

Business records show the company was liquidated in February 2011.

In 2006, Agrocoop and Europamont also bought Stanišić, a company that controlled vast amounts of agricultural land. Serbian police say Ćopić, together with his associates, illegally obtained the company's 987 hectares of land, obtaining an illegal gain of €4.1 million, Serbian police said in a 2011 press release.

Stanišić was liquidated in August 2010.

According to police and land registry documents, the land had a mortgage on it and couldn't be sold. Police allege– that Ćopić, with help from an employee at the land registry, illegally transferred ownership of the land to companies under their control.

Those companies then transferred the land to AIK bank to pay off a debt owed by another Ćopić company, Megatabak.

Ćopić explains things differently. He said to avoid Stanišić land from being seized to pay off the debts of the company, Ćopić told OCCRP he gave Agrocoop land to the bank to satisfy the debt with the agreement he could buy the land back within a year.

In September, Ćopić and three directors of his companies were charged with improperly enriching themselves through the company IPOK, a corn processing firm Ćopić bought in privatization through his company Argostan. According to police, Ćopić mortgaged assets of the entire company to get another loan from AIK Bank. Money was then transferred to other companies of his in form of loans which according to police were never paid back.

Several other companies had a similar pattern. Ćopić's companies bought the seed producing company Banat Seme, another agricultural firm in 2006, and leveraged that company to buy still another, Hemovet, for €7.5 million, according to state records. Bankruptcy of Hemovet was initiated in November 2010.

In May 2007, Agrocoop bought the cigarette distribution company Megatabak for €500,000 and transferred the ownership to Cyprus through another holding company. Ćopić said he did that only to get around banking rules.

"I wanted to separate them because of the banks, so they wouldn’t be connected companies. You can’t take a loan from the same bank if you already have one," he said. Ćopić also owned former state owned companies Sugar factory in Sremska Mitrovica and grain producer Sokolac, but both companies are now undergoing bankruptcy.

His most recent privatization, of the sugar factory in Bijeljina, Bosnia and Herzegovina, didn't get a chance to go bankrupt. He invested €6.4 million, according to Bosnian privatization records, but police blocked his shares under suspicion he bought it with drug money from Šarić. Ćopić has denied this claim.

In an interview just before his April arrest, Ćopić insisted he did nothing wrong in that case and was simply making wise business decisions.

"You go, borrow the money, and buy one company … That firm you bought has some property. And then you go buy second, third and sixth, got it," Ćopić told OCCRP.

Story by Stevan Dojčinović and Bojana Jovanović of the Center for Investigative Reporting in Serbia