Abuse of office (part three)

Abuse of office (part three) Serbia is the only country in Europe today which still has not adopted the Denationalisation Law, even though it is one of the main prerequisites for the country’s EU membership. Meanwhile, representatives of the communal, local and state authorities have taken the advantage of the situation, practically - through various acts and decisions – to serve those locations on a plate to certain individuals. Because of that, when Serbia finally gets the Denationalisation Law, citizens will be obliged to pay the damages to the rightful owners, but this time at market prices, estimated to reach millions of euros, all because of the state representatives’ decisions and actions. What became, during the Communist regime, known as the “socially-owned property” – which in effect was everyone’s and no-one’s property at the same time - instead of being returned to rightful owners was turned into the state property during the Milosevic regime. The law enabling such transition of property was adopted in 1995. The infrastructure minister at the time was Branislav Ivkovic. Branislav Ivkovic, Infrastructure Minister 1994-1998: “Unfortunately, Serbia’s constitution did not recognize private property, and the legislator – in this case the Infrastructure Ministry which drafted the law – could only project that the acres of city’s construction sites should become either state or socially-owned property. I practically saved those sites, when we drafted the law on city’s construction sites, by stating it as a fact that the sites, as they were, belonged exclusively to the state. Otherwise, it would have been ravaged for commercial purposes... “ B92: What did you save it from when it was... Ivkovic: “We saved it so it would not to end up robbed in the way the economy was savaged.” B92: But, hold on... the sites are plundered, are they not? Ivkovic: “No.” B92: What do you mean no, when certain businessmen have got a hold on it? Ivkovic: “Today they can... The state has all the resources necessary to return those sites, providing that there’s a will in place.” B92: But, how could the state return them, since the sites have been built on since? Ivkovic: “The same way the economy was robbed during the privatisation process. I am telling you that the city’s construction sites would have been robbed fivefold compared to the privatisation, if the state didn’t take over.” B92: But your decision not to return the sites to their true owners will as a result have a consequence that, after the denationalisation law is adopted, the citizens will have to pay damages to the owners at current market prices. Ivkovic: “Let’s get one thing straight: had the city’s construction sites been made ‘socially-owned property’, then it would have certainly been robbed in the same way that Serbia’s economical resources were sold after 2000. B92: Still, why didn’t you return that? Ivkovic: Why was not that returned more recently? How come that not a single law on expropriation has been adopted yet? B92: All right, but I’ve asked you a question. Branislav Ivkovic: Well, I am asking you why? How come that this government, which swears to be a democratic one, did not adopt an expropriation law? The restitution law adopted in many countries has enabled the injustice to be corrected. The law stated that the property confiscated by the Communist authorities should be returned to the true owners, or their successors. Even though the representatives of the Democratic Opposition of Serbia (DOS) kept promising in the wake of the 5/10/00 that their priority would be the adoption of the denationalisation law, thus correcting the injustice made by the Communist authorities, that law still has not been adopted. Meanwhile, the privatisation law was adopted in 2002, regardless of the fact that, practically, it was not clear what was actually being sold, since many privatised objects had had previous owners. Mladen Komadinic, the successor of the buildings in central Belgrade, where the Belgrade’s Department Stores were settled says: “We’ve expected the righteous restitution. We expected all the injustice that lasted for the last fifty years to be corrected after changes that occurred on October 5, 2000 [the fall of Milosevic].“ Another example to what happened with the private property following its nationalisation during the Communist regime is the Belgrade Brewery (BIP). Prior to 1945 it belonged to the family of Bogdan Veljkovic, which was one of the most prominent families in Belgrade before the rise of communism. In 1945 they were declared “in the name of the people” as the enemies, and all of their assets were confiscated. The family owned the Old Mill (Stari Mlin), the BIP, and the sites in central Belgrade’s Rajic Street. Bogdan Veljkovic is now the US citizen. He is an international banker who has spent 48 years living in the United States and France working for many international banks. However, in 2001 he decided to return to Belgrade, where he is still trying to return the property confiscated from his family during the Communist regime. Bogdan Veljkovic is now the US citizen. He is an international banker who has spent 48 years living in the United States and France working for many international banks. However, in 2001 he decided to return to Belgrade, where he is still trying to return the property confiscated from his family during the Communist regime. Veljkovic is now the president of the Restitution Union and he is the successor of the Veljkovic family property: “I was in Switzerland during those awful years and I truly believed that that some changes would occur. I thought that we would enter the circle of the civilized countries,” he said. In the next episode you will get a chance to see in what ways the privatisation process in Serbia has turned into the real-estate purchase instead into the recovery of the country’s economy as the state officials tried to represent it to the public. Still, one of the largest issues remains the fact that the privatisation law has been adopted without solving the problem of the restitution. In fact, it was upon the state authorities to know whose property was being sold – which led to the ambiguousness of the sales, since the state failed to take care of the sales records. Following the October 5, 2000 changes, Aleksandar Vlahovic became the Minister of Commerce and Privatisation. It was under his jurisdiction that the privatisation law was adopted. Aleksandar Vlahovic, Privatisation Minister (2001-2004): “We simply could not wait for the denationalisation law to be adopted. We needed to start with an important process of restructuring of Serbia’s economy, so we drafted the privatisation law, which was later adopted. I was not happy with the fact that the privatisation law was implemented in an atmosphere of constant pressures coming from the former owners. I understand their demands completely. Finally, during the 2003 election campaign, the slogan “We will adopt the denationalisation law” was one of our major campaign goals.” B92: As it was prior to 2000? Aleksandar Vlahovic: Exactly. But I cannot talk about those times, since I was not politically active back then. However, after 2004, those who promoted their policies during the campaign on the basis of the adoption of denationalisation law, failed to adopt it. Starting from 2004, through the privatisation process, factories and companies that had their true owners were being sold. Predrag Bubalo, who was the minister in charge at the time, refused to talk for our programme. “Djordje Weifert” brewery was on the site of today’s BIP factory. As of 1922, the Veljkovic family became the owner of the brewery. It was the biggest brewery in the Balkans and it was nationalised in 1946. “Djordje Weifert” brewery had 600 acres of land and some estimate it to be worth even EUR 70 million. Bogdan Veljkovic, President of the Restitution Union: “Let’s not forget that the privatisation process began during the Milosevic regime. The workers were entitled to 70 percent [of shares]. Also, a lot of the company’s shareholders were army generals. BIP factory, during the Milosevic regime, provided the army and the police with free beer. So we had a complete mismanagement in the company, which obviously, led it to collapsing. Then Karic, who through the bank in Kula became one of the shareholders of the BIP, appeared. So, after all those tycoons have taken their positions in the company, I realised that it was a national property, from which everyone should have benefited. Yet, my father was denounced as a national enemy, because he was an old owner. And all of a sudden these new owners appear, with desires to become new bosses.” Even though Veljkovic, as a successor of the old owners sought his property, which he would get, had the denationalisation law been adopted, the majority of company’s shares, owned by state, was sold in 2007 to the small Lithuanian company which deals with the production of wine and other beverages for EUR 21million. The Belgrade brewery also owned the Skadarlija sector, which once belonged to the Bajloni family, as well as the factory in Cacak, which, before the World War 2, operated as “Kren i Stankovic”. Skadarlija section, located in one of the most prominent Belgrade streets was constructed in 1880, by Ignjat Bajloni. The state failed to return it to its true successors, selling it instead to the Italian company Star Imobiliare in 2006 for EUR 10.6m. Approximately seven thousand square meters was sold. The property included three breweries and a shopping mall. This type of privatisation caused damages to the country’s budget worth several million euros, since by selling the socially-owned property, the real-estates that could have been excluded from the sale – according to the 1995 law on property owned by the Republic of Serbia – were sold. The aforementioned law states that any building or construction that the company itself did not build, automatically becomes the state property. Thus, buildings that were constructed before WW2 have become Serbia’s property. Mile Antic, is the coordinator of the Restitution Network: “What’s the point? The law on property owned by the Republic of Serbia is still valid. The fact that the law is not implemented is the fault of the state bodies that simply do not enforce it. However, according to the law, the nationalised property, real-estates, etc. are the property of Republic of Serbia and cannot be subjected to privatisation.” However, the best example of what actually happens during privatisation is the selling of Belgrade Department Store Company (Robne kuce Beograd). When the company was privatised, two buildings, that had been nationalised during the Communist regime, were sold as an integral part of the company, even though the state had all the information necessary to know that two buildings in Knez Mihailova Street – one four thousand square meters, the other seven thousand square meters – had their old owners, i.e., that the buildings were the property that would have to be returned to their true owners, after the law is adopted. These buildings have in 2007 become property of Verano Group owned by Radomir Zivanic. Zivanic, in cooperation with Greek Marfin Investment Group, bought Belgrade Department Store Company for the price of EUR 360m. The company was bankrupt for several years. During the auction, 33 buildings 240 square meters large were sold. The buildings were located in the most attractive places in Serbia’s cities. Verica Barac, Head of the Anti-Corruption Council said: “Let’s determine some sort of an average price for one square meter of the business space of the Department Store Company, bought by Baja Plavi [a nick name for Radomir Zivanic, the owner], including the nationalised property. So what’s the average price for, say, one square meter? After we determine that, we must ask a question of the price that the citizens of this country should pay for one square meter of that nationalised property before we enter the EU. Surely, due to various mechanisms such as blowing up debts, and all those well established manipulative mechanisms here, this was sold way beyond any reasonable market price, in general. The taxpayers will pay the real market value. The sale of Belgrade Department Store Company is still being disputed by one of the former owners’ successors, Mladen Komadinic. Mladen Komadinic, a successor to the old owners of the Belgrade Department Store Company’s building in central Belgrade Knez Mihailova street says: “Our family’s capital was made by several generations, and the store was on that same location for over fifty years.” Ever since the property in question had been nationalised, Belgrade Department Store Company was only the user of the premises. Still, with the help of the institutions in charge, they were catalogued as the owners of the nationalised buildings, even though there were no bases for such a decision. Mladen Komadinic: “If you take a look at the property catalogue, you can clearly see that the property in 5 Knez Mihailova Street is owned by the state and that the company is the sole user of the premises. This had been the case until 2001, when they submitted a request to be registered as owners, based on the change of the company’s structure – they went from being a holding company to becoming a shareholders company. It’s the same as if you were subletting the apartment from someone and then you change your last name to the guy you’re subletting the apartment from, thus obtaining the right to use the premises for free. Komadinic launched several proceedings while trying to warn the Privatisation Agency that it was about to sell the property that had had the old owners, going on to say that this was above all a state property which could not be sold as part of the company offices. In cases like this one, the State Attorney’s Office and the Property Administration are obliged to initiate proceedings to protect Serbia’s property. Mladen Komadinic: “The Administration and State Attorney’s Office became more responsive upon receiving our documentation. They recognised that the state had its share of sold property, and that its value needed to be assessed. However, all of a sudden, everyone gradually began to withdraw. I don’t know what happened. Perhaps, there was a pressure to leave this thing behind, I’m not sure... but all of a sudden, Milan Tomic, Director of the Property Administration simply sent one letter stating that the “[Administration] is going to withdraw its allegations stated in the previous letters”, adding that they “concur that the bankrupt company, namely Belgrade Department Store Company should be sold.” The “Insider” team got a hold of a memo signed by Sasa Juric, State Attorney’s deputy, which stated that State Attorney’s Office would not undertake any measures (to stop the sale) – which are otherwise proscribed by law. Mladen Komadinic: “The Agency sticks to the story that it was a fantastic privatisation. However, that was not privatisation, but the sale of the bankrupt company in order to calm the shareholders down, all the while promoting the sale as the privatisation, stating that there would be some privatisation revenues, which entirely was not the case. That fact could easily be proven should one take a look at the correspondence between the attorney’s office and the Privatisation Agency, where the interests of foreign investors are being allegedly taken into consideration.” The foreign investor in this particular case was in fact a Serbian businessman, one Radomir Zivanic, the owner of the Verano Company. Zivanic, also known as Baja Plavi (Blond Dude) owns Verano Group, the general distributer of Peugeot automobiles. He bought the Belgrade Department Store Company together with Greek investment fund Marfin that owns the Marfin Popular Bank. That particular bank was founded by merging of three banks. Laiki Bank was one of those three. That particular bank was infamous for its involvement in the transfer of Serbia’s money to Cyprus during the Milosevic regime. Zivanic refused to speak on our programme. He, along with most of Serbia’s businessmen, can scarcely be seen in public. He refuses to be interviewed, so there has never been an opportunity for him to explain the origins of his monetary assets. However, in 2000, he was blacklisted by the European Commission as an associate to the Milosevic regime. The EU saw him as persona-non-grata. The Verano Company was founded in 1991. Milija Babovic, another well-known “businessman” was the co-founder of the company, along with Zivanic. Today, Zivanic’s incorporates approximately 25 companies – including the food industries such as the bread producing company “Hleb” and the wheat producing company “Zitko.” Both of these companies were purchased during the privatisation process. Still, the major assets to Verano’s businesses are comprised of real-estates. He is the third largest Belgrade’s investor, following Miskovic and Matic. Apart from the Belgrade Department Store Company, Zivanic is also the owner of the “Zira” shopping mall settled at the location in the old Belgrade’s quarter at the corner of Cvijic and Roosevelt streets. The mall encompasses 45.500 square meters. His company tends to build the four-tower complex 53.000 square meters large in New Belgrade’s 23rd block. He is also building a mall 71.000 square metres large in Belgrade’s Vozdovac municipality, in the famous Trosarina part of Belgrade. By purchasing Belgrade Department Store Company, Zivanic has practically – via various notes of the jurisprudent institutions – obtained 240.000 square metres. The state has, on the other hand, sold the sites – two of which have their old owners, who want their property back – in central Belgrade at the price much lower than the real market price. The experts evaluated that solely the building in 5 Knez Mihailova street is worth at least EUR 60 million. What is interesting is that Zivanic paid EUR 1500 per square meter in altogether, while at the same time, at an auction a square meter of a building in the same location reached EUR 32,000. Mladen Komadinic, the successor to the Knez Mihailova street building used by the Belgrade Department Store Company says: “The damage is tremendous. If such an object, located in the heart of Serbia, representing the epicentre of Belgrade, Belgrade’s Greenwich so to say, can be registered to a bankrupt company by a criminal action only to be sold by that company as its own property, the question is what will happen to the property of other citizens? While the republic legislature has failed to adopt the restitution law, thus enabling the sale of the companies that have their old owners through the privatisation process, the city and its municipalities keep adopting various dubious decisions, according to which they legalise the decisions brought during the Milosevic regime and practically give the exclusive locations that have their old owners. There are hundreds of such examples, but the mechanism is the same. The Stari Mlin (The Old Mill) location is one of the examples. The Old Mill is located in 15 Vojvoda Misic Boulevard, near Belgrade’s new fairground, which is one of the hottest spots in Belgrade. The mill was the oldest one in Europe, sized 6,800 square metres. The steam mill was built in 1902, and later it was protected as one of Belgrade’s landmarks. It was owned by the Vracar Cooperative, with the majority of shares belonging to the family of Bogdan Veljkovic. In 1945, after the Communist took over power in Yugoslavia, the property was taken away from the Veljkovic family and became the socially-owned property. However, in 1995, after adopting the new law, the property, instead of being returned to their true owners, was pronounced the state property, which left space for many dubious transactions and the abuses of legislative system. Branislav Ivkovic, Infrastructure Minister 1994 – 1998: “After the denationalisation law’s been adopted, he would have plenty to return, providing someone wants it to be returned.” B92: Like what? Branislav Ivkovic: “Well it’s the state’s property. Come on... I’m asking you, why hasn’t the law been adopted?” B92: Well, you gave away the property to businessmen.... Branislav Ivkovic: Never have I done such a thing, B92: Well, apparently, you did. Add to that that those were the best locations. Branislav Ivkovic: If there’s anyone to blame for giving the property to the businessmen, i could say that the governments following 2000 used to do that. B92: It’s not true... during the time of... Branislav Ivkovic: Djindjic’s government is not to blame. But those that came later did it as much as they could. B92: But, please, hold on. During 1990s, the locations in Rajic Street, then the “Tri lista duvana” (Three Tobacco Leaves) and the “Old Mill” were lent to them, right? Branislav Ivkovic: Please go and ask the local authorities. You seem to keep mixing up... B92: But it has all been done in accordance with your law? Branislav Ivkovic: No. The property law simply gave the coordinates for the business’ framework. The local authorities were responsible for enforcing it... so, you know, the people kept electing the local authorities... they elected the Socialists (Socialist Party of Serbia – SPS), but they also elected the Serb Renewal Movement (SPO), Democratic Party (DS)... and they all had the possibility to operate within the law... B92: The law that you adopted? Branislav Ivkovic: Within the law that I proposed, they had the right to distribute the city construction sites the way they wanted to. However, you should ask local authorities how they’d chosen to enforce it. The Old Mill example illustrates the best the mechanisms and accountability of local authorities which, through various disputable decisions, created a situation where the citizens would have to pay for the restitution in order to ensure benefits for certain businessmen. Belgrade’s municipality of Savski Venac – where the Old Mill is located – adopted many disputable decisions from 1995 until 2007. It all began back in 1994, when the part of the Mill was destroyed in the fire. The cause of the fire was never established. By law, the municipality, the city and the state, have the jurisdiction to rent or put on auction only the empty lots. However, one thing strikes as interesting: three buildings, all in exclusive locations – the Wheat Company’s building, Three Tobacco Leaves and the IKL factory building – have burst into flames. The buildings were burnt to the ground, but empty lots remained. Then the lots were rented to various businessmen/investors. To this day, the causes for the fires have not been established. Still, following the fires, many people got a hold of the exclusive locations. Bogdan Veljkovic, Restitution Union President and the successor to the original owners: “It was a typical story... You have a site that is of some interest to someone. If it’s protected, you simply set it to fire. That happened eight months ago with the Three Tobacco Leaves, then with the Putnik hotel in Novi Sad. So, you have a typical modus operandi - when you want to sell the protected site, you simply burn it down and later you can build there. Immediately after the fire that burnt parts of the Old Mill – comprised of 18 buildings in total – in 1995, Savski Venac municipality, ruled by the SPS and the SPO, decided to trade the 6,800 square metre location with the Koling Company for 800 square meters of the residential zone, which was to be built in inner Belgrade. The contract was signed the same year by Branislav Ciric, the municipality’s PM, and the company’s director Milan Zukanovic. Lazo Lekovic, Legal Executive with the Koling Company: “We participated at the public tender and we bought the site as we were the highest bidder. It was all done publically. Then, we offered 800 square metres of the residential area. The site was evaluated by city’s Appraisal Institute, and they evaluated the site to be worth 800,000 Deutsche Marks. However, we recompensed the municipality with a larger sum. Back then, the value of those flats was 1.3 million Deutsche Marks. “ B92: Are you trying to say that you had overpaid the Old Mill? Lazo Lekovic: “No, I’m not saying that we overpaid it; I’m only saying that the Koling company recompensed some 30 to 40 percent to the municipality more than the estimated value of the location. The site, by the way, was completely derelict, and it needed to be repaired. We purchased the site because we needed the storage space, for we owned several construction sites nearby. “ However, the contract stated that all flats should be transferred to the municipality by the end of 1996. Beside the fact that the municipality’s decision to practically give this exclusive location to the owner of the Koling company for solely 800 square meters located in inner Belgrade was disputable, what is more interesting is that 22,000 square metres of residential locations are being constructed today, as well as the fact that the Koling company only gave 221.7 square metres six years after the expiration of the contract. Lazo Lekovic, Director of Koling’s legal department: “We made those contracts immediately, but the circumstance that followed, you know, the sanctions, war and anything else that took place, caused the companies who performed the construction, to be late. In the end, we paid the market value of the square metres we could not build.” From 1995 until 2006, the municipality of Savski Venac had signed six appendices of the contract with the Koling Company. Meanwhile, the authorities failed to break up the Koling contract, even though they had all the reasons necessary to do so, since the company failed to compensate the municipality with the apartments. B92: The coincidence seems to be unusual. Your company’s vice-president Mr Rajko Milicevic was the municipal attorney for Stari Grad during 1990s, isn’t that right? Lazo Lekovic, Director of Koling’s legal department: “I do not know why do you think it to be an unusual coincidence. You can call the gentleman, and ask him that question; I really would not want to talk about him. Still Mr Milicevic is an eminent attorney. Prior to his engagement with the Savski Venac municipality, he used to work as a lawyer and I don’t hear you saying that it’s an unusual coincidence that he was a lawyer who now works as the vice-president of our company. There are no coincidences... and besides, there are no bodies bringing the decisions, you know... “ B92: No. By the nature of his business he was supposed to take care of the contract; i.e. to make sure whether the contract was damaging or not. At least for as long as he was on that position. Lazo Lekovic: Who says that the contract was damaging? That contract was very beneficial for the municipality. B92: No, in the beginning you did not clearly state that the location would be used for commercial or residential purposes. Lazo Lekovic: But, I have given you the answer why we didn’t provide the real-estate. We did. But the municipality wanted the square metres built by other companies. We cannot influence the rhythm of other companies’ constructions. The municipality had no other signed contracts apart from those they had with Koling Company. Still, the authorities of Savski Venac municipality say that they did not break the contract, since it would have to pay the mortgage to Mirko Vucicevic, the owner of the Nevada Company. However, the Insider team has come to the licence that Mirko Vucurovic issued in 2004, that allows the erasing of his disclosing right, registered for the Old Mill. This means that in 2004, due to the breach of contract, the new authorities of Savski Venac municipality had all the reasons necessary to break up the contract with Koling and to return this exclusive location to the city. Instead, the new authorities formed by the DS made and appendix to the contract that was signed by Tomislav Djordjevic. Djordjevic is still the Speaker to Savski Venac municipality. Bogdan Veljkovic returned to Serbia after the democratic changes. He filed criminal lawsuit against all those responsible asking that the Koling Company, that breached the contract with municipality – failing to provide all the apartments that it promised – be removed from the registry. Bogdan Veljkovic, Restitution Union President and the successor to the previous owners: “When I began my inquiry they got frightened. The Koling Company decided to find some other buyer, a company named Prigan Holding from Cyprus. I made a lot of fuss about it through Americans and the European Parliament, asking the Cyprian embassy the information about the company. Then I discovered that all of a sudden a third buyer, certain Soravia Company from Vienna emerged, buying it all for EUR 300,000. So, I am asking you, who’s the loser here, my interests aside?” Lazo Lekovic, Director of Koling’s legal department: “The Old Mill was sold at one point. Our company tried to conduct projects, when the conditions allowing construction according to the zoning plan were met. We had prepared quite a neat project. By the way, the location is still under protection of Belgrade’s Cultural Heritage Preservation Institute. And the preservation conditions are extremely harsh. We finished one project for some very interesting and beautiful sites after which we began looking for a partner who would invest in the project, since it was a huge investment. At one point there was an interest for the purchase of the site and we made the decision to sell it. And the price we offered is not a secret. It can be seen in our legers. Still, the contract was signed by two parties, and I do not have the disclosure right of the buyer to publically state the agreed price. “The site was sold to the Austrian Soravia Company. The price of the Old Mill location remained undisclosed. The Austrian company Soravia replied to the Insider programme that the price they bought the Old Mill location was business secret. Even though Old Mill has its old owners, and that it is under Belgrade’s Heritage Institute’s protection, city’s zoning committee accepted the proposed project for Old Mill on May 17, 2007. The site is now the property of Austrian company Soravia Real Estate Development. Their website claims that they are building 25,000 square metres and that the job will be concluded by 2010. The fact that remains that this is only one of the examples of someone getting a hold of the location or site that has its true owners. What is even more frustrating is that it is done in accordance with the law, adopted by the state and enforced by local authorities – in this case the central Belgrade municipality of Savski Venac which decided to provide the exclusive location of almost 8,000 square metres that include eighteen buildings in exchange for 790 square metres of residential area given to the municipality only ten years later. All those responsible for the damages imposed to the city’s budget and to the citizens and old owners, refused to talk to our programme. Tomislav Djordjevic, Savski Venac Municipality Speaker and a member of the Democratic Party, initially agreed only to later decline talking to us. Koling Company was the main performer and the designer for several major projects including the residential project “Cvecara” (Florist’s) 12,000 square metres large, it also performed adaptation and reconstruction of Serbian government building, following NATO bombing. The company was also hired to build the “Dayton” petrol station (at the time one of the most innovative constructions in Belgrade), then on the construction of the Dedinje Landscape residential project in the vicinity of the royal residence in Lisicji Potok. It also constructed the “Mackov Kamen” (Cat Stone) residential complex – including more than 22 high standard villas and residences on the location 34,000 square metres large. The total size of the buildings is approximately 25,000 square metres. The company was also hired to build 30 residential villas in Belgrade’s elite neighbourhood of Dedinje – i.e. on the most exclusive locations in Uzicka and Tolstojeva Streets, then in Augusta Cesareca Street, Kralj Aleksandar Blvd. – almost 30,000 square metres large. Meanwhile, the owner of the Koling Company, tore down the company’s HQ and is now building the residential block 22,000 square metres large on the same lot. Formally, the project is to be built by the Zeland company, founded by the Koling holding company from Belgrade. The owner of the company had obtained his Dedinje lot, 8500 square metres large, during the Milosevic regime, by making a deal with the army about the real estate exchange. Lazo Lekovic, Director of Koling’s legal department: “Yugoslav Army decided back then to sell that property because they needed residential property for its officers. We participated in that public sale and bought that property as the highest bidder. We exchanged approximately about 1,000 square metres of residential space for that property.” B92: So, you are saying that you got, approximately, 8,500 square metres in Dedinje in exchange for about 1,000 square metres in Mladenovac? Lazo Lekovic: “Not just in Mladenovac, but in several Belgrade locations. I have the contract and we can look at it later.” The contract that was signed in 1993 between General-Major Mirko Marinkovic and the Koling owner Milan Zukanovic, clearly stated that the two buildings, forests and empty lots – more than 10,000 square metres large – in Dedinje, were to be transferred from the property of the military to private property, namely the Koling company property in exchange for the apartments in Belgrade’s suburb of Mladenovac 958 square metres large. The Dedinje location is now worth tens of millions of euros. A residential complex is currently being built on the location and the appraised price would reach several thousand euros per square meter. The best location sites in Belgrade, that used to have the old owners, were given to companies close to Slobodan Milosevic’s party. Following the opposition takeover in mid 1990s of local government, they had done nothing to stop wasting the state property, but encouraged – through various contracts, appendices and decisions damaging for municipality, city and state – the giving of luxurious locations to privileged businessmen. Bogdan Veljkovic, Restitution Union Chairman, the successor to the old owners: “I am really appalled when I see those who have benefited from that property. My family’s five generations worked to build all that. The Old Mill is only one of the locations that were given, during the Milosevic regime, to businessmen, despite the fact of the location having their previous owners who are seeking it back. Following democratic changes, the disputable property distribution decisions, were practically, legalised. Dragoslav Sumarac, Infrastructure Minister 2001 – 2004: “It was not legalised. You need a law to do that. We could not rule with decrees, the way Milosevic used to, and to confiscate everything. So, we were acting in accordance with laws, which, surely, we were not pleased with. The laws that we adopted essentially declared illegal construction as criminal act. We did so to prevent what was mostly abused during the Milosevic regime. Still, according to the laws originating from the Milosevic regime, each investor was obligated to adopt the site to its purpose within two to three years, which meant that the investor should build something on the location. If the investor failed to fulfil the deadline, the lot should be brought back to the state, and then put on auction again. Despite the fact that the majority of the investors failed to build anything on the lots provided to them by state, the new authorities failed to act according to the law that would provide the opportunity with the means for the budget. Still, they keep doing everything they can to leave those exclusive locations that have their true owners to the investors. At the same time the Infrastructure Ministry led by Dragoslav Sumarac decided to protect, in a way, the property of old owners with the zoning law adopted in 2003. That law provided the authorities with tools to confiscate many locations that had not been built on, and to return them to their true owners. Dragoslav Sumarac, Infrastructure Minister 2001 – 2004: “Well, I believe that during the Communist era there were many abuses. In 1945 people were denounced as national enemies, then the nationalisation of property happened. I always believed that the old owners needed to be compensated. You know, when you take away something that took several generations to create, how do you intend to bring foreign investments? It’s like saying to Rockefeller: ‘Come, build, invest here, and some day someone might take that away from you.” While there were some attempts on the state level to protect the rights of the former owners until the restitution law was adopted, the city authorities brought several decisions damaging to the city, state and the former owners but favourable to the businessmen who owned the rights to the property. Each of these decisions were made while Nenad Bogdanovic of the Democratic Party was the mayor, while the head of the Zoning Institute was Sinisa Nikolic and Bojan Stanojevic, both of the Democratic Party. Stanojevic was the head of the Commission for property distribution. Perhaps the best mechanism of the prevention of the enforcing the law is the location of “Three Leaves”. The law that was breached was adopted by the state parliament and it protected some of the old owners’ rights. Mile Antic, the coordinator of the Restitution Network: “The bottom line was to leave all the possibilities that are good for them open for as long as they wanted. It was practically an outcry for corruption, so to say. It enabled the city of Belgrade or any other municipality to make the decisions based on the deals they made with the investors, who got the land for free. We, the citizens do not have any benefit out of it, since nothing had been incorporated into the city budget. In May, 2005, Constitutional Court ruled that the decisions were illegal and contrary to the constitution. The court stated in its verdict that Belgrade’s City Council had overstepped its legally determined frame and introduced the immediate deals as the way of creating investment conditions. Perhaps the best mechanism of the prevention of the enforcing the law is the location of “Three Leaves”. The law that was breached was adopted by the state parliament and it protected some of the old owners’ rights. Mile Antic coordinator of the Restitution Network: “That was one of those particularly interesting examples of breaking the law. So, we know for a fact that it was nationalised property. However, starting from May 13, 2003, the old owners received the legitimate right to use it, since it the site had not been built on. They were told that they had the right to use it. But an abrupt approval for construction was suddenly issued. What followed had completely been illegal, since the approval or that licence was used to bargain with.” The documents of the concession and then of the “Three Leaves” location sale, which by the way has its rightful owners, showed the entire mechanism which put an individual before the state budget. The “Three Tobacco Leaves” restaurant burnt to the ground in 1989, in the similar way that several years later the Old Mill burnt. The remnants of the buildings were eligible for sale, since it was listed and registered as an empty lot. Immediately after the fire, the Vracar municipality gave its conceded the empty lot to the Jinpros company. The lot also contained the building and the yard belonging to the Hadzi-Galic family, both of which had been confiscated in 1948. Meanwhile, the MPC company, owned by Petar Matic built the business complex on the site. The Insider team obtained the entire documentation which proves all the abuses and breaches of every law and statutes. On June 1, 1989, Vracar municipality decided to give away the lot in central Belgrade, right across the Serbian parliament and the Presidency building, where the Three Tobacco Leaves restaurant used to be. The purpose of such a decision was to enable the investors to build the business zone at the site of the old restaurant. The decision stated that Jinpros Company needed to finish the construction by the end of 1990. Regardless of the statute, the company kept breaking the deadlines that were prolonged on several occasions, so the Jinpros company remained the user of that lot even after the democratic changes in 2000, 11 years later. After the zoning and construction law was adopted in 2003, the deadlines had to be respected and the contractor needed to begin with the construction, because otherwise the former owners had the right to seek their property back. However, the company did not build anything even after the law had been adopted, which meant that their lease needed to be cancelled. Belgrade’s executive authorities that comprised of Democratic Party and Democratic Party of Serbia, however, then adopted yet another statute – Jinpros was once again given the lease for the location without putting it on the market. The city urbanism secretariat led by Vuk Djurovic of the Democratic Party went even further and in April, 2004, only several days before the former owners could seek their property, he issued a decree that approved the construction licence to the Jinpros Company. The question remains: how could Jinpros have obtained this licence, if one must have the evidence for the lease on the construction site. Mile Antic, Restitution Network Coordinator: “We are not talking about the leases nor the right of usage. The only ones who had that right were exclusively the former owners or their successors. The company had no legal rights to file for the lease. However, they got it, and later traded with it. Until this day I do not know who was among those trading the lot and who would turn out in the end as the owner of that very pricey, but administratively very lean and disputable approval for construction. In early 2005, when the property, according to the law, should already been confiscated Jinpros managed to sell this location to the investment firm Hypo Alpe Adria Consultants. Meanwhile, the firm was bought by Petar Matic, thus getting the exclusive locations in central Belgrade and in Kalemegdan, not to mention several other buildings owned by Hypo Alpe Adria Consultants. Today, he is building “Tri lista duvana” (Three Tobacco Leaves) ltd. on the corner of central Belgrade streets: Kneza Milosa Street and Kralj Aleksandar Blvd. The business registry states that the company was established in 2005. According to the registry data the company should deal with the real estate project development, with Rajko Ivanovic as its CEO. The Insider team learnt that Ivanovic is one of the members of the MPC board of directors. The owner of this company is the MB Grupoo ltd, whose real owner is the Trade, Investment and Consulting firm as well as Beta Partners ltd. Belgrade. All three companies are registered at the same address as the “Usce” business centre and the MPC HQ. According to the registry, the owner of the Beta Partners firm is Milka Golubovic who is also among the MPC’s CEOs. The person responsible for constructions on the locations that have old owners is the architect who is conducting the project, with full knowledge that the property and legal issues have yet to be solved. Former city architect and now a member of Belgrade’s City Council Djordje Bobic, member of the Democratic Party claims that it is a problem, but that it needs to be resolved on the state level. Djordje Bobic, Democratic Party’s representative in Belgrade’s city council; Belgrade’s main architect from 2004 -2008: “They keep calling me the urban investor, which I actually am, because I believe that Belgrade cannot develop without the investors. That is simply the case in every major European city.” B92: How could the state sell something that it didn’t own? Djordje Bobic: I don’t know. It’s a huge problem, and as I have told you already, I am a big supporter of that law because I think that it’s the only way to actually put all things in order in the sphere of my interest.” Mahmud Busatlija, architect and investment consultant: “The problem begins when the state has to compensate the people to whom it would not be able to return their property. And that’s because the state does not have that sort of an income that could guarantee the return funds. Instead, it will transfer the compensation on its citizens.” . Serbia’s nationals would have to pay millions in damages to the successors of the old owners, if the disputable decisions were to be legalised before adopting the denationalisation law. The most exclusive locations mostly have their old owners, but regardless of that, the authorities have kept leasing them, through various statutes and decisions to certain businessmen. Aleksandar Vlahovic, Privatisation Minister 2001 – 2004: The state will have to refund the former owners in that case. Now, the question of the refund remains... B92: But when you say the state, you realise that you are talking about its citizens? Aleksandar Vlahovic: I agree, but when I say the citizens of this country and the state, I am talking about the executive government as well that was jurisprudent at one point for the functioning of this country, including government from 1944 and ’45, but also the current executive government that is expected to adopt the denationalisation law. B92: But also, there is an issue of who is going to finally pay for all the previously owned property sold during privatisation? Serbian citizens? Oliver Dulic, Environment and Spatial Planning Minister: “That’s right. I agree. You’re right.” B92: And that is the case according to the market prices? Oliver Dulic: It is common knowledge that one cannot correct one injustice by enforcing new ones. Bogdan Veljkovic, President of the Restitution Union: I think that the financial interests of the mafia, or the state mafia if you will, are so huge that they are willing to let Serbia go under, providing that they can scoop millions and disappear. Each of these places located in central Belgrade are worth millions of euros. Although most of these locations were confiscated from their rightful owners during the Communist regime, the authorities – even after the fall of Milosevic – kept consigning them to dubious businessmen.

Abuse of office (part three)

Serbia is the only country in Europe today which still has not adopted the Denationalisation Law, even though it is one of the main prerequisites for the country’s EU membership. Meanwhile, representatives of the communal, local and state authorities have taken the advantage of the situation, practically - through various acts and decisions – to serve those locations on a plate to certain individuals. Because of that, when Serbia finally gets the Denationalisation Law, citizens will be obliged to pay the damages to the rightful owners, but this time at market prices, estimated to reach millions of euros, all because of the state representatives’ decisions and actions.

What became, during the Communist regime, known as the “socially-owned property” – which in effect was everyone’s and no-one’s property at the same time - instead of being returned to rightful owners was turned into the state property during the Milosevic regime. The law enabling such transition of property was adopted in 1995. The infrastructure minister at the time was Branislav Ivkovic.

Branislav Ivkovic, Infrastructure Minister 1994-1998: “Unfortunately, Serbia’s constitution did not recognize private property, and the legislator – in this case the Infrastructure Ministry which drafted the law – could only project that the acres of city’s construction sites should become either state or socially-owned property. I practically saved those sites, when we drafted the law on city’s construction sites, by stating it as a fact that the sites, as they were, belonged exclusively to the state. Otherwise, it would have been ravaged for commercial purposes... “

B92: What did you save it from when it was...

Ivkovic: “We saved it so it would not to end up robbed in the way the economy was savaged.”

B92: But, hold on... the sites are plundered, are they not?

Ivkovic: “No.”

B92: What do you mean no, when certain businessmen have got a hold on it?

Ivkovic: “Today they can... The state has all the resources necessary to return those sites, providing that there’s a will in place.”

B92: But, how could the state return them, since the sites have been built on since?

Ivkovic: “The same way the economy was robbed during the privatisation process. I am telling you that the city’s construction sites would have been robbed fivefold compared to the privatisation, if the state didn’t take over.”

B92: But your decision not to return the sites to their true owners will as a result have a consequence that, after the denationalisation law is adopted, the citizens will have to pay damages to the owners at current market prices.

Ivkovic: “Let’s get one thing straight: had the city’s construction sites been made ‘socially-owned property’, then it would have certainly been robbed in the same way that Serbia’s economical resources were sold after 2000.

B92: Still, why didn’t you return that?

Ivkovic: Why was not that returned more recently? How come that not a single law on expropriation has been adopted yet?

B92: All right, but I’ve asked you a question.

Branislav Ivkovic: Well, I am asking you why? How come that this government, which swears to be a democratic one, did not adopt an expropriation law?

The restitution law adopted in many countries has enabled the injustice to be corrected. The law stated that the property confiscated by the Communist authorities should be returned to the true owners, or their successors. Even though the representatives of the Democratic Opposition of Serbia (DOS) kept promising in the wake of the 5/10/00 that their priority would be the adoption of the denationalisation law, thus correcting the injustice made by the Communist authorities, that law still has not been adopted. Meanwhile, the privatisation law was adopted in 2002, regardless of the fact that, practically, it was not clear what was actually being sold, since many privatised objects had had previous owners.

Mladen Komadinic, the successor of the buildings in central Belgrade, where the Belgrade’s Department Stores were settled says: “We’ve expected the righteous restitution. We expected all the injustice that lasted for the last fifty years to be corrected after changes that occurred on October 5, 2000 [the fall of Milosevic].“

 

Another example to what happened with the private property following its nationalisation during the Communist regime is the Belgrade Brewery (BIP). Prior to 1945 it belonged to the family of Bogdan Veljkovic, which was one of the most prominent families in Belgrade before the rise of communism. In 1945 they were declared “in the name of the people” as the enemies, and all of their assets were confiscated. The family owned the Old Mill (Stari Mlin), the BIP, and the sites in central Belgrade’s Rajic Street.

Bogdan Veljkovic is now the US citizen. He is an international banker who has spent 48 years living in the United States and France working for many international banks. However, in 2001 he decided to return to Belgrade, where he is still trying to return the property confiscated from his family during the Communist regime. Bogdan Veljkovic is now the US citizen. He is an international banker who has spent 48 years living in the United States and France working for many international banks. However, in 2001 he decided to return to Belgrade, where he is still trying to return the property confiscated from his family during the Communist regime.

Veljkovic is now the president of the Restitution Union and he is the successor of the Veljkovic family property: “I was in Switzerland during those awful years and I truly believed that that some changes would occur. I thought that we would enter the circle of the civilized countries,” he said.

In the next episode you will get a chance to see in what ways the privatisation process in Serbia has turned into the real-estate purchase instead into the recovery of the country’s economy as the state officials tried to represent it to the public. Still, one of the largest issues remains the fact that the privatisation law has been adopted without solving the problem of the restitution.

In fact, it was upon the state authorities to know whose property was being sold – which led to the ambiguousness of the sales, since the state failed to take care of the sales records.

Following the October 5, 2000 changes, Aleksandar Vlahovic became the Minister of Commerce and Privatisation. It was under his jurisdiction that the privatisation law was adopted. Aleksandar Vlahovic, Privatisation Minister (2001-2004): “We simply could not wait for the denationalisation law to be adopted. We needed to start with an important process of restructuring of Serbia’s economy, so we drafted the privatisation law, which was later adopted. I was not happy with the fact that the privatisation law was implemented in an atmosphere of constant pressures coming from the former owners. I understand their demands completely. Finally, during the 2003 election campaign, the slogan “We will adopt the denationalisation law” was one of our major campaign goals.”

B92: As it was prior to 2000?

Aleksandar Vlahovic: Exactly. But I cannot talk about those times, since I was not politically active back then. However, after 2004, those who promoted their policies during the campaign on the basis of the adoption of denationalisation law, failed to adopt it.

Starting from 2004, through the privatisation process, factories and companies that had their true owners were being sold. Predrag Bubalo, who was the minister in charge at the time, refused to talk for our programme.

“Djordje Weifert” brewery was on the site of today’s BIP factory. As of 1922, the Veljkovic family became the owner of the brewery. It was the biggest brewery in the Balkans and it was nationalised in 1946. “Djordje Weifert” brewery had 600 acres of land and some estimate it to be worth even EUR 70 million. Bogdan Veljkovic, President of the Restitution Union: “Let’s not forget that the privatisation process began during the Milosevic regime. The workers were entitled to 70 percent [of shares]. Also, a lot of the company’s shareholders were army generals. BIP factory, during the Milosevic regime, provided the army and the police with free beer. So we had a complete mismanagement in the company, which obviously, led it to collapsing. Then Karic, who through the bank in Kula became one of the shareholders of the BIP, appeared. So, after all those tycoons have taken their positions in the company, I realised that it was a national property, from which everyone should have benefited. Yet, my father was denounced as a national enemy, because he was an old owner. And all of a sudden these new owners appear, with desires to become new bosses.”

Even though Veljkovic, as a successor of the old owners sought his property, which he would get, had the denationalisation law been adopted, the majority of company’s shares, owned by state, was sold in 2007 to the small Lithuanian company which deals with the production of wine and other beverages for EUR 21million. The Belgrade brewery also owned the Skadarlija sector, which once belonged to the Bajloni family, as well as the factory in Cacak, which, before the World War 2, operated as “Kren i Stankovic”.

Skadarlija section, located in one of the most prominent Belgrade streets was constructed in 1880, by Ignjat Bajloni. The state failed to return it to its true successors, selling it instead to the Italian company Star Imobiliare in 2006 for EUR 10.6m. Approximately seven thousand square meters was sold. The property included three breweries and a shopping mall.

This type of privatisation caused damages to the country’s budget worth several million euros, since by selling the socially-owned property, the real-estates that could have been excluded from the sale – according to the 1995 law on property owned by the Republic of Serbia – were sold. The aforementioned law states that any building or construction that the company itself did not build, automatically becomes the state property. Thus, buildings that were constructed before WW2 have become Serbia’s property.

Mile Antic, is the coordinator of the Restitution Network: “What’s the point? The law on property owned by the Republic of Serbia is still valid. The fact that the law is not implemented is the fault of the state bodies that simply do not enforce it. However, according to the law, the nationalised property, real-estates, etc. are the property of Republic of Serbia and cannot be subjected to privatisation.” However, the best example of what actually happens during privatisation is the selling of Belgrade Department Store Company (Robne kuce Beograd). When the company was privatised, two buildings, that had been nationalised during the Communist regime, were sold as an integral part of the company, even though the state had all the information necessary to know that two buildings in Knez Mihailova Street – one four thousand square meters, the other seven thousand square meters – had their old owners, i.e., that the buildings were the property that would have to be returned to their true owners, after the law is adopted. These buildings have in 2007 become property of Verano Group owned by Radomir Zivanic. Zivanic, in cooperation with Greek Marfin Investment Group, bought Belgrade Department Store Company for the price of EUR 360m. The company was bankrupt for several years. During the auction, 33 buildings 240 square meters large were sold. The buildings were located in the most attractive places in Serbia’s cities.

Verica Barac, Head of the Anti-Corruption Council said: “Let’s determine some sort of an average price for one square meter of the business space of the Department Store Company, bought by Baja Plavi [a nick name for Radomir Zivanic, the owner], including the nationalised property. So what’s the average price for, say, one square meter? After we determine that, we must ask a question of the price that the citizens of this country should pay for one square meter of that nationalised property before we enter the EU. Surely, due to various mechanisms such as blowing up debts, and all those well established manipulative mechanisms here, this was sold way beyond any reasonable market price, in general. The taxpayers will pay the real market value.

The sale of Belgrade Department Store Company is still being disputed by one of the former owners’ successors, Mladen Komadinic.

Mladen Komadinic, a successor to the old owners of the Belgrade Department Store Company’s building in central Belgrade Knez Mihailova street says: “Our family’s capital was made by several generations, and the store was on that same location for over fifty years.” Ever since the property in question had been nationalised, Belgrade Department Store Company was only the user of the premises. Still, with the help of the institutions in charge, they were catalogued as the owners of the nationalised buildings, even though there were no bases for such a decision.

Mladen Komadinic: “If you take a look at the property catalogue, you can clearly see that the property in 5 Knez Mihailova Street is owned by the state and that the company is the sole user of the premises. This had been the case until 2001, when they submitted a request to be registered as owners, based on the change of the company’s structure – they went from being a holding company to becoming a shareholders company. It’s the same as if you were subletting the apartment from someone and then you change your last name to the guy you’re subletting the apartment from, thus obtaining the right to use the premises for free.

Komadinic launched several proceedings while trying to warn the Privatisation Agency that it was about to sell the property that had had the old owners, going on to say that this was above all a state property which could not be sold as part of the company offices. In cases like this one, the State Attorney’s Office and the Property Administration are obliged to initiate proceedings to protect Serbia’s property.

Mladen Komadinic: “The Administration and State Attorney’s Office became more responsive upon receiving our documentation. They recognised that the state had its share of sold property, and that its value needed to be assessed. However, all of a sudden, everyone gradually began to withdraw. I don’t know what happened. Perhaps, there was a pressure to leave this thing behind, I’m not sure... but all of a sudden, Milan Tomic, Director of the Property Administration simply sent one letter stating that the “[Administration] is going to withdraw its allegations stated in the previous letters”, adding that they “concur that the bankrupt company, namely Belgrade Department Store Company should be sold.”

The “Insider” team got a hold of a memo signed by Sasa Juric, State Attorney’s deputy, which stated that State Attorney’s Office would not undertake any measures (to stop the sale) – which are otherwise proscribed by law.

Mladen Komadinic: “The Agency sticks to the story that it was a fantastic privatisation. However, that was not privatisation, but the sale of the bankrupt company in order to calm the shareholders down, all the while promoting the sale as the privatisation, stating that there would be some privatisation revenues, which entirely was not the case. That fact could easily be proven should one take a look at the correspondence between the attorney’s office and the Privatisation Agency, where the interests of foreign investors are being allegedly taken into consideration.” The foreign investor in this particular case was in fact a Serbian businessman, one Radomir Zivanic, the owner of the Verano Company.

Zivanic, also known as Baja Plavi (Blond Dude) owns Verano Group, the general distributer of Peugeot automobiles. He bought the Belgrade Department Store Company together with Greek investment fund Marfin that owns the Marfin Popular Bank. That particular bank was founded by merging of three banks. Laiki Bank was one of those three. That particular bank was infamous for its involvement in the transfer of Serbia’s money to Cyprus during the Milosevic regime.

Zivanic refused to speak on our programme. He, along with most of Serbia’s businessmen, can scarcely be seen in public. He refuses to be interviewed, so there has never been an opportunity for him to explain the origins of his monetary assets. However, in 2000, he was blacklisted by the European Commission as an associate to the Milosevic regime. The EU saw him as persona-non-grata. The Verano Company was founded in 1991. Milija Babovic, another well-known “businessman” was the co-founder of the company, along with Zivanic.

Today, Zivanic’s incorporates approximately 25 companies – including the food industries such as the bread producing company “Hleb” and the wheat producing company “Zitko.” Both of these companies were purchased during the privatisation process. Still, the major assets to Verano’s businesses are comprised of real-estates. He is the third largest Belgrade’s investor, following Miskovic and Matic. Apart from the Belgrade Department Store Company, Zivanic is also the owner of the “Zira” shopping mall settled at the location in the old Belgrade’s quarter at the corner of Cvijic and Roosevelt streets. The mall encompasses 45.500 square meters. His company tends to build the four-tower complex 53.000 square meters large in New Belgrade’s 23rd block. He is also building a mall 71.000 square metres large in Belgrade’s Vozdovac municipality, in the famous Trosarina part of Belgrade.

By purchasing Belgrade Department Store Company, Zivanic has practically – via various notes of the jurisprudent institutions – obtained 240.000 square metres. The state has, on the other hand, sold the sites – two of which have their old owners, who want their property back – in central Belgrade at the price much lower than the real market price. The experts evaluated that solely the building in 5 Knez Mihailova street is worth at least EUR 60 million. What is interesting is that Zivanic paid EUR 1500 per square meter in altogether, while at the same time, at an auction a square meter of a building in the same location reached EUR 32,000.

Mladen Komadinic, the successor to the Knez Mihailova street building used by the Belgrade Department Store Company says: “The damage is tremendous. If such an object, located in the heart of Serbia, representing the epicentre of Belgrade, Belgrade’s Greenwich so to say, can be registered to a bankrupt company by a criminal action only to be sold by that company as its own property, the question is what will happen to the property of other citizens? While the republic legislature has failed to adopt the restitution law, thus enabling the sale of the companies that have their old owners through the privatisation process, the city and its municipalities keep adopting various dubious decisions, according to which they legalise the decisions brought during the Milosevic regime and practically give the exclusive locations that have their old owners. There are hundreds of such examples, but the mechanism is the same. The Stari Mlin (The Old Mill) location is one of the examples.

The Old Mill is located in 15 Vojvoda Misic Boulevard, near Belgrade’s new fairground, which is one of the hottest spots in Belgrade. The mill was the oldest one in Europe, sized 6,800 square metres. The steam mill was built in 1902, and later it was protected as one of Belgrade’s landmarks. It was owned by the Vracar Cooperative, with the majority of shares belonging to the family of Bogdan Veljkovic. In 1945, after the Communist took over power in Yugoslavia, the property was taken away from the Veljkovic family and became the socially-owned property. However, in 1995, after adopting the new law, the property, instead of being returned to their true owners, was pronounced the state property, which left space for many dubious transactions and the abuses of legislative system.

Branislav Ivkovic, Infrastructure Minister 1994 – 1998: “After the denationalisation law’s been adopted, he would have plenty to return, providing someone wants it to be returned.”

B92: Like what?

Branislav Ivkovic: “Well it’s the state’s property. Come on... I’m asking you, why hasn’t the law been adopted?”

B92: Well, you gave away the property to businessmen....

Branislav Ivkovic: Never have I done such a thing,

B92: Well, apparently, you did. Add to that that those were the best locations.

Branislav Ivkovic: If there’s anyone to blame for giving the property to the businessmen, i could say that the governments following 2000 used to do that.

B92: It’s not true... during the time of...

Branislav Ivkovic: Djindjic’s government is not to blame. But those that came later did it as much as they could.

B92: But, please, hold on. During 1990s, the locations in Rajic Street, then the “Tri lista duvana” (Three Tobacco Leaves) and the “Old Mill” were lent to them, right?

Branislav Ivkovic: Please go and ask the local authorities. You seem to keep mixing up...

B92: But it has all been done in accordance with your law?

Branislav Ivkovic: No. The property law simply gave the coordinates for the business’ framework. The local authorities were responsible for enforcing it... so, you know, the people kept electing the local authorities... they elected the Socialists (Socialist Party of Serbia – SPS), but they also elected the Serb Renewal Movement (SPO), Democratic Party (DS)... and they all had the possibility to operate within the law...

B92: The law that you adopted?

Branislav Ivkovic: Within the law that I proposed, they had the right to distribute the city construction sites the way they wanted to. However, you should ask local authorities how they’d chosen to enforce it.

The Old Mill example illustrates the best the mechanisms and accountability of local authorities which, through various disputable decisions, created a situation where the citizens would have to pay for the restitution in order to ensure benefits for certain businessmen. Belgrade’s municipality of Savski Venac – where the Old Mill is located – adopted many disputable decisions from 1995 until 2007. It all began back in 1994, when the part of the Mill was destroyed in the fire. The cause of the fire was never established. By law, the municipality, the city and the state, have the jurisdiction to rent or put on auction only the empty lots. However, one thing strikes as interesting: three buildings, all in exclusive locations – the Wheat Company’s building, Three Tobacco Leaves and the IKL factory building – have burst into flames. The buildings were burnt to the ground, but empty lots remained. Then the lots were rented to various businessmen/investors. To this day, the causes for the fires have not been established. Still, following the fires, many people got a hold of the exclusive locations. Bogdan Veljkovic, Restitution Union President and the successor to the original owners: “It was a typical story... You have a site that is of some interest to someone. If it’s protected, you simply set it to fire. That happened eight months ago with the Three Tobacco Leaves, then with the Putnik hotel in Novi Sad. So, you have a typical modus operandi - when you want to sell the protected site, you simply burn it down and later you can build there. Immediately after the fire that burnt parts of the Old Mill – comprised of 18 buildings in total – in 1995, Savski Venac municipality, ruled by the SPS and the SPO, decided to trade the 6,800 square metre location with the Koling Company for 800 square meters of the residential zone, which was to be built in inner Belgrade. The contract was signed the same year by Branislav Ciric, the municipality’s PM, and the company’s director Milan Zukanovic. Lazo Lekovic, Legal Executive with the Koling Company: “We participated at the public tender and we bought the site as we were the highest bidder. It was all done publically. Then, we offered 800 square metres of the residential area. The site was evaluated by city’s Appraisal Institute, and they evaluated the site to be worth 800,000 Deutsche Marks. However, we recompensed the municipality with a larger sum. Back then, the value of those flats was 1.3 million Deutsche Marks. “

B92: Are you trying to say that you had overpaid the Old Mill?

Lazo Lekovic: “No, I’m not saying that we overpaid it; I’m only saying that the Koling company recompensed some 30 to 40 percent to the municipality more than the estimated value of the location. The site, by the way, was completely derelict, and it needed to be repaired. We purchased the site because we needed the storage space, for we owned several construction sites nearby. “ However, the contract stated that all flats should be transferred to the municipality by the end of 1996. Beside the fact that the municipality’s decision to practically give this exclusive location to the owner of the Koling company for solely 800 square meters located in inner Belgrade was disputable, what is more interesting is that 22,000 square metres of residential locations are being constructed today, as well as the fact that the Koling company only gave 221.7 square metres six years after the expiration of the contract.

Lazo Lekovic, Director of Koling’s legal department: “We made those contracts immediately, but the circumstance that followed, you know, the sanctions, war and anything else that took place, caused the companies who performed the construction, to be late. In the end, we paid the market value of the square metres we could not build.” From 1995 until 2006, the municipality of Savski Venac had signed six appendices of the contract with the Koling Company. Meanwhile, the authorities failed to break up the Koling contract, even though they had all the reasons necessary to do so, since the company failed to compensate the municipality with the apartments.

B92: The coincidence seems to be unusual. Your company’s vice-president Mr Rajko Milicevic was the municipal attorney for Stari Grad during 1990s, isn’t that right?

Lazo Lekovic, Director of Koling’s legal department: “I do not know why do you think it to be an unusual coincidence. You can call the gentleman, and ask him that question; I really would not want to talk about him. Still Mr Milicevic is an eminent attorney. Prior to his engagement with the Savski Venac municipality, he used to work as a lawyer and I don’t hear you saying that it’s an unusual coincidence that he was a lawyer who now works as the vice-president of our company. There are no coincidences... and besides, there are no bodies bringing the decisions, you know... “

B92: No. By the nature of his business he was supposed to take care of the contract; i.e. to make sure whether the contract was damaging or not. At least for as long as he was on that position.

Lazo Lekovic: Who says that the contract was damaging? That contract was very beneficial for the municipality.

B92: No, in the beginning you did not clearly state that the location would be used for commercial or residential purposes.

Lazo Lekovic: But, I have given you the answer why we didn’t provide the real-estate. We did. But the municipality wanted the square metres built by other companies. We cannot influence the rhythm of other companies’ constructions. The municipality had no other signed contracts apart from those they had with Koling Company. Still, the authorities of Savski Venac municipality say that they did not break the contract, since it would have to pay the mortgage to Mirko Vucicevic, the owner of the Nevada Company. However, the Insider team has come to the licence that Mirko Vucurovic issued in 2004, that allows the erasing of his disclosing right, registered for the Old Mill. This means that in 2004, due to the breach of contract, the new authorities of Savski Venac municipality had all the reasons necessary to break up the contract with Koling and to return this exclusive location to the city. Instead, the new authorities formed by the DS made and appendix to the contract that was signed by Tomislav Djordjevic. Djordjevic is still the Speaker to Savski Venac municipality.

Bogdan Veljkovic returned to Serbia after the democratic changes. He filed criminal lawsuit against all those responsible asking that the Koling Company, that breached the contract with municipality – failing to provide all the apartments that it promised – be removed from the registry.

Bogdan Veljkovic, Restitution Union President and the successor to the previous owners: “When I began my inquiry they got frightened. The Koling Company decided to find some other buyer, a company named Prigan Holding from Cyprus. I made a lot of fuss about it through Americans and the European Parliament, asking the Cyprian embassy the information about the company. Then I discovered that all of a sudden a third buyer, certain Soravia Company from Vienna emerged, buying it all for EUR 300,000. So, I am asking you, who’s the loser here, my interests aside?” Lazo Lekovic, Director of Koling’s legal department: “The Old Mill was sold at one point. Our company tried to conduct projects, when the conditions allowing construction according to the zoning plan were met. We had prepared quite a neat project. By the way, the location is still under protection of Belgrade’s Cultural Heritage Preservation Institute. And the preservation conditions are extremely harsh. We finished one project for some very interesting and beautiful sites after which we began looking for a partner who would invest in the project, since it was a huge investment. At one point there was an interest for the purchase of the site and we made the decision to sell it. And the price we offered is not a secret. It can be seen in our legers. Still, the contract was signed by two parties, and I do not have the disclosure right of the buyer to publically state the agreed price. “The site was sold to the Austrian Soravia Company. The price of the Old Mill location remained undisclosed. The Austrian company Soravia replied to the Insider programme that the price they bought the Old Mill location was business secret. Even though Old Mill has its old owners, and that it is under Belgrade’s Heritage Institute’s protection, city’s zoning committee accepted the proposed project for Old Mill on May 17, 2007. The site is now the property of Austrian company Soravia Real Estate Development. Their website claims that they are building 25,000 square metres and that the job will be concluded by 2010. The fact that remains that this is only one of the examples of someone getting a hold of the location or site that has its true owners. What is even more frustrating is that it is done in accordance with the law, adopted by the state and enforced by local authorities – in this case the central Belgrade municipality of Savski Venac which decided to provide the exclusive location of almost 8,000 square metres that include eighteen buildings in exchange for 790 square metres of residential area given to the municipality only ten years later. All those responsible for the damages imposed to the city’s budget and to the citizens and old owners, refused to talk to our programme. Tomislav Djordjevic, Savski Venac Municipality Speaker and a member of the Democratic Party, initially agreed only to later decline talking to us. Koling Company was the main performer and the designer for several major projects including the residential project “Cvecara” (Florist’s) 12,000 square metres large, it also performed adaptation and reconstruction of Serbian government building, following NATO bombing. The company was also hired to build the “Dayton” petrol station (at the time one of the most innovative constructions in Belgrade), then on the construction of the Dedinje Landscape residential project in the vicinity of the royal residence in Lisicji Potok. It also constructed the “Mackov Kamen” (Cat Stone) residential complex – including more than 22 high standard villas and residences on the location 34,000 square metres large. The total size of the buildings is approximately 25,000 square metres. The company was also hired to build 30 residential villas in Belgrade’s elite neighbourhood of Dedinje – i.e. on the most exclusive locations in Uzicka and Tolstojeva Streets, then in Augusta Cesareca Street, Kralj Aleksandar Blvd. – almost 30,000 square metres large.

Meanwhile, the owner of the Koling Company, tore down the company’s HQ and is now building the residential block 22,000 square metres large on the same lot. Formally, the project is to be built by the Zeland company, founded by the Koling holding company from Belgrade. The owner of the company had obtained his Dedinje lot, 8500 square metres large, during the Milosevic regime, by making a deal with the army about the real estate exchange.

Lazo Lekovic, Director of Koling’s legal department: “Yugoslav Army decided back then to sell that property because they needed residential property for its officers. We participated in that public sale and bought that property as the highest bidder. We exchanged approximately about 1,000 square metres of residential space for that property.”

B92: So, you are saying that you got, approximately, 8,500 square metres in Dedinje in exchange for about 1,000 square metres in Mladenovac?

Lazo Lekovic: “Not just in Mladenovac, but in several Belgrade locations. I have the contract and we can look at it later.”

The contract that was signed in 1993 between General-Major Mirko Marinkovic and the Koling owner Milan Zukanovic, clearly stated that the two buildings, forests and empty lots – more than 10,000 square metres large – in Dedinje, were to be transferred from the property of the military to private property, namely the Koling company property in exchange for the apartments in Belgrade’s suburb of Mladenovac 958 square metres large. The Dedinje location is now worth tens of millions of euros. A residential complex is currently being built on the location and the appraised price would reach several thousand euros per square meter.

The best location sites in Belgrade, that used to have the old owners, were given to companies close to Slobodan Milosevic’s party. Following the opposition takeover in mid 1990s of local government, they had done nothing to stop wasting the state property, but encouraged – through various contracts, appendices and decisions damaging for municipality, city and state – the giving of luxurious locations to privileged businessmen.

Bogdan Veljkovic, Restitution Union Chairman, the successor to the old owners: “I am really appalled when I see those who have benefited from that property. My family’s five generations worked to build all that. The Old Mill is only one of the locations that were given, during the Milosevic regime, to businessmen, despite the fact of the location having their previous owners who are seeking it back. Following democratic changes, the disputable property distribution decisions, were practically, legalised.

Dragoslav Sumarac, Infrastructure Minister 2001 – 2004: “It was not legalised. You need a law to do that. We could not rule with decrees, the way Milosevic used to, and to confiscate everything. So, we were acting in accordance with laws, which, surely, we were not pleased with. The laws that we adopted essentially declared illegal construction as criminal act. We did so to prevent what was mostly abused during the Milosevic regime.

Still, according to the laws originating from the Milosevic regime, each investor was obligated to adopt the site to its purpose within two to three years, which meant that the investor should build something on the location. If the investor failed to fulfil the deadline, the lot should be brought back to the state, and then put on auction again. Despite the fact that the majority of the investors failed to build anything on the lots provided to them by state, the new authorities failed to act according to the law that would provide the opportunity with the means for the budget. Still, they keep doing everything they can to leave those exclusive locations that have their true owners to the investors.

At the same time the Infrastructure Ministry led by Dragoslav Sumarac decided to protect, in a way, the property of old owners with the zoning law adopted in 2003. That law provided the authorities with tools to confiscate many locations that had not been built on, and to return them to their true owners. Dragoslav Sumarac, Infrastructure Minister 2001 – 2004: “Well, I believe that during the Communist era there were many abuses. In 1945 people were denounced as national enemies, then the nationalisation of property happened. I always believed that the old owners needed to be compensated. You know, when you take away something that took several generations to create, how do you intend to bring foreign investments? It’s like saying to Rockefeller: ‘Come, build, invest here, and some day someone might take that away from you.” While there were some attempts on the state level to protect the rights of the former owners until the restitution law was adopted, the city authorities brought several decisions damaging to the city, state and the former owners but favourable to the businessmen who owned the rights to the property. Each of these decisions were made while Nenad Bogdanovic of the Democratic Party was the mayor, while the head of the Zoning Institute was Sinisa Nikolic and Bojan Stanojevic, both of the Democratic Party. Stanojevic was the head of the Commission for property distribution.

Perhaps the best mechanism of the prevention of the enforcing the law is the location of “Three Leaves”. The law that was breached was adopted by the state parliament and it protected some of the old owners’ rights.

Mile Antic, the coordinator of the Restitution Network: “The bottom line was to leave all the possibilities that are good for them open for as long as they wanted. It was practically an outcry for corruption, so to say. It enabled the city of Belgrade or any other municipality to make the decisions based on the deals they made with the investors, who got the land for free. We, the citizens do not have any benefit out of it, since nothing had been incorporated into the city budget. In May, 2005, Constitutional Court ruled that the decisions were illegal and contrary to the constitution. The court stated in its verdict that Belgrade’s City Council had overstepped its legally determined frame and introduced the immediate deals as the way of creating investment conditions.

Perhaps the best mechanism of the prevention of the enforcing the law is the location of “Three Leaves”. The law that was breached was adopted by the state parliament and it protected some of the old owners’ rights.

Mile Antic coordinator of the Restitution Network: “That was one of those particularly interesting examples of breaking the law. So, we know for a fact that it was nationalised property. However, starting from May 13, 2003, the old owners received the legitimate right to use it, since it the site had not been built on. They were told that they had the right to use it. But an abrupt approval for construction was suddenly issued. What followed had completely been illegal, since the approval or that licence was used to bargain with.” The documents of the concession and then of the “Three Leaves” location sale, which by the way has its rightful owners, showed the entire mechanism which put an individual before the state budget.

The “Three Tobacco Leaves” restaurant burnt to the ground in 1989, in the similar way that several years later the Old Mill burnt. The remnants of the buildings were eligible for sale, since it was listed and registered as an empty lot. Immediately after the fire, the Vracar municipality gave its conceded the empty lot to the Jinpros company. The lot also contained the building and the yard belonging to the Hadzi-Galic family, both of which had been confiscated in 1948. Meanwhile, the MPC company, owned by Petar Matic built the business complex on the site. The Insider team obtained the entire documentation which proves all the abuses and breaches of every law and statutes. On June 1, 1989, Vracar municipality decided to give away the lot in central Belgrade, right across the Serbian parliament and the Presidency building, where the Three Tobacco Leaves restaurant used to be. The purpose of such a decision was to enable the investors to build the business zone at the site of the old restaurant. The decision stated that Jinpros Company needed to finish the construction by the end of 1990. Regardless of the statute, the company kept breaking the deadlines that were prolonged on several occasions, so the Jinpros company remained the user of that lot even after the democratic changes in 2000, 11 years later. After the zoning and construction law was adopted in 2003, the deadlines had to be respected and the contractor needed to begin with the construction, because otherwise the former owners had the right to seek their property back. However, the company did not build anything even after the law had been adopted, which meant that their lease needed to be cancelled. Belgrade’s executive authorities that comprised of Democratic Party and Democratic Party of Serbia, however, then adopted yet another statute – Jinpros was once again given the lease for the location without putting it on the market. The city urbanism secretariat led by Vuk Djurovic of the Democratic Party went even further and in April, 2004, only several days before the former owners could seek their property, he issued a decree that approved the construction licence to the Jinpros Company. The question remains: how could Jinpros have obtained this licence, if one must have the evidence for the lease on the construction site.

Mile Antic, Restitution Network Coordinator: “We are not talking about the leases nor the right of usage. The only ones who had that right were exclusively the former owners or their successors. The company had no legal rights to file for the lease. However, they got it, and later traded with it. Until this day I do not know who was among those trading the lot and who would turn out in the end as the owner of that very pricey, but administratively very lean and disputable approval for construction. In early 2005, when the property, according to the law, should already been confiscated Jinpros managed to sell this location to the investment firm Hypo Alpe Adria Consultants. Meanwhile, the firm was bought by Petar Matic, thus getting the exclusive locations in central Belgrade and in Kalemegdan, not to mention several other buildings owned by Hypo Alpe Adria Consultants. Today, he is building “Tri lista duvana” (Three Tobacco Leaves) ltd. on the corner of central Belgrade streets: Kneza Milosa Street and Kralj Aleksandar Blvd. The business registry states that the company was established in 2005. According to the registry data the company should deal with the real estate project development, with Rajko Ivanovic as its CEO. The Insider team learnt that Ivanovic is one of the members of the MPC board of directors. The owner of this company is the MB Grupoo ltd, whose real owner is the Trade, Investment and Consulting firm as well as Beta Partners ltd. Belgrade. All three companies are registered at the same address as the “Usce” business centre and the MPC HQ. According to the registry, the owner of the Beta Partners firm is Milka Golubovic who is also among the MPC’s CEOs. The person responsible for constructions on the locations that have old owners is the architect who is conducting the project, with full knowledge that the property and legal issues have yet to be solved. Former city architect and now a member of Belgrade’s City Council Djordje Bobic, member of the Democratic Party claims that it is a problem, but that it needs to be resolved on the state level.

Djordje Bobic, Democratic Party’s representative in Belgrade’s city council; Belgrade’s main architect from 2004 -2008: “They keep calling me the urban investor, which I actually am, because I believe that Belgrade cannot develop without the investors. That is simply the case in every major European city.”

B92: How could the state sell something that it didn’t own?

Djordje Bobic: I don’t know. It’s a huge problem, and as I have told you already, I am a big supporter of that law because I think that it’s the only way to actually put all things in order in the sphere of my interest.” Mahmud Busatlija, architect and investment consultant: “The problem begins when the state has to compensate the people to whom it would not be able to return their property. And that’s because the state does not have that sort of an income that could guarantee the return funds. Instead, it will transfer the compensation on its citizens.” .

Serbia’s nationals would have to pay millions in damages to the successors of the old owners, if the disputable decisions were to be legalised before adopting the denationalisation law. The most exclusive locations mostly have their old owners, but regardless of that, the authorities have kept leasing them, through various statutes and decisions to certain businessmen.

Aleksandar Vlahovic, Privatisation Minister 2001 – 2004: The state will have to refund the former owners in that case. Now, the question of the refund remains...

B92: But when you say the state, you realise that you are talking about its citizens?

Aleksandar Vlahovic: I agree, but when I say the citizens of this country and the state, I am talking about the executive government as well that was jurisprudent at one point for the functioning of this country, including government from 1944 and ’45, but also the current executive government that is expected to adopt the denationalisation law.

B92: But also, there is an issue of who is going to finally pay for all the previously owned property sold during privatisation? Serbian citizens?

Oliver Dulic, Environment and Spatial Planning Minister: “That’s right. I agree. You’re right.”

B92: And that is the case according to the market prices?

Oliver Dulic: It is common knowledge that one cannot correct one injustice by enforcing new ones.

Bogdan Veljkovic, President of the Restitution Union: I think that the financial interests of the mafia, or the state mafia if you will, are so huge that they are willing to let Serbia go under, providing that they can scoop millions and disappear.