Abuse off office (part five)

Abuse off office (part five) Petar Matic bought the factory "Partizanka" in order to manufacture socks. But after the Detailed Spatial Plan had been changed, a luxurious residential complex, "Oaza", appeared at the location instead of the factory. BIGZ, onetime major printing house, was bought to print books but, according to announcements, a residential complex will be built in its place. BIGZ, onetime major printing house, was bought to print books but, according to announcements, a residential complex will be built in its place. Miroslav Miskovic bought the company "Autokomanda" supposedly to repair motor vehicles. However, a large shopping mall is to be built at its place. Philip Zepter bought the shipyard in order to make ships, but modifications to the General Spatial Plan changed the land's purpose from industrial to residential. Apartments will be built instead of ships. In 2007, "Vopex Trade", registered as a retail trade company dealing with fruit and vegetables, bought the Wool Combine located in the centre of Belgrade. "Vopex" was established by Lumaco d.o.o., which is owned by the Port of Belgrade, previously bought by Miskovic and Beko. In this way, using a company whose main activity is selling fruits and vegetables and which was founded by the Port of Belgrade, they have bought a combine that was meant to produce wool. These are only a few examples of companies which have been sold to businessmen by the way of privatization, purchase of shares or bankruptcy. Most of them discontinued the main business activities of these factories. The main principle is often the same: a company or a factory incurs heavy debts, sometimes goes bankrupt, after which a prospective buyer buys the company at a price far below its real value. Since the sale contract, even in the case of privatization, obliges the buyer to continue the primary activity of the company or factory during the next three years – or a maximum of five years – they usually use this time to initiate modifications to the detailed spatial plan. The City Assembly then adopts a new plan, turning the industrial zone into a city residential area. Luxurious apartments have been built or are under construction in places where factories once used to be. Workers have lost their jobs because the law allowed businessmen to buy factories not to achieve economic recovery and jumpstart production, but to modify the Detailed or General Spatial Plan and grab highest-valued locations. Ljiljana Culic, representative of the workers of the former factory "Inex Partizanka": I have worked for "Partizanka" since 1966. "Partizanka" was founded in Belgrade in 1912. I often tell my children that the factory survived two world wars, but could not survive the actions of the new government. It was a modern, export-oriented factory that utilized new technologies. Yes, we have taken loans from the state, but we have always paid them back. Our salaries were small because we were buying new machines and new technologies. The sale of the socks and knitwear manufacturer "Inex Partizanka" situated at an attractive location in Belgrade, near Vuk's monument, is an example that demonstrates how the workers have lost their jobs while certain individuals – assisted by state institutions – were able to achieve handsome profits. The factory was bankrupted and sold as an unsuccessful company. Instead of recovery and investment in production, the new buyer built a luxurious residential building in its place. Bankruptcy was declared in 2001, not because of the debt towards creditors, but because of the debt towards workers – owners of 44 percent of the capital – whose salaries had not been paid. Ljiljana Culic, representative of the workers of the former factory "Inex Partizanka": Why haven't the Commercial Court, the city administration and the Republic listened to us? The factory owed money only to the workers. Why haven't they listened to us? We wanted to organize the company, to run the machines and continue production. We could forgive those salaries. We wanted to manage the machines that we had bought ourselves. While the workers were trying to find an investor and creditors in order to continue production, the bankruptcy manager, Milun Djuric, ignored these initiatives. In 2002, he began selling the factory's property using direct deals instead of auctions. On May 9, 2002 Petar Matic delivered an offer – via his company "City Real Estate" – related only to the purchase of commercial real estate, not the recovery of production. This offer was accepted and a contract was signed only 22 days later. Milun Djuric was specified as the seller in the contract. Djuric refused to be interviewed by the "Insider", saying that these events took place too long ago. The building with 8,000 square meters of commercial space at a location near Vuk's monument was sold for only 90 million dinars. Ljiljana Culic, representative of the workers of the former factory "Inex Partizanka": The building in the Cirila i Metodija Street was sold for 90 million dinars, and it was turned into a residential object called "Oasis", where a square meter costs 3,000 euros. I don't know who was able to pay for that and who bought it, but we have found out that there have already been three successive owners. "Oasis" was built just to be sold later and allow somebody to make a profit using our work, our sweat and tears. The luxurious building "Oasis" was built by Petar Matic's company in 2005 within the walls of the socks and knitwear factory "Inex Partizanka". The factory was not even demolished – existing capacities of the old factory were used for construction. We have acquired a copy of the contract on sale and it shows that 8,073 square meters were paid 90 million dinars in six monthly installments, which means 171 euro per square meter. The new apartments have been sold for a twenty times bigger price. Aside from 6,000 square meters of residential space, the building contains 1,300 square meters of commercial area as well as 2,500 square meters within the underground garage with 87 parking places. The apartments range from 50 to 250 square meters. The construction license was signed by the then secretary for spatial planning, Ognjen Djurovic, and former city architect, Djordje Bobic, who is today a representative in the City Assembly Djordje Bobic, architect and Democratic Party representative in the City Assembly, chief city architect 2003-2008: I am very proud of this project. B92: We don't dispute that, but what happened before? A bankrupted factory was sold for 90 million dinars, although it owned 8,000 square meters of space at a good location. It was sold as a bankrupted factory. Djordje Bobic: Yes. B92: Immediately after that, the Detailed Regulation Plan was modified or adopted and now it is allowed to build luxurious residential buildings at the location. How is it possible? Djordje Bobic: It is not logical to have such a factory in the centre of the city, a factory that is obsolete and practically falling apart. Half of the building was demolished to build a new house etc. B92: Yes, but if the officials knew that, and if it was not appropriate to have a factory at that location, why didn't they sell it as a building site or organized a bid to lease it? Djordje Bobic: Because the officials... B92: The price would have been much bigger? Djordje Bobic: Because the owner, i.e. the state, decided to sell the factory and that was it. B92: Yes, but that is ridiculous. Djordje Bobic: You are correct in a certain sense, but, how should I put it, such is the framework we work in. B92: But is it true that more money could have been paid to the budget? Djordje Bobic: Well, let's say it is. No one of the officials could answer our question: if it is obvious that a factory has to be removed from an attractive location, why should the state sell the bankrupted factory instead of moving it to another location, selling it to someone who actually wants to continue production – which would allow the workers to keep their jobs – and later selling the building site at an auction, which would provide much more money to the budget? Ljiljana Culic, representative of the workers of the former factory "Inex Partizanka": We have contacted the cabinet of the mayor, Nenad Bodganovic. How is it possible to turn an industrial site into a residential area? Nenad Bogdanovic and his team didn't have time to meet us. After the sale of "Partizanka", they appointed Djordje Bobic to be the chief designer of the "Oasis". Later he became the chief architect of the city of Belgrade. I think that the state and the city have treated their property, and our property, very badly. It is interesting to note that, before Matic officially bought the building of "Partizanka", on May 22 the Institute of Urbanism received a note from the Secretariat of Urbanism which demanded consideration of the possibility of building a residential object at the factory's location. The note, which we had a chance to see, said that the investor, "City Real Estate" desired modifications to the Detailed Spatial Plan and that the Secretariat was of the opinion that the idea should be supported if the plans allowed it. At the time, the Detailed Spatial Plan adopted in 1977 was still in effect, which defined the area as a manufacturing zone. After several decisions were adopted by the city, the location was turned into a residential zone. The Institute of Urbanism stated that the General Spatial Plan, which was being prepared at the time, specified the change in the purpose of the site just like the previous Plan. Therefore it was possible to satisfy the investor. Ljiljana Culic, representative of the workers of the former factory "Inex Partizanka": This is such a horrible feeling. I used to work in this factory in all three shifts. The factory was my second home. If the roof was leaking, we would all go to save the material, regardless of working time. We would remove every piece of dirt from the floor to prevent it from getting into finished products. We carefully maintained every needle in the machines. Now there are apartments with security guards and swimming pools. I live near the "Oasis". It is a terrible feeling, not being able to explain your children why and where you have spent all your working years, why you lived, why you worked. I think that the buyer should not be blamed, but the government. I understand how the market works, I don't know the buyer and I have nothing against him, but I protest the actions of the state, the city, the Commercial Court, the Government of Serbia, the city administration, the Chamber of Commerce and all the people who were supposed to take care of this property. Mahmud Busatlija, architect and investment consultant: This is how it works: you buy a factory and pay workers to hang around for two or three more years. During this time, you manage to modify the spatial plan, make projects and everything. This is exactly the time you need to prepare construction. After that, you eliminate the factory and build a new object – commercial or residential – which earns you huge profit. Mahmud Busatlija, architect and investment consultant: This is how it works: you buy a factory and pay workers to hang around for two or three more years. During this time, you manage to modify the spatial plan, make projects and everything. This is exactly the time you need to prepare construction. After that, you eliminate the factory and build a new object – commercial or residential – which earns you huge profit. Aleksandar Vlahovic, minister of privatization 2001 – 2004: You cannot claim that it was all about buying and selling real estate, and disregard more than one hundred successful privatizations which are today the main driving force of the Serbian economy. It is not true. B92: But it is obvious and leads to a logical conclusion, and you have said... Aleksandar Vlahovic: Let me tell you, the other choice was for the state to nationalize all the companies and to turn the public property into state property, meaning that workers would not have become shareholders. In this scenario, the state could have said: "OK, now we are going to separate good locations from the bad, sell the good ones at the auction and achieve best possible price, which will allow us to maximize payments to the budget. We don't care whether the company would continue production, whether the workers would be dissatisfied with the fact that the state had nationalized the public company and excluded them from the capital..." B92: Well, how have they benefited in this case? Aleksandar Vlahovic: It depends on your point of view regarding privatization. Today, Aleksandar Vlahovic and Danko Djunic are co-owners of the company "Eki Investment". B92: "Eki Investment" has won the tender for "Novi Dom"? Aleksandar Vlahovic: Yes. B92: Have you won the tender, paid the highest price and bought this company in order to continue production and sale of furniture or because of the real estate it owns? Aleksandar Vlahovic: We have bought the company because we believe that... and by we I mean the consortium has bought the company; let me be more clear, "Eki Investment" is one of the members of this consortium, the other member is "Nelt Co" and the third member is "Atase". "Eki Investment" owns one third of shares in "Novi Dom". The company was bought because of its potential, not only because of its business operations, since it is obvious that the number of square meters of its real estate greatly exceeds the capacity that "Novi Dom" can offer. Such is the case with almost half of all furniture manufacturers in Serbia. We have bought it, among other reasons, because it can be an interesting project of managing the existing real estate, without the intention to sell the buildings and everything else. After taking into account several different examples, it seems that bankruptcies of companies or factories have often been initiated deliberately in order to lower the price during their sale. In this way a large amount of state capital has been sold. The state has also sold its own property far below its market value disregarding bankruptcy proceedings. Only in 2004 a new law on bankruptcy procedure was adopted in Serbia. According to this law, the bankruptcy manager is appointed by the Bankruptcy Board of the Commercial Court. The bankrupted company's creditors have a significant role in the bankruptcy procedure. The new law also specifies reorganization in cases where the recovery of the bankrupted debtor is possible, as well as the sale of its property if the company is heavily indebted. Consequently, names of many companies – officially in bankruptcy – can be seen on signs placed at numerous building sites, in capacity of investors or co-investors. Such is the case with one of the major construction companies that is now in bankruptcy, Hidrotehnika Beogradgradnja. The company was building apartments during the nineties, and still owns the right to construct around 20.000 square meters of residential and commercial space at one of the most attractive locations in the city center, the Slavija. During Milosevic's rule, Hidrotehnika won several attractive locations: 127 Vojvode Stepe St., 244 Ustanicka St., facility 7, Dimitrija Tucovica St., Blocks X and XI, Slavija, Blok VI, facility 7, Slavija, Blok VI, facilities 5-B and 6, 244 Ustanicka St., facility H-1, Slavija, facility O3, 244 Ustanicka St., facility next to H-3. Hidrotehnika was sold for around one million euros at an auction held in 2004, together with its debt and locations where several tens of thousands of square meters of real estate can be built. Officially, the buyer was Mirko Rasic. The Insider's sources claim that the real buyer was actually Philip Zepter. However, only 18 months after the sale, the company was so heavily indebted that it went bankrupt. The Privatization Agency terminated the contract with the buyer. The company's primary creditors were major construction companies, as well as Philip Zepter, who demanded 300,000 euros, according to the company documentation. The creditors appointed a bankruptcy manager, Vasilije Markovic, who had been the director of "Trudbenik". Very soon after that, the Managing Board of Creditors decided to remove him from the position because, as they claimed, they had no control over his actions. Dusan Ilic, president of the Managing Board of "Hidrotehnika – Beogradgradnja": There was a lot of disagreement during reorganization of the management. A part of the management has completely ignored the interests of creditors, running the company without any oversight. The creditors have been demanding removal of the director for more than a year, but the process before the Commercial Court has not even formally begun. Several criminal charges of abuse of position have been filed against Markovic because, creditors claim, he has signed contracts with co-investors without their approval. On the other side, Markovic says that his plan, which entails transfer of locations, would provide payments in the amount of 10 million euros, and claims that his actions are not questionable. Vasilije Markovic, director of the company "Hidrotehnika – Beogradgradnja": The reorganization plan specifies that the plan represents the Statute and a new contract and nothing can be done outside this plan. It can only be disputed whether the plan is being implemented or not. For example, if the plan specifies that an object is worth 100,000 euros, and if we manage to sell it for a bigger price, that means that we have satisfied the conditions. Otherwise we would have to write an explanation to the bankruptcy judge and explain why we failed to achieve this price. Dusan Ilic, president of the Managing Board of "Hidrotehnika – Beogradgradnja": He is using the procedure to manage the property of the bankrupted debtor without any oversight, and I am convinced that he is not alone in this and that some of his associates assist him. The most attractive locations have practically been given to the co-investor without any oversight. On the other side, Markovic claims that co-investors have been chosen by an expert commission. The creditors have filed criminal charges of forgery against the director of "Hidrotehnika", Vasilije Markovic. Namely, "Hidrotehnika" received the document on city planning conditions for the location in 128 Vojvode Stepe St. in 2008, but it was signed by a man who died in 2002. According to the land register, the land plot was registered to "Hidrotehnika", as an owner of one third, and to the late Dragoljub Djakovic, as an owner of two thirds of the location. Djakovic died in October 2002, but in 2008 he was signed on all documents that were necessary for the paperwork to be completed. The signature on the request submitted to the Secretariat of Urbanism and Construction was also forged. The request was submitted for the purpose of acquiring the document on city planning conditions and the approval for construction. The same forged signature was also used to sign the project task and the design overview related to the residential-commercial building in 127 Vojvode Stepe St.; it was placed in the header of the title page, in the field marked 'Investor'. Vasilije Markovic, director of the company "Hidrotehnika – Beogradgradnja": Your information is not correct. Someone misinformed you. B92: "Hidrotehnika" received the document on city planning conditions entitled to the company and a dead man who died in 2002. Vasilije Markovic: Your information is incorrect. You have bad advisers. B92: I have the document on city planning conditions. Vasilije Markovic: Please, "Hidrotehnika" put out a tender and selected a co-investor. The co-investor made a contract on designing and providing necessary documentation. Since the location is registered on "Hidrotehnika", I have authorized both the designers, tasked with providing those conditions, and the building contractor, "Inter-Eksport". B92: The request for issuance of the document on city planning conditions was signed in 2008 by the man who died in 2002, Dragoljub Djakovic. Vasilije Markovic: Please, why don't you talk to him instead of me? B92: I can't talk to him, he died in 2002. Vasilije Markovic: Well, I haven't... I don't know who signed it, are you listening to me? I told you that we have put out a tender and authorized others to work further. We don't have – I don't have anything to do with him. After the conversation was recorded, Vasilije Markovic sent the "Insider" a statement saying that he was asked about the man who died because the Insider's journalists act in the interest of various tycoons. He pointed out that he had not been informed in advance of this question. Had he been informed in advance, he would have prepared an appropriate response, he said. In the statement delivered to us after the recorded interview, Markovic explained how it was possible that the dead man became one of the co-investors of "Hidrotehnika": "I have authorized the designer – architect Dragoslav Stankovic – to manage all proceedings before all relevant official bodies on behalf of 'Hidrotehnika' regarding the necessary documentation. Significant legal changes were adopted in the meantime, with the law now stipulating that these documents may be issued only to the owners. The late Djakovic and 'Hidrotehnika' were listed on the ownership certificate for this location, on the basis of which the designer received necessary documents for both persons. At the same time, the search for heirs was underway which ended successfully with an out-of-court inheritance proceedings. Therefore it is clear that there is nothing mysterious here", says Markovic's letter to the "Insider". Dusan Ilic, president of the Managing Board of "Hidrotehnika – Beogradgradnja": Since the architect admitted to signing the late man's name, the committee that was formed by the director for the purpose of preparing the tender, as well as the director himself, had to be aware of the fact that the co-investor was dead and that inheritance proceedings must be completed before dealing with another, new co-investor. However, there is another problem – how is it possible that the Secretariat of Urbanism can issue the documents on the basis of forged signature? Nenad Komatina, secretary for urbanism, Belgrade 2004-2008: The police and prosecutor's office deal with forgeries. We don't have the authorization nor capacity to discover forgeries. Nenad Komatina, secretary for urbanism, Belgrade 2004-2008: The police and prosecutor's office deal with forgeries. We don't have the authorization nor capacity to discover forgeries. B92: So it means that you could sign a construction license on the basis of... Nenad Komatina: Of course, it is possible if... it is possible that someone could submit a forged document, but that would mean that another official body has issued a forged document or incomplete documentation. B92: It is obvious that you haven't noticed the forgery in this case, since you have signed the document? Nenad Komatina: Yes, I know, but I have told you that I am not... we are not the police. We cannot look for forgeries, we don't have capacity for that. We have had several such cases, but we cannot determine whether a document is forged or not. Whenever we had such a suspicion, we would act in accordance with the city directive and notify the head of the administration, who would initiate appropriate procedure before the Ministry of Internal Affairs. Creditors of "Hidrotehnika", which is in bankruptcy, have filed criminal charges against the director for forgery, among other things. At the same time, Vasilije Markovic claims that everything was done in accordance with the law. While the creditors of "Hidrotehnika", which is in bankruptcy, demand removal of the director, claiming that he is transferring the company's locations to co-investors without their knowledge, the Committee of the Association of Judicial Experts is of the opinion that the Plan of Reorganization of the Debtor in Bankruptcy is being implemented in accordance with the approved schedule. The analysis states that creditors are gradually being paid and that, for example, the building H-1 in 244 Ustanicka St. in Belgrade is ready for technical inspection, which means that it can be expected that the plan will be fully realized and the creditors be fully paid after the sale of these apartments. Vasilije Markovic was appointed director of "Hidrotehnika" in 2007. The company had previously built two buildings without construction licenses at one of its locations. Construction license for the building in Ustanicka St. was issued only on November 14, 2008, after the construction had been completed. At the corner of Ustanicka St. and Bulevar Revolucije, "Hidrotehnika" has turned a single-room apartment hotel into a residential complex and constructed new buildings without any license for construction. Near the end of the nineties, a shopping mall was created from prefabricated facilities at the same location. All these acts have been practically legalized with the help of the City Assembly, which has adopted modifications to the existing Detailed Spatial Plan. The plan had specified that Bulevar Revolucije street, today named Bulevar Kralja Aleksandra, had to be widened and all illegally constructed buildings demolished. However, the owners of prefabricated facilities and the shopping mall, as well as the representatives of "Hidrotehnika", submitted a proposal to the City Assembly demanding modification of the Detailed Spatial Plan.Unusually quickly, the Assembly adopted the modifications. It is interesting to note that the office of lawyer Vesna Ilic was located in the shopping mall. At the time, Vesna Ilic was the cabinet chief of the former mayor Nenad Bogdanovic. Her husband, Njegovan Ivic, also had an office at the same place. Today, Ms. Ivic is the head of the city administration and she has refused to be interviewed by the "Insider". Before the new Spatial Plan was adopted by the Assembly, the previous Plan had specified widening of the Bulevar Revolucije street at the same location. However, the new Plan stipulates that it shall be narrowed. The analysis that had been prepared before the modification of the Detailed Spatial Plan adopted by the Assembly even states that, in accordance with the existing General Spatial Plan, it was planned to give the Bulevar Revolucije a status of a main road, while the Ustanicka Street should have become a first-category road. The analysis also says that the location where these buildings have been built is a very attractive location at the corner of two important city arteries and an important communication hub; it was even planned to build a square at this place. Despite all these considerations, the City Assembly adopted the Detailed Spatial Plan on June 25, 2004. In accordance with the new Plan adopted by the Assembly and the architectural design approved for this location, the area where the shopping mall and Hidrotehnika's building are located will look like this: one of the streets is to be removed, while Bulevar Revolucije will be narrowed; the garage goes five levels underground, while the building above has five floors; a street leads into the garage and continues at the other side, with a very small distance between buildings. This example shows how detailed spatial plans are being modified for completely unexplainable reasons in order to accommodate buildings that have been built without license. In this case, it seems that it will not be possible to widen the street, Bulevar Revolucije, at this location due to the decision made by the City Assembly. Milan Popovic, president of Zvezdara municipality: I don't know what happened there and why it was done. There was probably some necessity for that. As far as I've heard from you while preparing for this programme, it is scandalous if the widening of Bulevar Revolucije has been truly jeopardized because of this. I don't know whether this is actually what happened because it's not municipality's responsibility. I cannot comment on this since I don't have information. Why has the plan been changed? The plan has been changed because there was a need to change it, and I don't find that disputable – not just for this location, but any one – but I have a problem with that if it threatens the public interest. Mahmud Busatlija, architect and investment consultant: If a General Spatial Plan stipulates that a road will pass through a public land plot, there is no legal possibility to obtain a construction license to build anything on that land plot. But if someone builds something there with a license, the person who issued him the license is the culprit. It is even easier to find a solution if he builds an object without a license – you should just demolish it. However, in this case the City Assembly has made a decision to modify the spatial plan because someone has constructed a building illegally exactly at the place where the street should be. Obviously, everything is possible when economic interest is aligned with politics. Detailed regulation plans are often changed. It seems that representatives in the City Assembly, who vote for these changes, do not care about the consequences. Djordje Bobic, architect and Democratic Party representative in the City Assembly, chief city architect 2003-2008: We are awaiting the modification of the General Plan to be adopted this year. In accordance to this modification, some of these zones will be activated as construction land zones. B92: Will these modifications to the General Plan affect the location of Autokomanda – is it true that construction area will be increased and purpose of zones changed? Djordje Bobic: Yes. B92: Why? Djordje Bobic: Because it is not economical to have low intensity construction at such a high-quality location. There is no other reason. B92: But it seems as if it is being done for the benefit of Miroslav Miskovic, for example? Djordje Bobic: Well, why not? Let's be clear. The money paid for square meters as a fee... I am not talking about the rent. The rent is small compared to the fee. This is a high-quality zone. It is more than 550 euros per square meter of area. I think it is highly important to build a building with 3,000 square meters instead of only 300. The owner of "Delta", Miroslav Miskovic, bought the company "Autokomanda" supposedly in order to make a business repairing motor vehicles. However, after a period of two years during which he had been obliged to continue with this activity, the General Plan was changed, turning this zone from an industrial area to an urban construction area. Verica Barac, president of the Anti-Corruption Council: The land follows the legal path of the buildings. This means that the owner of the buildings will also own the land. Instead of being only a user of the land, he will become the owner. But the value of the land was not included in the sale price of the buildings. After the purchase of a bankrupted factory or a printing company in the course of their privatization, with assistance from state agencies, the buyer succeeds in modifying the spatial plan and changing the purpose of the land from industrial to urban development zone. In this way, the buyer acquires a high-value location for a price of the bankrupted factory. B92: How much was the damage to the state budget due to these laws? Aleksandar Vlahovic, minister of privatization 2001 – 2004: I can give you another example. We have increased the pace of auction-type privatization. Why? Among other reasons, because there was no adequate ownership inventory with regard to public companies. We had to sell all these companies, but without prior settlement of property relations regarding the land in use. Why am I telling this? I want to emphasize the huge effort we had to undertake only to prepare a company for privatization, let alone prepare and pass a range of laws – that had to be proposed by someone else within the Government of Serbia – just to be able to approach the sale of companies in a different way. B92: But why hasn't it been done? Who was responsible to take care of the interest of citizens in the Government of Serbia and the country in general? Aleksandar Vlahovic: Let me tell you, in 2001 or 2002 our main priority was to supply enough electric power to the citizens of Serbia because we had huge problems trying to restore the electric power system. In 2001, our key priority was probably to eliminate the illegal smuggling of petrol and cigarettes. I don't need to remind you what kind of a country we inherited in 2001and what needed to be done. Oliver Dulic, minister of ecology and spatial planning: The Law on Privatization, adopted in 2001, defined the privatization procedure and the market price of companies. Of course, no one could have imagined that residential and commercial buildings would be constructed at the locations of these companies. What have the buyers done? They asked the municipal authorities – this is where the blame should be placed – to modify the planning documents and allow them to build residential-commercial units instead of an industrial zone. The local self-government bodies allowed them to do it. After few years, huge complexes have been built in these locations, much bigger than the factories that used to be there and costing much, much more. Hundred times more than those factories. Factories are still being sold using the same principle. Such was the case with the Belgrade Shipyard, a company in bankruptcy. In 2002, Zoran Janjusevic was appointed the bankruptcy manager of the company. In November 2003, the Shipyard with 44,000 square meters of area along the bank of Danube was sold for 13 million euros, amounting to 295 euros per square meter. The buyer was a Swiss company, a front for Philip Zepter. At the moment of sale, the bankruptcy manager was Darinka Isailovic, former assistant to Zoran Janjusevic. The Shipyard was allegedly bought for the purpose of building ships. However, the General Plan was modified, designating the location as an urban development zone. Nenad Komatina, secretary for urbanism, Belgrade 2004-2008: The General Plan aims to remove industrial facilities from the city center and build objects which are suitable to such locations. B92: But somehow it always happens that the Plan is changed only after a businessman buys a factory, leaving the impression that these modifications serve...? Nenad Komatina: It has nothing to do with me. I have already explained the procedure of adoption of plans. The Secretariat of Urbanism is the last step in the procedure of planning, but I must emphasize that there is a tendency to remove industrial facilities from the city center. This is common practice in the world and in our country. B92: All right, but wouldn't it be logical to make this change beforehand and put the land up for auction, for example, not sell it right away? Nenad Komatina: It would be logical, but it has nothing to do with the Secretariat. Djordje Bobic, architect and Democratic Party representative in the City Assembly, chief city architect 2003-2008: I have noticed that there are many cases reported on in the media, the cases regarding purchases of companies with land. According to the law, the buyer of the real estate becomes the user of the land that belongs to this real estate and the building. B92: Isn't it detrimental to the state's budget? Djordje Bobic: My personal opinion is that the damage can be estimated, but the market regulates such things. I think that the same goes with old factories. BIGZ was also sold, for example, including the magnificent building of Mr. Belogorko across the City Fair, not to mention all other things that have been sold. B92: It was sold as bankrupted printing company. Djordje Bobic: Yes, as a bankrupted printing company. B92: Not as a high-valued location? Djordje Bobic: Buyers have purchased it and now they are preparing a project. B92: If the state is aware of the low market price that a bankrupted printing company can achieve, and of the intention to remove the printing facilities, why is it doing this? That the buyer... Djordje Bobic: Most probably not. B92: Then why such a move which is detrimental to state's interest? Djordje Bobic: I don't know. The building of BIGZ, previously the largest printing house in the country, is placed at one of the best locations in Belgrade. The building has several owners. Around 80 percent of the space was bought by Petar Matic in 2007 during privatization process. It has been announced that all 25,000 square meters will be reconstructed, and that a hotel and a business center will be built at the location. Company "Beta Partners" won the auction in March 2007 with the offered price of 310 million dinars. According to brochures, for this price they have acquired 20,256 square meters of business real estate in the Vojvode Misica Street in Belgrade, a residential building in the Almaska Street in Novi Sad and the resort Veli Losinj in Croatia. Seven hectares of land owned by the state was also sold. Mahmud Busatlija, architect and investment consultant: We are talking about a labyrinth of abuse made possible by the alignment of interests of the state administration and the local self-government, on one side, and the big capital and economic centers of power, on the other side. Privatization of the company "Partizanski Put" demonstrates how the purchase of a road maintenance company serves as a step towards acquisition of a location in the city center with intention to build a hotel. Construction company "Partizanski Put" was sold at the tender in the Privatization Agency on November 23, 2006. According to the information published before the procedure, the company owns several objects with a total area of 39,227 square meters, mostly located in Belgrade. The most attractive location is the main office building at 6 Takovska Street in the center of Belgrade, across the Federal Parliament, with the area of 3,032 square meters. However, the company "Preduzece za Puteve Beograd" purchased "Partizanski Put" for only 400,000 euros, after offering the lowest allowed price. "Preduzece za Puteve Beograd" has accepted the obligation not to sell, transfer or in any other way dispose of the capital during the period of five years without the Agency's written approval. "Preduzece za Puteve Beograd" and "Partizanski Put" are owned by "Preduzece za Puteve Nis". PZP Nis is officially owned by Milo Djuraskovic. However, many believe that Djuraskovic acts on behalf of Miroslav Miskovic, since "Delta M" has participated in the privatization of the company "Preduzece za Puteve" together with Djuraskovic's companies. PZP Nis today owns the companies "Preduzece za Puteve Backa Put, Kragujevac and Beograd", "Partizanski Put Vranje" and "Srem Put". One of the co-owners of the company PZP Nis – which owns most of the companies dealing with construction of roads – was Marko Miskovic, via his company "Mera Investment Fund" based in the Dutch Antilles. According to the sources of the "Insider", Marko Miskovic has recently sold most of the shares to Djuraskovic. The commercial register shows that Marko Miskovic's company now owns only 6.59 percent of shares in the company "Preduzece za Puteve Nis". The "Insider" has found out that a hotel is being built at the location in 6 Takovska Street, while the application for license was submitted by "Preduzece za Puteve Nis". Privatization in Serbia was an excellent opportunity for individuals who have amassed a fortune thanks to their privileged position during the rule of Slobodan Milosevic to obtain ownership and influence over the state. After the change of power in the country, during privatization, companies were bought by people who had been allowed to smuggle cigarettes, to achieve import monopoly, to buy foreign currency at drastically lower exchange rates during hyper-inflation, by those who used state channels to transfer money to Cyprus and foreign accounts during the nineties... Aleksandar Vlahovic, minister of privatization 2001 – 2004: I think that the World Bank and the International Monetary Fund are the most competent to judge the Serbian Law on Privatization. Both institutions, as well as the European Bank for Reconstruction and Development, are of the opinion that the privatization process in Serbia has been completed most successfully compared to all other countries in transition. B92: The biggest investors and buyers in Serbia are the people who have acquired their fortune during Milosevic's rule, thanks to various privileges. This is a fact. Aleksandar Vlahovic: You believe that these people have done something illegal in the previous period to acquire their money and buy all these things? Isn't that a job for... B92: I don't believe anything, the problem is that no one has investigated this. Where did their capital come from? Aleksandar Vlahovic: Isn't that something for the authorities to consider? Not only consider, but to investigate if there is any doubt. B92: I agree with that, so I am asking you the same question. You have been a member of the government. Aleksandar Vlahovic: Well, I was only the minister of economy and privatization. Aleksandar Vlahovic was the minister of privatization until 2004. He was succeeded by Predrag Bubalo from the Democratic Party of Serbia, during whose mandate a lot of companies were sold. Bubalo refused to be interviewed by the "Insider". After the privatization in Serbia, most of the companies and real estate properties are now owned by Miroslav Miskovic, Milan Beko, Petar Matic, Radomir Baja Zivanic and Milan Jankovic – Philip Zepter. Verica Barac, president of the Anti-Corruption Council: This is why we have the same people after eight years, people who have divided the market among themselves. All of this is simply an agreement between them. It is obvious that the state loses, while certain individuals benefit. Now, when the privatization is almost completed, Serbian businessmen have only one last step to make: to become owners of many hectares of land on which they have bought ports, publishing companies or factories. After their purchase of the Port of Belgrade, Milan Beko and Miroslav Miskovic accepted the obligation to conduct port-related activities at the site. However, there are plans to build luxurious residential buildings – after modification of the General Spatial Plan – at the area of several tens of hectares at this location.

Abuse off office (part five)

Petar Matic bought the factory "Partizanka" in order to manufacture socks. But after the Detailed Spatial Plan had been changed, a luxurious residential complex, "Oaza", appeared at the location instead of the factory. BIGZ, onetime major printing house, was bought to print books but, according to announcements, a residential complex will be built in its place. BIGZ, onetime major printing house, was bought to print books but, according to announcements, a residential complex will be built in its place. Miroslav Miskovic bought the company "Autokomanda" supposedly to repair motor vehicles. However, a large shopping mall is to be built at its place. Philip Zepter bought the shipyard in order to make ships, but modifications to the General Spatial Plan changed the land's purpose from industrial to residential. Apartments will be built instead of ships. In 2007, "Vopex Trade", registered as a retail trade company dealing with fruit and vegetables, bought the Wool Combine located in the centre of Belgrade. "Vopex" was established by Lumaco d.o.o., which is owned by the Port of Belgrade, previously bought by Miskovic and Beko. In this way, using a company whose main activity is selling fruits and vegetables and which was founded by the Port of Belgrade, they have bought a combine that was meant to produce wool. These are only a few examples of companies which have been sold to businessmen by the way of privatization, purchase of shares or bankruptcy. Most of them discontinued the main business activities of these factories. The main principle is often the same: a company or a factory incurs heavy debts, sometimes goes bankrupt, after which a prospective buyer buys the company at a price far below its real value. Since the sale contract, even in the case of privatization, obliges the buyer to continue the primary activity of the company or factory during the next three years – or a maximum of five years – they usually use this time to initiate modifications to the detailed spatial plan. The City Assembly then adopts a new plan, turning the industrial zone into a city residential area. Luxurious apartments have been built or are under construction in places where factories once used to be. Workers have lost their jobs because the law allowed businessmen to buy factories not to achieve economic recovery and jumpstart production, but to modify the Detailed or General Spatial Plan and grab highest-valued locations. Ljiljana Culic, representative of the workers of the former factory "Inex Partizanka": I have worked for "Partizanka" since 1966. "Partizanka" was founded in Belgrade in 1912. I often tell my children that the factory survived two world wars, but could not survive the actions of the new government. It was a modern, export-oriented factory that utilized new technologies. Yes, we have taken loans from the state, but we have always paid them back. Our salaries were small because we were buying new machines and new technologies. The sale of the socks and knitwear manufacturer "Inex Partizanka" situated at an attractive location in Belgrade, near Vuk's monument, is an example that demonstrates how the workers have lost their jobs while certain individuals – assisted by state institutions – were able to achieve handsome profits. The factory was bankrupted and sold as an unsuccessful company. Instead of recovery and investment in production, the new buyer built a luxurious residential building in its place. Bankruptcy was declared in 2001, not because of the debt towards creditors, but because of the debt towards workers – owners of 44 percent of the capital – whose salaries had not been paid.

Ljiljana Culic, representative of the workers of the former factory "Inex Partizanka": Why haven't the Commercial Court, the city administration and the Republic listened to us? The factory owed money only to the workers. Why haven't they listened to us? We wanted to organize the company, to run the machines and continue production. We could forgive those salaries. We wanted to manage the machines that we had bought ourselves. While the workers were trying to find an investor and creditors in order to continue production, the bankruptcy manager, Milun Djuric, ignored these initiatives. In 2002, he began selling the factory's property using direct deals instead of auctions. On May 9, 2002 Petar Matic delivered an offer – via his company "City Real Estate" – related only to the purchase of commercial real estate, not the recovery of production. This offer was accepted and a contract was signed only 22 days later. Milun Djuric was specified as the seller in the contract. Djuric refused to be interviewed by the "Insider", saying that these events took place too long ago. The building with 8,000 square meters of commercial space at a location near Vuk's monument was sold for only 90 million dinars.

Ljiljana Culic, representative of the workers of the former factory "Inex Partizanka": The building in the Cirila i Metodija Street was sold for 90 million dinars, and it was turned into a residential object called "Oasis", where a square meter costs 3,000 euros. I don't know who was able to pay for that and who bought it, but we have found out that there have already been three successive owners. "Oasis" was built just to be sold later and allow somebody to make a profit using our work, our sweat and tears. The luxurious building "Oasis" was built by Petar Matic's company in 2005 within the walls of the socks and knitwear factory "Inex Partizanka". The factory was not even demolished – existing capacities of the old factory were used for construction. We have acquired a copy of the contract on sale and it shows that 8,073 square meters were paid 90 million dinars in six monthly installments, which means 171 euro per square meter. The new apartments have been sold for a twenty times bigger price. Aside from 6,000 square meters of residential space, the building contains 1,300 square meters of commercial area as well as 2,500 square meters within the underground garage with 87 parking places. The apartments range from 50 to 250 square meters. The construction license was signed by the then secretary for spatial planning, Ognjen Djurovic, and former city architect, Djordje Bobic, who is today a representative in the City Assembly Djordje Bobic, architect and Democratic Party representative in the City Assembly, chief city architect 2003-2008: I am very proud of this project.

B92: We don't dispute that, but what happened before? A bankrupted factory was sold for 90 million dinars, although it owned 8,000 square meters of space at a good location. It was sold as a bankrupted factory.

Djordje Bobic: Yes.

B92: Immediately after that, the Detailed Regulation Plan was modified or adopted and now it is allowed to build luxurious residential buildings at the location. How is it possible?

Djordje Bobic: It is not logical to have such a factory in the centre of the city, a factory that is obsolete and practically falling apart. Half of the building was demolished to build a new house etc.

B92: Yes, but if the officials knew that, and if it was not appropriate to have a factory at that location, why didn't they sell it as a building site or organized a bid to lease it?

Djordje Bobic: Because the officials...

B92: The price would have been much bigger?

Djordje Bobic: Because the owner, i.e. the state, decided to sell the factory and that was it.

B92: Yes, but that is ridiculous.

Djordje Bobic: You are correct in a certain sense, but, how should I put it, such is the framework we work in.

B92: But is it true that more money could have been paid to the budget?

Djordje Bobic: Well, let's say it is. No one of the officials could answer our question: if it is obvious that a factory has to be removed from an attractive location, why should the state sell the bankrupted factory instead of moving it to another location, selling it to someone who actually wants to continue production – which would allow the workers to keep their jobs – and later selling the building site at an auction, which would provide much more money to the budget?

Ljiljana Culic, representative of the workers of the former factory "Inex Partizanka": We have contacted the cabinet of the mayor, Nenad Bodganovic. How is it possible to turn an industrial site into a residential area? Nenad Bogdanovic and his team didn't have time to meet us. After the sale of "Partizanka", they appointed Djordje Bobic to be the chief designer of the "Oasis". Later he became the chief architect of the city of Belgrade. I think that the state and the city have treated their property, and our property, very badly. It is interesting to note that, before Matic officially bought the building of "Partizanka", on May 22 the Institute of Urbanism received a note from the Secretariat of Urbanism which demanded consideration of the possibility of building a residential object at the factory's location. The note, which we had a chance to see, said that the investor, "City Real Estate" desired modifications to the Detailed Spatial Plan and that the Secretariat was of the opinion that the idea should be supported if the plans allowed it. At the time, the Detailed Spatial Plan adopted in 1977 was still in effect, which defined the area as a manufacturing zone. After several decisions were adopted by the city, the location was turned into a residential zone. The Institute of Urbanism stated that the General Spatial Plan, which was being prepared at the time, specified the change in the purpose of the site just like the previous Plan. Therefore it was possible to satisfy the investor.

Ljiljana Culic, representative of the workers of the former factory "Inex Partizanka": This is such a horrible feeling. I used to work in this factory in all three shifts. The factory was my second home. If the roof was leaking, we would all go to save the material, regardless of working time. We would remove every piece of dirt from the floor to prevent it from getting into finished products. We carefully maintained every needle in the machines. Now there are apartments with security guards and swimming pools. I live near the "Oasis". It is a terrible feeling, not being able to explain your children why and where you have spent all your working years, why you lived, why you worked. I think that the buyer should not be blamed, but the government. I understand how the market works, I don't know the buyer and I have nothing against him, but I protest the actions of the state, the city, the Commercial Court, the Government of Serbia, the city administration, the Chamber of Commerce and all the people who were supposed to take care of this property.

Mahmud Busatlija, architect and investment consultant: This is how it works: you buy a factory and pay workers to hang around for two or three more years. During this time, you manage to modify the spatial plan, make projects and everything. This is exactly the time you need to prepare construction. After that, you eliminate the factory and build a new object – commercial or residential – which earns you huge profit. Mahmud Busatlija, architect and investment consultant: This is how it works: you buy a factory and pay workers to hang around for two or three more years. During this time, you manage to modify the spatial plan, make projects and everything. This is exactly the time you need to prepare construction. After that, you eliminate the factory and build a new object – commercial or residential – which earns you huge profit.

Aleksandar Vlahovic, minister of privatization 2001 – 2004: You cannot claim that it was all about buying and selling real estate, and disregard more than one hundred successful privatizations which are today the main driving force of the Serbian economy. It is not true.

B92: But it is obvious and leads to a logical conclusion, and you have said...

Aleksandar Vlahovic: Let me tell you, the other choice was for the state to nationalize all the companies and to turn the public property into state property, meaning that workers would not have become shareholders. In this scenario, the state could have said: "OK, now we are going to separate good locations from the bad, sell the good ones at the auction and achieve best possible price, which will allow us to maximize payments to the budget. We don't care whether the company would continue production, whether the workers would be dissatisfied with the fact that the state had nationalized the public company and excluded them from the capital..."

B92: Well, how have they benefited in this case?

Aleksandar Vlahovic: It depends on your point of view regarding privatization. Today, Aleksandar Vlahovic and Danko Djunic are co-owners of the company "Eki Investment".

B92: "Eki Investment" has won the tender for "Novi Dom"?

Aleksandar Vlahovic: Yes.

B92: Have you won the tender, paid the highest price and bought this company in order to continue production and sale of furniture or because of the real estate it owns?

Aleksandar Vlahovic: We have bought the company because we believe that... and by we I mean the consortium has bought the company; let me be more clear, "Eki Investment" is one of the members of this consortium, the other member is "Nelt Co" and the third member is "Atase". "Eki Investment" owns one third of shares in "Novi Dom". The company was bought because of its potential, not only because of its business operations, since it is obvious that the number of square meters of its real estate greatly exceeds the capacity that "Novi Dom" can offer. Such is the case with almost half of all furniture manufacturers in Serbia. We have bought it, among other reasons, because it can be an interesting project of managing the existing real estate, without the intention to sell the buildings and everything else. After taking into account several different examples, it seems that bankruptcies of companies or factories have often been initiated deliberately in order to lower the price during their sale. In this way a large amount of state capital has been sold. The state has also sold its own property far below its market value disregarding bankruptcy proceedings. Only in 2004 a new law on bankruptcy procedure was adopted in Serbia. According to this law, the bankruptcy manager is appointed by the Bankruptcy Board of the Commercial Court. The bankrupted company's creditors have a significant role in the bankruptcy procedure. The new law also specifies reorganization in cases where the recovery of the bankrupted debtor is possible, as well as the sale of its property if the company is heavily indebted. Consequently, names of many companies – officially in bankruptcy – can be seen on signs placed at numerous building sites, in capacity of investors or co-investors. Such is the case with one of the major construction companies that is now in bankruptcy, Hidrotehnika Beogradgradnja. The company was building apartments during the nineties, and still owns the right to construct around 20.000 square meters of residential and commercial space at one of the most attractive locations in the city center, the Slavija. During Milosevic's rule, Hidrotehnika won several attractive locations: 127 Vojvode Stepe St., 244 Ustanicka St., facility 7, Dimitrija Tucovica St., Blocks X and XI, Slavija, Blok VI, facility 7, Slavija, Blok VI, facilities 5-B and 6, 244 Ustanicka St., facility H-1, Slavija, facility O3, 244 Ustanicka St., facility next to H-3. Hidrotehnika was sold for around one million euros at an auction held in 2004, together with its debt and locations where several tens of thousands of square meters of real estate can be built. Officially, the buyer was Mirko Rasic. The Insider's sources claim that the real buyer was actually Philip Zepter. However, only 18 months after the sale, the company was so heavily indebted that it went bankrupt. The Privatization Agency terminated the contract with the buyer. The company's primary creditors were major construction companies, as well as Philip Zepter, who demanded 300,000 euros, according to the company documentation. The creditors appointed a bankruptcy manager, Vasilije Markovic, who had been the director of "Trudbenik". Very soon after that, the Managing Board of Creditors decided to remove him from the position because, as they claimed, they had no control over his actions. Dusan Ilic, president of the Managing Board of "Hidrotehnika – Beogradgradnja": There was a lot of disagreement during reorganization of the management. A part of the management has completely ignored the interests of creditors, running the company without any oversight.

The creditors have been demanding removal of the director for more than a year, but the process before the Commercial Court has not even formally begun. Several criminal charges of abuse of position have been filed against Markovic because, creditors claim, he has signed contracts with co-investors without their approval. On the other side, Markovic says that his plan, which entails transfer of locations, would provide payments in the amount of 10 million euros, and claims that his actions are not questionable. Vasilije Markovic, director of the company "Hidrotehnika – Beogradgradnja": The reorganization plan specifies that the plan represents the Statute and a new contract and nothing can be done outside this plan. It can only be disputed whether the plan is being implemented or not. For example, if the plan specifies that an object is worth 100,000 euros, and if we manage to sell it for a bigger price, that means that we have satisfied the conditions. Otherwise we would have to write an explanation to the bankruptcy judge and explain why we failed to achieve this price. Dusan Ilic, president of the Managing Board of "Hidrotehnika – Beogradgradnja": He is using the procedure to manage the property of the bankrupted debtor without any oversight, and I am convinced that he is not alone in this and that some of his associates assist him. The most attractive locations have practically been given to the co-investor without any oversight.

On the other side, Markovic claims that co-investors have been chosen by an expert commission. The creditors have filed criminal charges of forgery against the director of "Hidrotehnika", Vasilije Markovic. Namely, "Hidrotehnika" received the document on city planning conditions for the location in 128 Vojvode Stepe St. in 2008, but it was signed by a man who died in 2002. According to the land register, the land plot was registered to "Hidrotehnika", as an owner of one third, and to the late Dragoljub Djakovic, as an owner of two thirds of the location. Djakovic died in October 2002, but in 2008 he was signed on all documents that were necessary for the paperwork to be completed. The signature on the request submitted to the Secretariat of Urbanism and Construction was also forged. The request was submitted for the purpose of acquiring the document on city planning conditions and the approval for construction. The same forged signature was also used to sign the project task and the design overview related to the residential-commercial building in 127 Vojvode Stepe St.; it was placed in the header of the title page, in the field marked 'Investor'. Vasilije Markovic, director of the company "Hidrotehnika – Beogradgradnja": Your information is not correct. Someone misinformed you.

B92: "Hidrotehnika" received the document on city planning conditions entitled to the company and a dead man who died in 2002.

Vasilije Markovic: Your information is incorrect. You have bad advisers.

B92: I have the document on city planning conditions.

Vasilije Markovic: Please, "Hidrotehnika" put out a tender and selected a co-investor. The co-investor made a contract on designing and providing necessary documentation. Since the location is registered on "Hidrotehnika", I have authorized both the designers, tasked with providing those conditions, and the building contractor, "Inter-Eksport". B92: The request for issuance of the document on city planning conditions was signed in 2008 by the man who died in 2002, Dragoljub Djakovic.

Vasilije Markovic: Please, why don't you talk to him instead of me?

B92: I can't talk to him, he died in 2002.

Vasilije Markovic: Well, I haven't... I don't know who signed it, are you listening to me? I told you that we have put out a tender and authorized others to work further. We don't have – I don't have anything to do with him. After the conversation was recorded, Vasilije Markovic sent the "Insider" a statement saying that he was asked about the man who died because the Insider's journalists act in the interest of various tycoons. He pointed out that he had not been informed in advance of this question. Had he been informed in advance, he would have prepared an appropriate response, he said. In the statement delivered to us after the recorded interview, Markovic explained how it was possible that the dead man became one of the co-investors of "Hidrotehnika":

"I have authorized the designer – architect Dragoslav Stankovic – to manage all proceedings before all relevant official bodies on behalf of 'Hidrotehnika' regarding the necessary documentation. Significant legal changes were adopted in the meantime, with the law now stipulating that these documents may be issued only to the owners. The late Djakovic and 'Hidrotehnika' were listed on the ownership certificate for this location, on the basis of which the designer received necessary documents for both persons. At the same time, the search for heirs was underway which ended successfully with an out-of-court inheritance proceedings. Therefore it is clear that there is nothing mysterious here", says Markovic's letter to the "Insider". Dusan Ilic, president of the Managing Board of "Hidrotehnika – Beogradgradnja": Since the architect admitted to signing the late man's name, the committee that was formed by the director for the purpose of preparing the tender, as well as the director himself, had to be aware of the fact that the co-investor was dead and that inheritance proceedings must be completed before dealing with another, new co-investor.

However, there is another problem – how is it possible that the Secretariat of Urbanism can issue the documents on the basis of forged signature?

Nenad Komatina, secretary for urbanism, Belgrade 2004-2008: The police and prosecutor's office deal with forgeries. We don't have the authorization nor capacity to discover forgeries. Nenad Komatina, secretary for urbanism, Belgrade 2004-2008: The police and prosecutor's office deal with forgeries. We don't have the authorization nor capacity to discover forgeries.

B92: So it means that you could sign a construction license on the basis of...

Nenad Komatina: Of course, it is possible if... it is possible that someone could submit a forged document, but that would mean that another official body has issued a forged document or incomplete documentation.

B92: It is obvious that you haven't noticed the forgery in this case, since you have signed the document?

Nenad Komatina: Yes, I know, but I have told you that I am not... we are not the police. We cannot look for forgeries, we don't have capacity for that. We have had several such cases, but we cannot determine whether a document is forged or not. Whenever we had such a suspicion, we would act in accordance with the city directive and notify the head of the administration, who would initiate appropriate procedure before the Ministry of Internal Affairs. Creditors of "Hidrotehnika", which is in bankruptcy, have filed criminal charges against the director for forgery, among other things. At the same time, Vasilije Markovic claims that everything was done in accordance with the law.

While the creditors of "Hidrotehnika", which is in bankruptcy, demand removal of the director, claiming that he is transferring the company's locations to co-investors without their knowledge, the Committee of the Association of Judicial Experts is of the opinion that the Plan of Reorganization of the Debtor in Bankruptcy is being implemented in accordance with the approved schedule. The analysis states that creditors are gradually being paid and that, for example, the building H-1 in 244 Ustanicka St. in Belgrade is ready for technical inspection, which means that it can be expected that the plan will be fully realized and the creditors be fully paid after the sale of these apartments.

Vasilije Markovic was appointed director of "Hidrotehnika" in 2007. The company had previously built two buildings without construction licenses at one of its locations. Construction license for the building in Ustanicka St. was issued only on November 14, 2008, after the construction had been completed. At the corner of Ustanicka St. and Bulevar Revolucije, "Hidrotehnika" has turned a single-room apartment hotel into a residential complex and constructed new buildings without any license for construction. Near the end of the nineties, a shopping mall was created from prefabricated facilities at the same location. All these acts have been practically legalized with the help of the City Assembly, which has adopted modifications to the existing Detailed Spatial Plan. The plan had specified that Bulevar Revolucije street, today named Bulevar Kralja Aleksandra, had to be widened and all illegally constructed buildings demolished. However, the owners of prefabricated facilities and the shopping mall, as well as the representatives of "Hidrotehnika", submitted a proposal to the City Assembly demanding modification of the Detailed Spatial Plan.Unusually quickly, the Assembly adopted the modifications. It is interesting to note that the office of lawyer Vesna Ilic was located in the shopping mall. At the time, Vesna Ilic was the cabinet chief of the former mayor Nenad Bogdanovic. Her husband, Njegovan Ivic, also had an office at the same place. Today, Ms. Ivic is the head of the city administration and she has refused to be interviewed by the "Insider". Before the new Spatial Plan was adopted by the Assembly, the previous Plan had specified widening of the Bulevar Revolucije street at the same location. However, the new Plan stipulates that it shall be narrowed. The analysis that had been prepared before the modification of the Detailed Spatial Plan adopted by the Assembly even states that, in accordance with the existing General Spatial Plan, it was planned to give the Bulevar Revolucije a status of a main road, while the Ustanicka Street should have become a first-category road. The analysis also says that the location where these buildings have been built is a very attractive location at the corner of two important city arteries and an important communication hub; it was even planned to build a square at this place. Despite all these considerations, the City Assembly adopted the Detailed Spatial Plan on June 25, 2004. In accordance with the new Plan adopted by the Assembly and the architectural design approved for this location, the area where the shopping mall and Hidrotehnika's building are located will look like this: one of the streets is to be removed, while Bulevar Revolucije will be narrowed; the garage goes five levels underground, while the building above has five floors; a street leads into the garage and continues at the other side, with a very small distance between buildings. This example shows how detailed spatial plans are being modified for completely unexplainable reasons in order to accommodate buildings that have been built without license. In this case, it seems that it will not be possible to widen the street, Bulevar Revolucije, at this location due to the decision made by the City Assembly. Milan Popovic, president of Zvezdara municipality: I don't know what happened there and why it was done. There was probably some necessity for that. As far as I've heard from you while preparing for this programme, it is scandalous if the widening of Bulevar Revolucije has been truly jeopardized because of this. I don't know whether this is actually what happened because it's not municipality's responsibility. I cannot comment on this since I don't have information. Why has the plan been changed? The plan has been changed because there was a need to change it, and I don't find that disputable – not just for this location, but any one – but I have a problem with that if it threatens the public interest. Mahmud Busatlija, architect and investment consultant: If a General Spatial Plan stipulates that a road will pass through a public land plot, there is no legal possibility to obtain a construction license to build anything on that land plot. But if someone builds something there with a license, the person who issued him the license is the culprit. It is even easier to find a solution if he builds an object without a license – you should just demolish it. However, in this case the City Assembly has made a decision to modify the spatial plan because someone has constructed a building illegally exactly at the place where the street should be. Obviously, everything is possible when economic interest is aligned with politics.

Detailed regulation plans are often changed. It seems that representatives in the City Assembly, who vote for these changes, do not care about the consequences. Djordje Bobic, architect and Democratic Party representative in the City Assembly, chief city architect 2003-2008: We are awaiting the modification of the General Plan to be adopted this year. In accordance to this modification, some of these zones will be activated as construction land zones.

B92: Will these modifications to the General Plan affect the location of Autokomanda – is it true that construction area will be increased and purpose of zones changed?

Djordje Bobic: Yes.

B92: Why?

Djordje Bobic: Because it is not economical to have low intensity construction at such a high-quality location. There is no other reason.

B92: But it seems as if it is being done for the benefit of Miroslav Miskovic, for example?

Djordje Bobic: Well, why not? Let's be clear. The money paid for square meters as a fee... I am not talking about the rent. The rent is small compared to the fee. This is a high-quality zone. It is more than 550 euros per square meter of area. I think it is highly important to build a building with 3,000 square meters instead of only 300. The owner of "Delta", Miroslav Miskovic, bought the company "Autokomanda" supposedly in order to make a business repairing motor vehicles. However, after a period of two years during which he had been obliged to continue with this activity, the General Plan was changed, turning this zone from an industrial area to an urban construction area.

Verica Barac, president of the Anti-Corruption Council: The land follows the legal path of the buildings. This means that the owner of the buildings will also own the land. Instead of being only a user of the land, he will become the owner. But the value of the land was not included in the sale price of the buildings.

After the purchase of a bankrupted factory or a printing company in the course of their privatization, with assistance from state agencies, the buyer succeeds in modifying the spatial plan and changing the purpose of the land from industrial to urban development zone. In this way, the buyer acquires a high-value location for a price of the bankrupted factory.

B92: How much was the damage to the state budget due to these laws? Aleksandar Vlahovic, minister of privatization 2001 – 2004: I can give you another example. We have increased the pace of auction-type privatization. Why? Among other reasons, because there was no adequate ownership inventory with regard to public companies. We had to sell all these companies, but without prior settlement of property relations regarding the land in use. Why am I telling this? I want to emphasize the huge effort we had to undertake only to prepare a company for privatization, let alone prepare and pass a range of laws – that had to be proposed by someone else within the Government of Serbia – just to be able to approach the sale of companies in a different way.

B92: But why hasn't it been done? Who was responsible to take care of the interest of citizens in the Government of Serbia and the country in general? Aleksandar Vlahovic: Let me tell you, in 2001 or 2002 our main priority was to supply enough electric power to the citizens of Serbia because we had huge problems trying to restore the electric power system. In 2001, our key priority was probably to eliminate the illegal smuggling of petrol and cigarettes. I don't need to remind you what kind of a country we inherited in 2001and what needed to be done.

Oliver Dulic, minister of ecology and spatial planning: The Law on Privatization, adopted in 2001, defined the privatization procedure and the market price of companies. Of course, no one could have imagined that residential and commercial buildings would be constructed at the locations of these companies. What have the buyers done? They asked the municipal authorities – this is where the blame should be placed – to modify the planning documents and allow them to build residential-commercial units instead of an industrial zone. The local self-government bodies allowed them to do it. After few years, huge complexes have been built in these locations, much bigger than the factories that used to be there and costing much, much more. Hundred times more than those factories. Factories are still being sold using the same principle. Such was the case with the Belgrade Shipyard, a company in bankruptcy. In 2002, Zoran Janjusevic was appointed the bankruptcy manager of the company. In November 2003, the Shipyard with 44,000 square meters of area along the bank of Danube was sold for 13 million euros, amounting to 295 euros per square meter. The buyer was a Swiss company, a front for Philip Zepter. At the moment of sale, the bankruptcy manager was Darinka Isailovic, former assistant to Zoran Janjusevic. The Shipyard was allegedly bought for the purpose of building ships. However, the General Plan was modified, designating the location as an urban development zone. Nenad Komatina, secretary for urbanism, Belgrade 2004-2008: The General Plan aims to remove industrial facilities from the city center and build objects which are suitable to such locations.

B92: But somehow it always happens that the Plan is changed only after a businessman buys a factory, leaving the impression that these modifications serve...?

Nenad Komatina: It has nothing to do with me. I have already explained the procedure of adoption of plans. The Secretariat of Urbanism is the last step in the procedure of planning, but I must emphasize that there is a tendency to remove industrial facilities from the city center. This is common practice in the world and in our country.

B92: All right, but wouldn't it be logical to make this change beforehand and put the land up for auction, for example, not sell it right away?

Nenad Komatina: It would be logical, but it has nothing to do with the Secretariat. Djordje Bobic, architect and Democratic Party representative in the City Assembly, chief city architect 2003-2008: I have noticed that there are many cases reported on in the media, the cases regarding purchases of companies with land. According to the law, the buyer of the real estate becomes the user of the land that belongs to this real estate and the building.

B92: Isn't it detrimental to the state's budget?

Djordje Bobic: My personal opinion is that the damage can be estimated, but the market regulates such things. I think that the same goes with old factories. BIGZ was also sold, for example, including the magnificent building of Mr. Belogorko across the City Fair, not to mention all other things that have been sold.

B92: It was sold as bankrupted printing company.

Djordje Bobic: Yes, as a bankrupted printing company.

B92: Not as a high-valued location?

Djordje Bobic: Buyers have purchased it and now they are preparing a project.

B92: If the state is aware of the low market price that a bankrupted printing company can achieve, and of the intention to remove the printing facilities, why is it doing this? That the buyer...

Djordje Bobic: Most probably not.

B92: Then why such a move which is detrimental to state's interest?

Djordje Bobic: I don't know. The building of BIGZ, previously the largest printing house in the country, is placed at one of the best locations in Belgrade. The building has several owners. Around 80 percent of the space was bought by Petar Matic in 2007 during privatization process. It has been announced that all 25,000 square meters will be reconstructed, and that a hotel and a business center will be built at the location. Company "Beta Partners" won the auction in March 2007 with the offered price of 310 million dinars. According to brochures, for this price they have acquired 20,256 square meters of business real estate in the Vojvode Misica Street in Belgrade, a residential building in the Almaska Street in Novi Sad and the resort Veli Losinj in Croatia. Seven hectares of land owned by the state was also sold.

Mahmud Busatlija, architect and investment consultant: We are talking about a labyrinth of abuse made possible by the alignment of interests of the state administration and the local self-government, on one side, and the big capital and economic centers of power, on the other side. Privatization of the company "Partizanski Put" demonstrates how the purchase of a road maintenance company serves as a step towards acquisition of a location in the city center with intention to build a hotel. Construction company "Partizanski Put" was sold at the tender in the Privatization Agency on November 23, 2006. According to the information published before the procedure, the company owns several objects with a total area of 39,227 square meters, mostly located in Belgrade. The most attractive location is the main office building at 6 Takovska Street in the center of Belgrade, across the Federal Parliament, with the area of 3,032 square meters. However, the company "Preduzece za Puteve Beograd" purchased "Partizanski Put" for only 400,000 euros, after offering the lowest allowed price. "Preduzece za Puteve Beograd" has accepted the obligation not to sell, transfer or in any other way dispose of the capital during the period of five years without the Agency's written approval. "Preduzece za Puteve Beograd" and "Partizanski Put" are owned by "Preduzece za Puteve Nis". PZP Nis is officially owned by Milo Djuraskovic. However, many believe that Djuraskovic acts on behalf of Miroslav Miskovic, since "Delta M" has participated in the privatization of the company "Preduzece za Puteve" together with Djuraskovic's companies. PZP Nis today owns the companies "Preduzece za Puteve Backa Put, Kragujevac and Beograd", "Partizanski Put Vranje" and "Srem Put". One of the co-owners of the company PZP Nis – which owns most of the companies dealing with construction of roads – was Marko Miskovic, via his company "Mera Investment Fund" based in the Dutch Antilles. According to the sources of the "Insider", Marko Miskovic has recently sold most of the shares to Djuraskovic. The commercial register shows that Marko Miskovic's company now owns only 6.59 percent of shares in the company "Preduzece za Puteve Nis". The "Insider" has found out that a hotel is being built at the location in 6 Takovska Street, while the application for license was submitted by "Preduzece za Puteve Nis". Privatization in Serbia was an excellent opportunity for individuals who have amassed a fortune thanks to their privileged position during the rule of Slobodan Milosevic to obtain ownership and influence over the state. After the change of power in the country, during privatization, companies were bought by people who had been allowed to smuggle cigarettes, to achieve import monopoly, to buy foreign currency at drastically lower exchange rates during hyper-inflation, by those who used state channels to transfer money to Cyprus and foreign accounts during the nineties... Aleksandar Vlahovic, minister of privatization 2001 – 2004: I think that the World Bank and the International Monetary Fund are the most competent to judge the Serbian Law on Privatization. Both institutions, as well as the European Bank for Reconstruction and Development, are of the opinion that the privatization process in Serbia has been completed most successfully compared to all other countries in transition.

B92: The biggest investors and buyers in Serbia are the people who have acquired their fortune during Milosevic's rule, thanks to various privileges. This is a fact.

Aleksandar Vlahovic: You believe that these people have done something illegal in the previous period to acquire their money and buy all these things? Isn't that a job for...

B92: I don't believe anything, the problem is that no one has investigated this. Where did their capital come from?

Aleksandar Vlahovic: Isn't that something for the authorities to consider? Not only consider, but to investigate if there is any doubt.

B92: I agree with that, so I am asking you the same question. You have been a member of the government.

Aleksandar Vlahovic: Well, I was only the minister of economy and privatization. Aleksandar Vlahovic was the minister of privatization until 2004. He was succeeded by Predrag Bubalo from the Democratic Party of Serbia, during whose mandate a lot of companies were sold. Bubalo refused to be interviewed by the "Insider". After the privatization in Serbia, most of the companies and real estate properties are now owned by Miroslav Miskovic, Milan Beko, Petar Matic, Radomir Baja Zivanic and Milan Jankovic – Philip Zepter. Verica Barac, president of the Anti-Corruption Council: This is why we have the same people after eight years, people who have divided the market among themselves. All of this is simply an agreement between them. It is obvious that the state loses, while certain individuals benefit.

Now, when the privatization is almost completed, Serbian businessmen have only one last step to make: to become owners of many hectares of land on which they have bought ports, publishing companies or factories.