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### Viewing cable 10ZAGREB53, CROATIAN PROSECUTORS INVESTIGATING FORMER PM AND

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Reference ID | Created | Released | Classification | Origin
--- | --- | --- | --- | ---
10ZAGREB53 | 2010-01-26 13:40 | 2010-12-09 21:30 | CONFIDENTIAL | Embassy Zagreb

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    VZCZCXRO8278
    PP RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR
    DE RUEHVB #0053/01 0261340
    ZNY CCCCC ZZH
    P 261340Z JAN 10
    FM AMEMBASSY ZAGREB
    TO RUEHC/SECSTATE WASHDC PRIORITY 9847
    INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY

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    Tuesday, 26 January 2010, 13:40
    C O N F I D E N T I A L SECTION 01 OF 02 ZAGREB 000053
    SIPDIS
    STATE FOR EUR/SCE, EUR/ACE, AND INL/AAE
    EO 12958 DECL: 01/01/2020
    TAGS PGOV, PREL, KCOR, HR
    SUBJECT: CROATIAN PROSECUTORS INVESTIGATING FORMER PM AND
    OTHER “UNTOUCHABLES” FOR CORRUPTION
    REF: 09 ZAGREB 644
    Classified By: Political Officer Chris Zimmer for reasons 1.4 (b) and ( d).

    ¶1. (C) SUMMARY: Chief State Prosecutor Mladen Bajic has outlined to us several ongoing corruption cases targeting former Prime Minister Ivo Sanader and other top government officials. Prosecutors are developing at least one case against the former PM which could result in his indictment, and they are continuing to uncover evidence in several other cases which could also implicate Sanader. PM Kosor has strengthened anti-corruption efforts by creating interagency teams to investigate the most serious cases of corruption in state-owned enterprises, while the Ministers of Interior and Justice have warned that there are no “untouchables” in the corruption clampdown. END SUMMARY.

    ¶2. (C) In a series of meetings in early to mid-January, Croatian Chief State Prosecutor Mladen Bajic described several ongoing corruption probes to Poloff which target former Prime Minister Ivo Sanader, current and former ministers, and nearly all major state-owned enterprises (SOEs). Bajic said that Sanader has possible involvement in several cases, but the one in which prosecutors have gathered the most evidence involves illegal mediation between his friends and Hypo Alpe Adria Bank Group of Austria. The Hypo Bank case indicates that Sanader allegedly arranged a DM 4 million loan for his neighbor, Miroslav Kutle, in the 1990’s and received a DM 800,000 kickback from Kutle in return. XXXXXXXXXXXX is cooperating with the anti-corruption prosecutors (USKOK), and XXXXXXXXXXXX story has been corroborated by XXXXXXXXXXXX with knowledge of the transactions. The illegal mediation charge for receiving gifts and benefits while abusing an official position to secure business transactions carries a prison term of one to five years. Bajic said that Hypo Bank is cooperating with the investigation.

    ¶3. (C) Sanader is also implicated in several corruption cases involving the Transportation Ministry. Transport Minister Bozidar Kalmeta has been under fire for several months due to corruption cases  XXXXXXXXXXXX Bajic said that Sanader often bypassed Kalmeta and gave instructions about how to handle certain cases directly to . Bajic did note, however, that XXXXXXXXXXXX should have at least been aware of what was happening within XXXXXXXXXXXX.

    ¶4. (C) Bajic said his office is leading interagency teams established under orders from PM Kosor to deal with five priority cases involving state-owned enterprises (SOEs): XXXXXXXXXXXX. The teams, led by the prosecutor’s Office for Suppression of Corruption and Organized Crime (USKOK), meet daily and include the Police, Tax Administration, Finance Police, and other experts. Bajic said he believes that all major Croatian SOEs are now under investigation. Chief of Police Oliver Grbic told reporters in mid-January that police were running twelve investigations during the past six months intoXXXXXXXXXXXX management officials of public companies.

    ¶5. (C) A sixth company under investigation, Podravka, has 26 percent government ownership, and parliament approves the supervisory board. At least seven members of the board, all affiliated with the ruling coalition, were arrested, and Deputy Prime Minister (and Minister of Economy and former Podravka executive) Damir Polancec resigned in October 2009. Dinko Cvitan, head of USKOK, confirmed to poloff on January 21 that USKOK has now opened a formal investigation of Polancec for illegal mediation. The scandal involves embezzlement and fraudulent loans by several Podravka-linked firms in an attempt by managers to buy controlling interest in the company. Bajic said he needed several documents from XXXXXXXXXXXX in Hungary to move forward with charges in the case, and initially described efforts to secure them from Hungary as “catastrophic.” XXXXXXXXXXXX and several Hungarian officials were uncooperative, he said, XXXXXXXXXXXX. During a January 18 meeting between PM Kosor and Hungarian PM Bajnai, PM Bajnai told press that documents relating to Podravka’s XXXXXXXXXXXX were sent on to Croatia on January 15; Bajic said he received a Hungarian prosecutor’s
    ZAGREB 00000053 002 OF 002
    report on XXXXXXXXXXXX’s dealings with Podravka on January 22.

    ¶6. (U) Minister of Interior Tomislav Karamarko and Minister of Justice Ivan Simonovic have also been spearheading a public relations campaign to publicize the “war on corruption” in Croatia. Simonovic said on Croatian Radio that “no one can be above the law -- either former or present or future presidents or prime ministers.” He went on to add that “there have always been untouchables, but this is the first time in the history of Croatia that there won’t be untouchables anymore.”

    ¶7. (C) COMMENT: An important test of Croatia’s anti-corruption efforts will be the ability to go after the biggest fish. For several years, Bajic has been extremely hesitant to open even a formal investigation, let alone seek an indictment against high-ranking officials, unless he felt he had a watertight case. The opening of the formal investigation against Polancec, and Bajic’s assessment that the Hypo Bank case currently has solid evidence against Sanader, are strong signs that some “big fish” may soon face formal charges, joining former Defense and Interior Minister Berislav Roncevic, who is currently under indictment for a truck procurement scandal during his time at the MoD (reftel). While the illegal mediation charges being considered against Sanader and Polancec may seem rather minor, Bajic suggests that there is likely much more to be uncovered involving the former PM. In any case, as Bajic likes to point out, Al Capone was brought down for tax evasion rather than for his more notorious activities. FOLEY

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