Privatisation Under the Party Patronage

"Error" of a Bank Clerk

Half a million German Marks which represents the founding capital of forty Bosnian citizens in the Sarajevo Society for the Management of Privatisation Investment Funds "Sibar Invest" came from B&H Federation budget and "other sources".

AIM Sarajevo, February 19, 2001

The mysterious appearance and disappearance of DM 27,500 from the account of municipal organisation of the Federation of War Veteran (RVI) of Zenica, revealed that none of 40 citizens, nominal owners of the Society for the Management of Investment Funds "SIBAR Invest", paid a pfening of their own money as DM 500 thousand worth of equity.

Actually, in this whole deal the demobilised veterans and invalids, as well as their associations might be cheated once again because the SDA "guardians" have again abused them as a cover-up for their shady transactions.

When in late January officials of the municipal organisation of the RVI Zenica asked where the money on their account came from and where did it disappear seven days later, the Zenica "SEH IN Bank" explained it as an "error of a bank clerk". As the bankers explained, the money was intended for the RVI cantonal and not municipal organisation and was a loan of the Federation Finance Ministry. Perhaps there would be nothing controversial about this had not the RVI cantonal organisation "lent" it to three founders of SIBAR Invest as their share in the firm's equity. Among these three beneficiaries of this loan are Mehmed Corhodzic, Director of "Borac" from Travnik and high SDA official and Kerim Lucarevic, Director of the Sarajevo "Energopetrol".

Both these men hold leading positions in prosperous state firms. The subsequent explanation offered by officials of the cantonal RVI organisation actually unmasked the whole mechanism used for the establishment of the Society for Funds Management "Sibar Invest" and its investment fund "Bonus". The initiative on forming the "veteran" investment fund came from the top ranks of the Party of Democratic Action and the operational part was realised through veterans' organisations.

The first problem they came across was of technical-financial nature. Under the law they were obliged to establish a society for the management of investment funds for which a minimum deposit of half a million German Marks in cash is required. Only domestic and foreign legal and physical persons can be founders, except from those firms in which state capital exceeds 50 percent. Only after that it is possible to establish the fund itself. Furthermore, DM 200 million in privatisation certificates are the minimum required for the registration of this fund. Masters of financial tricks in the SDA top leadership came up with a brilliant idea.

Party's trustworthy people, some 40 of them, would appear as formal founders of the society for the management of privatisation investment funds "Sibar Invest" and the money would be "squeezed out" from the state treasury. For the purpose of getting around the Privatisation Law, for it made no sense to finance the privatisation of state property from budget funds, war veterans' organisations assumed the transmission role. They were approved "loans" and donations from the budget, which, in turn, they "lent" to selected cadres so that this money could be used as their share in the founding capital of SIBAR Invest.

The official explanation of this financial acrobatics was offered by leaders of the cantonal RVI organisation from Zenica who claimed that the state "has moral obligation" to protect the value of privatisation certificates distributed to the veterans. To make matters even worse, they proudly pointed out that "none of 40 nominal co-owners of SIBAR Invest have invested a single penny of their own". According to this RVI organisation, the selected individuals have signed a written obligation on transferring all possible profit and gain realised on the basis of their co-ownership of SIBAR Invest to the RVI organisation.

In other words, this was "pure humanitarian engagement". But, people from the municipal organisation in Zenica do not share the "enthusiasm" of the RVI leaders and their conviction that this move was absolutely correct. Quite contrary, people from Zenica called this move the abuse of the war veterans' organisation and insisted on a detailed investigation of the financial police.

Until now the only one who denied the official version of this transaction was Mehmed Corhodzic, who publicly refuted the existence of a contract by which the founders would surrender all gain realised on the basis of their ownership, and stated that he had no clue how his name appeared on the list of beneficiaries of DM 2,500 worth loan (!?)

And this recipe for the provision of DM 500 thousand in cash as founding capital of SIBAR Invest raises many questions. If founders have no concrete financial interest, then all those who have invested their certificates into "Bonus" Fund, managed by SIBAR Invest, should start worrying. For, "the name of the game" in market competition is profit. The larger the better. It would be logical to assume that people who initially invested half a million German Marks in cash would be very interested in business results of the Fund because that would greatly determine their chances of getting their money back, as well as the amount of gain. If they make wrong decisions in investing certificates in shares of state enterprises, everyone who entrusted his certificates to such a Fund would suffer losses, but the founders would lose the most. Naturally, all this is true when people "gamble" on the market with their own money.

In this case, the money is not theirs and if the Fund turns out to be a financial failure, it would not hurt the founders' pockets in contrast to those who have entrusted them with their certificates. On the other hand, if the intention was truly to help demobilised veterans and invalids protect the value of their certificates, there were other ways of securing the necessary founding capital. The fact is that the greater part of veterans' population is today barely making ends meet.

Still, at least 50 thousand veterans and invalids, as well as their family members, could give no more than DM 10 necessary for ensuring the legally required minimum for establishing an investment fund management society, i.e. some DM 500 thousand. This money could then pay best-qualified and most efficient economic experts. At the same time, these founders would be vitally interested in successfully investing both their own and other people's certificates.

As things stand now, who will have the heart to ask full professional dedication and maximum engagement of the current founders of SIBAR Invest if these men are doing it "on humanitarian basis". This means that whatever the arrangement, it will be a kind of "present" and it is known that a gift horse is not to be looked into the mouth. The absence of direct financial interest of the founders in the business performances of "their" Privatisation Investment Fund, quite rightfully has raised suspicions that in making decisions on investments in state-owned enterprises and the subsequent influence on their business policy, will depend on some other criteria and not the economic ones. The only thing certain in these transactions today is that the money is taken from the budget and where will it end up and thanks to whom, is up to the police and the court to determine.

Drazen SIMIC

AIM Sarajevo