DEMINING: ALLEGATIONS OF FRAUD AND MALFEASANCE IN

S E C R E T SARAJEVO 002907

SIPDIS

SIPDIS

DEPT FOR EUR (DICARLO),EUR/ACE, EUR/NCE, EUR/SCE (HOH,
SAINZ, FOOKS),D (SMITH),P (BAME),F, L/LEI, OIG, AND PM

E.O. 12958: DECL: 11/14/2016
TAGS: KCRM MASS PREL MOPS PGOV BK SI
SUBJECT: DEMINING: ALLEGATIONS OF FRAUD AND MALFEASANCE IN
USG SUPPORTED PROGRAMS

REF: SARAJEVO 2706

Classified By: Amb. Douglas McElhaney for reasons 1.4 (b) and (d)

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SUMMARY
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1. (S) In response to the August arrest of Radomir Kojic, a
prominent figure in the demining community, we have begun to
receive allegations of fraud and abuse in humanitarian
demining work in Bosnia. There are reports that demining
operations throughout Bosnia may suffer from large and
systemic levels of fraud and abuse. Ongoing criminal
investigations continue to link major figures within the
demining community to organized crime, and these individuals
are alleged to have embezzled funds, including USG monies,
from demining operations. We also heard allegations of
widespread malfeasance on the part of contractors and the
International Trust Fund (ITF),which implements USG and
other demining donors, demining programs in Bosnia. Senior
Bosnian government officials and other important figures in
the humanitarian demining community have also raised
concerns. We believe the charges require review by
appropriate USG authorities. End summary.

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CASE AGAINST KOJIC
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2. (S) In late October, the Office of the Prosecutor-General
of Bosnia and Herzegovina approached us to request assistance
in the prosecution of Radomir Kojic (see reftel). Kojic, who
was arrested in a joint NATO-SIPA action in August, is
currently awaiting trial on charges of tax evasion, money
laundering and embezzlement. Kojic is also under
investigation for allegedly arranging 10 contract murders.
Among his many commercial enterprises, Kojic had been very
active in the humanitarian demining community, and
prosecutors believe that he embezzled millions of dollars in
international donor funds for use in his organized crime, and
possibly war criminal support, network.


3. (S) Earlier allegations of fraud resulted in Kojic being
barred from receiving demining tenders in 2003, but
prosecutors told us they have strong evidence suggesting that
Kojic remained active in the demining community well after
his debarment. According to prosecutors, Kojic registered
shell demining companies under associates' and family
members' names that then received international demining
assistance. Prosecutors are seeking USG assistance in
providing records of financial and equipment transfers made
to Kojic's demining operations to assist in the prosecution
of Kojic and determine the full scope of his criminal
activities (see reftel). Prosecutors also separately
approached the LEGATT about the possibility of interviewing
USG officials in relation to the case.

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POST REVIEW RAISES CONCERNS
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4. (S) As a result of questions raised by the Kojic arrest,
we initiated a review of USG funded demining programs in
Bosnia. Among other measures, we spent a week traveling
throughout Bosnia to examine the demining concerns at a local
level. We interviewed numerous people associated with the
demining community, including local Bosnia-Herzegovina Mine
Action Center (BHMAC) inspectors, deminers, and demining
company representatives. At all locations, we heard
allegations of systematic and pervasive fraud throughout the
demining process.


5. (S) BHMAC inspectors told us that they have been
instructed by superiors to falsely declare clean areas as
"mined" in order to award fraudulent demining contracts.
Even more troubling, they report pressure to falsely declare
areas free of mines after shoddy work by ITF contractors.
Many local demining officials also assert that the majority
of demining organizations on the official ITF tender list are
shell companies with no independent demining capacity. We
were told these companies were used to give the tender
process the appearence of free and open competition and
conceal collusion among a select group of bidders. BHMAC
employees contend that their organization is complicit in
issuing demining licenses to fraudulent companies.


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SENIOR OFFICIALS LEVEL SERIOUS CHARGES
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6. (S) The Director of BHMAC, Dusan Gavran, and one of the
three demining commissioners, Assistant Minister of Foreign
Trade Dragisa Mekic, told us that they had evidence that
Kojic's front demining companies continued to receive funding
until 2005 with the full knowledge of ITF. Gavran alleged
that ITF, at the highest levels, was complicit in rewarding
tenders to shell companies. Gavran provided a list of seven
demining companies on the ITF tender list that he asserts are
fraudulent and give kickbacks to ITF in return for tenders
(Note. Gavran's list will be sent to PM separately to
determine if any USG monies went to these allegedly
fraudulent companies. End note). Separately, the Director
of the Mine Detection Dog Center for South East Europe (which
receives substantial USG support) and former Deputy Director
of BHMAC, Nermin Hadzimujagic, said that he had serious
concerns over the legitimacy of the current humanitarian
demining process, and echoed many of the accusations we had
previously heard.

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COMMENT: LOOKING FOR A WAY FORWARD
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7. (S) Though rumor and innuendo are endemic to Bosnia, the
widespread allegations, from multiple sources, of fraud in
USG funded demining programs are troubling. At the very
least, the Prosecutor-General's case against Kojic has
uncovered additional evidence of past abuse of USG demining
funds by Kojic and his associates beyond 2003.


8. (S) Failures to fully vet demining contractors,
allegations of kickbacks and tender irregularities raise
serious questions about ITF and BHMAC competency, and perhaps
complicity in criminal activity. An audit or investigation
by appropriate authorities would be necessary to gauge the
true scope of the problem. With our survey, post has
exhausted its capabilities in probing the questions raised
about demining activities in Bosnia. In our opinion, the
current ITF regime under which a third party effectively
handles millions of dollars in our demining assistance
without a thorough and careful vetting of contractors has
created a permissive environment for possible corrupt
practices, as highlighted by the Kojic matter. There is no
doubt that demining programs, and the USG funding that
maintains them, remain crucial to the post-conflict
development of Bosnia. We recommend that the Department
consider investigation and audit of demining expenditures in
Bosnia.
CEFKIN