MACEDONIA: RENEWED ACTIVITY IN 45 MILLION EURO

UNCLAS SECTION 01 OF 02 SKOPJE 001144 SIPDIS SENSITIVE SIPDIS DEPT FOR EUR/SCE, DOJ/OPDAT FOR CARL ALEXANDRE E.O. 12958: N/A TAGS: PINR MK SUBJECT: MACEDONIA: RENEWED ACTIVITY IN 45 MILLION EURO EMBEZZLEMENT CORRUPTION CASE SUMMARY ¶1. (SBU) On November 15, Macedonia's special Organized Crime prosecutor issued detention requests for former Export Import Bank Director Metodija Smilenski, and former National Bank of Macedonia (NBM) Governor Ljube Trpeski. They are accused of defrauding the NBM of over 45 million Euros in 2004. Smilenski, whose financial schemes date back to 1993 is awaiting his final extradition hearing in Serbia. Trpeski is under police surveillance in the Skopje military hospital, where he reportedly is recovering from heart problems before returning to home detention while he awaits trial. End summary. METODIJA SMILENSKI - THE MASTERMIND ¶2. (SBU) On November 22, the Macedonian Justice Ministry sent an indictment to Belgrade against Metodija Smilenski, a private Macedonian businessman with close ties to former PM Ljubco Georgievski. (Note: Georgievski formerly was the leader of VMRO-DPMNE, the current ruling party.) Smilenski is accused of embezzling over 45 million Euros through various fraudulent business schemes, mainly during his time as director of the Export Import Bank in Macedonia. On June 15, Smilenski was arrested in Belgrade on the basis of an international warrant issued by the Macedonian office of Interpol. His request for Serbian citizenship was denied by the Serbian Ministry of the Interior, and the Serbian Supreme Court recently gave the green light to his extradition. However, since Smilenski is a dual citizen (Macedonian and Austrian),the Serbian Ministry of Justice is still considering his extradition to Macedonia. ¶3. (SBU) The current charges against Smilenski are related to alleged embezzlement, but there are a number of other cases pending against him on charges related to the abuse of his official position and having encouraged others to perform criminal acts of corruption. - In 1993 Smilenski invested in the "Centro" company, one of the largest trading companies in the former Yugoslavia, with 1,200 employees and some 18 million Euros worth of real estate. Through fictitious contracts, forged documents and money transfers to off-shore companies, Smilenski allegedly bankrupted the company by 1996. - In August 2003, he was charged in Macedonia with forging documents. In November 2004, he was sentenced in absentia to a 5,000 Euro fine and 100 days in prison. - In January 2004, he was charged with encouraging the then-Director of the Bureau for Commodity Reserves, Vanco Pelovski, to abuse his official position and authority, allegedly causing a loss of 1.3 million Euros to the Ministry of Finance. - In September 2004, Smilenski was charged with abuse of his official position as Director of the Export Import Bank and the misuse of some 15 million Euros from the NBM. - Smilenski's name also is connected with illegal activities in the textile factory "Makedonka" in the city of Stip. He and his accomplices, some of them high government officials at the time (e.g. the former Minister of Transport, Ljupco Balkovski, the former director of the Public Enterprise for State Property, Ilija Kitanovski, and the former Minister of Economy, Besnik Fetai) have been implicated in money laundering and fictitious mortgage schemes as well. LJUBE TRPESKI - THE ACCOMPLICE ¶4. (SBU) Trpeski, a former member of the Socialist Party and ex-governor of the NBM, granted over 15 million Euros to guarantee Export Import Bank credits fronted by the German Bank LHB and the Bank of Austria. Credits taken from the foreign banks allegedly were circulated through Smilenski's companies and, using fictitious receivables, were transferred to his Austria-based company "Makotrade GMBH Vienna." The charges against Trpeski are related to his misuse of official position to defraud creditors. Skopje Public Prosecutor Sterjo Zikov has convinced the other directors of the NBM to SKOPJE 00001144 002 OF 002 cooperate with the prosecution and to turn state's witness against Trpeski. On November 22, Trpeski was detained in Skopje but was immediately admitted to the military hospital for alleged heart problems. He is currently under police surveillance and will then be held under home detention awaiting trial. COMMENT ¶5. (SBU) The recent revival in the prosecution's efforts to detain Smilenski and Trpeski is an important step in the fight against corruption. However, judicial sources believe that the requests for detention have come too late, when some evidence is most likely already lost. It is believed that Lence Sofronievska, the outgoing President of the Judicial Council of the Republic, has close business connections with Smilenski, and may have exerted pressure on the judges involved in cases against him. Sources told PolOff that they believe Sofronievska's weakened position may be the reason the requests for detention finally have been filed. ¶6. (SBU) At the same time, prosecutors are concerned about the appointment of Zoran Dimitrievski as the Presiding Judge of the five-judge panel in this case. Even though Dimitrievski is competent, he has limited experience, and prosecutors believe that he was appointed just for that reason, since many people in high positions "do not want this case to see the light of day." (Note: In Macedonia, court cases of such magnitude are heard by a panel of 5 judges; two are professional lawyers and three are lay persons who are selected by Parliament from a list of volunteers. In general, selection of judges is routine, but the Presiding Judge can influence the process. This is an important factor considering that the votes of the three lay judges have the same weight in the final verdict as the votes of the two professional judges.) MILOVANOVIC