VISAS DONKEY CORRUPTION 212 (F) SRM (MISKOVIC, Miroslav)

S E C R E T BELGRADE 001065 SIPDIS VISAS DONKEY CORRUPTION 212 (F) STATE FOR INL/C/P, CA.VO/L/C, EUR/SCE PARIS PASS STRASBOIRG SIPDIS C O R R E C T E D C O P Y - CAPTION FOR PARIS ADDED SERVICE/ERROR MESSAGE E.O. 12958: DECL: 07/27/37 TAGS: CVIS KCOR KCRM ASEC PGOV PREL ECON KFRD SR SUBJECT: VISAS DONKEY CORRUPTION 212 (F) SRM (MISKOVIC, Miroslav) CLASSIFIED BY AMBASSADOR MICHAEL POLT, reasons 1.4 (b,d) ¶1. (s) Summary: Miroslav Miskovic, dpob: 5 July 1945, Serbia, is the richest man in Serbia and, according to the most recent Forbes ranking, one of the richest in the world, with over $1 billion in wealth. He dominates banking, insurance, and consumer goods in Serbia after obtaining massive wealth as a beneficiary of official corruption by Slobodan Milosevic in the mid-1990's. We now have solid that Miskovic was the beneficiary of egregious political corruption, which has had a serious adverse effect on U.S. national interests mentioned in Section 4 of Presidential Proclamation 7750, namely the stability of democratic institutions and U.S. foreign assistance goals. The Embassy thus strongly recommends he be entered into CLASS as P212f until he can be found permanently ineligible for a US NIV under INA section 212(f) (PP 7750). End summary. ¶2. C) Serbia is a country in transition to a market-driven economy and a fully developed democracy. Many of its institutions in the economy and in all three branches of the government are underdeveloped and subject to political pressure. Serbia also labors under the unique burden of the consequences of over a decade of state-sponsored corruption and deliberate mismanagement of the state and the economy under Slobodan Milosevic. ¶3. (C) The fragility of Serbia's democratic institutions, in particular its judiciary, combine with a small political elite, a sensationalistic press, and strong political party structures to create an environment ripe for manipulation of the legal process for political gain or to settle personal scores. Government officials have routinely begun politically-motivated investigations of alleged corrupt practices to sully political opponents, only to drop the pursuit of legal action once an opponent had been discredited. At the same time, those in power protect their own, failing to follow up on accusations of corruption when doing so would hurt them politically. ¶4. (C) It is widely accepted in the press, the analytical community, the general public, and among political and economic powerbrokers and senior Mission sources that a small handful of extremely rich men control a disproportionate share of key economic interests in Serbia. These "oligarchs" all either had direct ties to the Milosevic regime (and some to Milosevic personally),served in the Milosevic governments, were active members of Milosevic's Socialist Party (SPS) or the Party of the Yugoslav Left (JUL) (run by Milosevic's wife, Mira Markovic),or were key players in sanctions-busting and other smuggling activity during the Milosevic regime. Documentation on the illegal activities of these men, or the circumstances under which they obtained their wealth or control of key economic interests (including in energy, retail, commodities, banking, media, and telecoms),is unlikely ever to come to light, not least because most of them - according to well-placed Mission contacts - provide financial support to one or more of the main political parties in Serbia, and most of them have stayed out of politics. (Note: By way of example, the press reported in late February that all documents indicating misuse of customs revenues were destroyed the day after Milosevic was forced from power.) The exception is Bogoljub Karic, whose foray into politics to protect his business interests against other oligarchs led to the extralegal seizure of his TV station by the government, his flight from the country under corruption charges (see para 3, above),and the seizure of his mobile telecoms assets by the government for later privatization. ¶5. (C) Recent questionable decisions by the government with regard to the issuance of broadcast licenses and the mishandled privatizations of some assets, along with decisions not to privatize other key assets, all point to influence by the oligarch class on government policy - to the detriment of the stability of democratic institutions in Serbia and to our economic and investment interests in this country. However, since the oligarchs are tied into the political elite, it is nearly impossible to produce hard evidence of tampering, and less likely still that any Serbian government in the foreseeable future would initiate extensive investigations into these irregularities. The government has to date contented itself largely with going after "small fish" corruption, with the local press sensationalizing cases of the "privatization mafia," the "toll mafia," the "customs mafia," and other minor causes celebre. ¶6. (C) Although endemic corruption is characteristic of most transitional societies, the decisive influence wielded by a small group of wealthy Serbian businessmen is dangerous for a country where democratic institutions are weak and rule of law is incomplete. With Serbia's EU accession talks frozen, tycoons could have enough leeway to entrench their control over the Serbian economy and increase their influence over political decision-making. This trend could undermine our goal of creating a democratic Serbia that enhances stability in the Balkans. The 212(f) mechanism provides us with a tool to ensure the people of Serbia that this handful of unscrupulous oligarchs who stole their fortunes from the Serbian people with the help of Slobodon Milosevic will not be rewarded for their theft in the form of the USG glossing over their past misdeeds when they apply to travel to the U.S. -------------- MIROSLAV MISKOVIC -------------- ¶7. (s) In recent months, we have obtained proof positive of Miroslav Miskovic's direct benefit from official corruption on the part of then-Customs Director Mihalj Kertes. The evidence first came to light as a result of an investigative report on a local television station that showed pictures of letters of permission given to Miskovic and his companies during the Milosevic regime that allowed his companies to evade and/or manipulate payment of customs duties to the tune of millions of dollars. We subsequently obtained a copy of the letter itself from Brankica Stankovic (strictly protect),the reporter who broke the story. She told us she obtained the document from ICTY chief prosecutor Carla del Ponte, who has amassed literally tons of documentation highlighting official corruption during the Milosevic regime as part of her (now defunct) case against the former dictator. ¶8. (s) The document, on official Customs Administration letterhead and under seal, signed by Kertes (who is currently under indictment for corruption and has existing Consular system hits),provides Miskovic's umbrella company, Delta Holding, and its subsidiaries with allowances for special treatment for the importation of its goods. Specifically, it allows Delta to clear all its goods through the main customs house in Belgrade (at the time, importers of consumer goods were required to clear customs at the border),and it allows Delta a 45 day grace period after clearance to pay customs and other fees that are due (at the time, all fees had to be paid on the spot and in cash at the time of clearance). Text of document at end of cable, copy of original Serbian language document faxed to EUR/SCE. ¶9. (s) Subsequent to receiving this document, we spoke with Predrag Arsenijevic (strictly protect),currently chief of staff to the Director of Customs and former Customs chief at the Belgrade customs house during the period in question. Arsenijevic confirmed that the document was widely used and that it violated at least three provisions of existing customs laws and regulations in either spirit or letter. First, by allowing Miskovic to unload in Belgrade, the document gave the tycoon an unfair market advantage over potential competitors who had to unload at the border and truck their good sin themselves. Second, in practice the document allowed Miskovic to keep his goods in storage in customs, clearing them piecemeal only when market demand was right. This also gave him an unfair advantage, and in addition allowed him to benefit from hyperinflation as goods sold much later on were valued at their invoice amount from the date of entry. ¶10. (s) Finally, and most damning, Miskovic was allowed to clear goods through customs simply on the "promise" that the company would pay duties within the allotted 45 days. Arsenijevic said these were days of "cash and carry" - most traders had to pay all fees for whole shipments up front to avoid devaluation and to ensure payments were made - he said bank guarantees were worthless by then. So whatever customs fees paid by Delta were paid after 45 days of hyperinflation had cut into the bill. And that, said Arsenijevic, was only if Delta paid at all! Since Delta was allowed to clear goods with just this document, many customs bills went unpaid. He said customs had to create a special log just to try to keep track of Delta's clearances, and then had to try to collect on past-due bills on their own. Arsenijevic commented that customs revenues are currently at twelve times their levels of the mid-1990's. Wryly correcting himself, he added that this was reported revenues that were transferred to the budget - the actual revenues may well be in line with the numbers from the past, with Miskovic, Kertes, and others pocketing the difference. ¶11. (s) In his Forbes citation, Miskovic lists his fortune as "self-made" in the banking and insurance industries. More appropriately, it was made on the backs of the Serbian people as they struggled through crippling sanctions and hyperinflation while he collected on their misery. Miskovic's partner in crime, Mihalj Kertes, is already a confirmed purveyor of corruption and is once again under indictment in Serbia specifically on the basis of this report. We think it only fitting that Miskovic, at the very least, be treated similarly by our consular system, so that he does not derive the further benefit of access to the U.S. from his pillaging of Serbia. We strongly recommend he be entered as a P212f (PP7750) until he applies for a visa and can be found permanently ineligible under INA section 212(f). ¶12. (u) Begin Text of Customs Document: (SEAL) Federal Republic of Yugoslavia Federal Customs Administration 06/1 number D-14837/1 22 November 1996 Belgrade TO ALL CUSTOMS HOUSES By hand to all managers The Federal Customs Administration (SUC) hereby approves that all consumer goods imported by DELTA HOLDING company from Belgrade, and specifically its subsidiaries DELTA M, DELHEM and DELTICO, all three from Belgrade, be directed, under customs supervision, to the main Customs House in Belgrade for customs clearance on imports, with the provision that the amount owed for customs duties and other import levies will be paid within 45 days from the date of customs clearance. Copies: -- Office of computer and automatic data processing of the Federal Customs Administration -- DELTA HOLDING, Belgrade This Directive to be sent by facsimile to number 222-3912, the IPC of the SUC, and customs houses (SEAL of the SUC) Director General Mihalj Kertes (signature) End text. POLT