MACEDONIA: PROGRESS PROSECUTING CORRUPTION CASES

UNCLAS SECTION 01 OF 02 SKOPJE 000492

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EUR/SCE
DOJ/OPDAT FOR CARL ALEXANDRE

E.O. 12958: N/A
TAGS: KCOR KCRM KJUS PGOV MK
SUBJECT: MACEDONIA: PROGRESS PROSECUTING CORRUPTION CASES

REF: A. 06 SKOPJE 1144

SUMMARY
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1. (SBU) In recent months, Macedonia's justice system has convicted
defendants on corruption-related charges in four separate, unrelated
court cases. Several former government officials were among those
convicted. Encouragingly, the courts demonstrated improved
efficiency in these cases (in part due to Department of Justice
provided training and assistance),and the convictions included
persons associated with both the ruling party and opposition
parties.


2. (SBU) The justice system's next test will be the impending trial
of former Export Import Bank Director Metodija Smilenski, who was
connected to the Socialist Party which is now a member of the
coalition government. Smilenski is accused of defrauding the
National Bank of Macedonia of over 45 million euros in 2004
(reftel),and was extradited to Macedonia June 14 from Serbia, where
he had fled to avoid criminal charges. Now that the GOM has
Smilenski in custody, the justice system will need to demonstrate it
can prosecute a "big fish" as efficiently as it has prosecuted less
well-connected defendants. End Summary.

Fictitious Sheep And Prime Real Estate
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3. (U) In a court case that received major media attention in
Macedonia, on April 12 a court convicted 11 defendants for
participation in a scheme to defraud the government and a subsequent
illegal real estate deal. During the 2001 conflict, an ethnic
Albanian shepherd, Isnifaris Xhemaili, falsely claimed that the
Macedonian army had accidentally killed his flock of sheep. In
2004, he received 720,000 euros from the GOM as compensation,
resulting from a questionable court judgment.


4. (U) Xhemaili and his associates used the money he received from
the GOM to buy government-owned real estate in Skopje in a
sweetheart deal. The ownership of some of the property, which had
been nationalized decades ago by the government of Yugoslavia, was
under dispute at the time of the purchase. Individuals contesting
the deal claimed their families had owned the property at the time
it was nationalized. Xhemaili's purchase of the property
nevertheless went forward after the Deputy Minister of Economy at
the time, Sasha Andonovski, ruled that there was no merit to the
families' ownership claims.


5. (SBU) The judge in this case, known as the "sheepfold case,"
efficiently managed a large, complex trial that swiftly resulted in
convictions of 11 defendants. Andonovski and the director of the
government real estate records office in Skopje both received
three-year prison sentences. Xhemaili received a 4.5 year prison
sentence, and a notary who had directed the entire scheme received a
relatively stiff 14-year sentence. The defendants' assets also were
seized, which has not often been the case in the past.

Ex-Customs Director Sentenced In Absentia
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6. (SBU) On May 17, a Macedonian court convicted the former Director
General of the Customs Administration, Dragan Daravelski, in
absentia, for abuse of official position and embezzlement. The
court handed down a seven year prison sentence to Daravelski, who
was DG of Customs from 1998 to 2002 under the VMRO-DPMNE led
government, and a 4.5 year sentence to the former Customs Financial
Manager. The court also ordered the two to return 1.7 million euros
to the GOM. Unfortunately, Daravelski will likely not serve any
prison time; he currently lives in Serbia and cannot be extradited
because he acquired Serbian citizenship under suspicious
circumstances after completing his tenure at the Customs
Administration.

Ex-Executives Of A State Owned Company Sentenced
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7. (U) Vlado Sugareski, the former Director of the government owned
power company REK Bitola, and Vlatko Kocinski, the former Commercial
Director of the enterprise, were convicted on May 8 of abuse of
authority and bribery. The two former executives, both of whom were
associated with the VMRO-DPMNE ruling party, had written and
approved fraudulent procurement contracts from which they received
kickbacks. Sugareski, a former VMRO-DPMNE member of parliament,
received a 4.5 year prison sentence, Kocinski received a 2.5 year
sentence, and the owner of the private company involved in the

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scheme received a 1.5 year sentence.

Border Police Convicted Of Accepting Bribes
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8. (U) On May 23, 13 border police officers were convicted of
accepting bribes and abuse of official position. The police
officers received prison sentences ranging from six months to 2.5
years. The Ministry of Interior's (MOI) Organized Crime Department
developed evidence against the police officers following an internal
investigation.

A "Big Fish" Returns To Macedonia
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9. (SBU) On June 14, Metodija Smilenski, the defendant in one of the
largest outstanding corruption cases returned to Macedonia. As with
Daravelski, Smilenski had sought Serbian citizenship to avoid
extradition to Macedonia. He failed to receive Serbian citizenship,
and Serbia extradited him to Macedonia. Smilenski, along with the
former National Bank Governor Ljube Trpeski, was charged with
embezzling over 45 million euros while he was Director of the Export
Import Bank in Macedonia. Smilenski was involved in several shady
deals between 1993 and 2004, and the Macedonian media has speculated
that, if he agrees to testify, he could provide evidence of crimes
committed by some of Macedonia's political and business elite. Both
Smilenski and Trpeski were affiliated with the Socialist Party,
which is now a member of Macedonia's coalition government.

DOJ Assistance Shows Results
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10. (SBU) Mission's OPDAT and ICITAP programs have provided training
to many prosecutors and judges (OPDAT),and police (ICITAP). Most
of the judges and prosecutors involved in the cases mentioned above
received OPDAT training. Most notably, the judge in the "sheepfold"
case, a recipient of OPDAT training, ran a remarkably efficient
trial, especially given the case's complexity and the number of
defendants. Mission's ICITAP program has worked closely with police
Organized Crime Department, which successfully investigated the
corrupt border police.

Comment: A Positive, Non-Partisan, Start
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11. (SBU) The recent convictions demonstrate that the judicial
system has made progress in prosecuting relatively complex
corruption cases. It is also a positive sign that among those
convicted there were members of the current ruling party,
VMRO-DPMNE, when it was in power from 1998-2002 (Daravelski,
Sugareski, and Kocinski),as well as members of the current
opposition parties (including Andonovski, who was a member of SDSM).
Now the judicial system needs to demonstrate it can also prosecute
Smilenski and Trpeski in an efficient, non-partisan manner, no
matter who may eventually be implicated.

MILOVANOVIC