MACEDONIA: COURT NETS "BIG FISH" CORRUPTION CASE

UNCLAS SECTION 01 OF 02 SKOPJE 000615

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EUR/SCE, DOJ/OPDAT FOR CARL ALEXANDRE

E.O. 12958: N/A
TAGS: PGOV KCRM KJUS KCOR MK
SUBJECT: MACEDONIA: COURT NETS "BIG FISH" CORRUPTION CASE

REF: A. 06 SKOPJE 1144


B. SKOPJE 492

SUMMARY
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1. (SBU) The July 18 conviction and sentencing to four years
in prison for former Export Import Bank director Metodija
Smilenski demonstrates that the Macedonian judicial system is
capable of swift, efficient, and non-partisan action. One of
Macedonia's "big fish" corruption case defendants, Smilenski
is accused of embezzling over 45 million Euros, bankrupting
numerous factories, and destroying thousands of jobs in the
process. Smilenski's alleged close connections in the past
to VMRO-DPMNE, the senior partner in the coalition government
currently in power, lend the conviction greater credibility.
With another Smilenski trial on even more serious charges
scheduled for August 20, the judicial system will have yet
another chance to show it can translate its anti-corruption
rhetoric into effective action. End summary.

SWIFT CONVICTION MARKS A HOPEFUL START...
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2. (SBU) On June 14, after a year-long extradition procedure
initiated by the Skopje public prosecutor, the director of
the bankrupt Export Import Bank, Metodija Smilenski, returned
to Macedonia from Serbia to face trial in several corruption
cases (reftels). Known to have had close ties to former PM
Ljubco Georgievski (1998-2002) of the VMRO-DPMNE party,
currently the senior governing coalition partner, Smilenski
is accused of embezzling over 45 million Euros through
various fraudulent business schemes dating back to 1993.


3. (SBU) Smilenski faces corruption or corruption-related
charges in several cases around the country. On July 18, the
Sveti Nikole Trial Court handed down his first conviction, on
embezzlement charges, and sentenced him to four years in
prison. The court found Smilenski guilty of embezzling the
property worth more than one million Euros from the local
firm "Snitex." The court also found him guilty of forging
and destroying the business records of the "Kartontex"
factory, and of siphoning off money from the firm to the
Export Import Bank. In both instances, the court found,
Smilenski's actions bankrupted the companies involved and
left some 2,000 employees jobless. In addition to the prison
sentence rendered, the court ordered Smilenski to pay
restitution for the defrauded proceeds, and advised the
injured parties to file a civil claim against him to collect
damages. Both the defense and the prosecution are planning
to appeal the sentence before the Stip Appellate Court.

...BUT THE TOUGHEST TRIAL IS YET TO COME
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4. (SBU) The most serious charges against Smilenski stem
from a trial which was scheduled to start at the Skopje Basic
Court on July 10. The trial was rescheduled for August 20
due to the alleged poor health of Smilenski's accomplice and
co-defendant in the case, former governor of the Macedonian
National Bank Ljube Trpeski. In addition, the defense
claimed that the service of court writs was illegitimate, and
asked the court to change Smilenski's pre-trial detention to
home detention due to his advanced age (70).


5. (SBU) According to the indictment filed by the Special
Organized Crime Prosecutor, Smilenski aided and abetted
Trpeski in approving a fraudulent National Bank loan of over
30 million Euros to the Export Import Bank. In a complex
accounting scheme involving transfers to Smilenski's various
companies in Macedonia and Austria, the entire National Bank
loan allegedly ended up in accounts which belong to Smilenski
and other unidentified persons. If convicted of the charges,
Smilenski and Trpeski could each receive between four and 15
years in prison. However, if Smilenski is found guilty of
all charges filed against him in Macedonia, he could receive
an aggregate prison sentence not to exceed the maximum of 15
years proscribed for the most severe of the crimes.

COMMENT
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6. (SBU) The swift conviction in Smilenski's Sveti Nikole

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trial marks a positive step in the GOM's anti-corruption
efforts, despite local pundits' earlier assurances that the
defendant's connections to the current governing party would
put him above the law. The postponement of the
Smilenski-Trpeski trial, however, and Smilenski's 1.5 million
Euro sale of property while in pre-trial extradition
detention in January, suggest that Macedonia's "big fish"
corruption case defendant still might manage to escape the
fullest measure of justice for the crimes he is alleged to
have committed. We will continue to monitor the cases, and
to urge the courts to guard against political interference in
the proceedings.
MILOVANOVIC