ITALIAN PROSECUTORS QUESTION PM DJUKANOVIC ABOUT '90S

UNCLAS SECTION 01 OF 03 PODGORICA 000130

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: PGOV PREL KCOR KCRM MW
SUBJECT: ITALIAN PROSECUTORS QUESTION PM DJUKANOVIC ABOUT '90S
CIGARETTE SMUGGLING ALLEGATIONS



1. (SBU) SUMMARY: Montenegrin PM Milo Djukanovic voluntarily
traveled to Bari, Italy on March 31 for questioning by Italian
prosecutors. Djukanovic and another 14 Montenegrins have been
under investigation by the Italian authorities since 1999 for
"associating with the mafia to profit from cigarette smuggling
from 1994 to 2002." Djukanovic's lawyer said Djukanovic had
denied that he (the PM) or Montenegro had done anything wrong
-- Djukanovic claimed Montenegro had legally licensed the
transit of cigarettes in order to survive at a time when
Montenegro was under pressure both from Milosevic and
international sanctions against the former Yugoslavia. The
Montenegrin opposition used Djukanovic's appearance in Bari to
launch another wave of criticism against the PM just before the
country's April 6 presidential elections. End Summary.



Background On The Case

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2. (U) Media reports differ on the content of the allegations
against Djukanovic, but most agree that Djukanovic is accused of
playing a key role in a massive smuggling scheme which began in
1994 when Djukanovic (who was also PM at that time) granted a
license to Swiss national Franco de la Torre to import about
1,000 tons of cigarettes per month from the U.S. to Montenegro.
(Note: De la Torre is currently on trial in Italy on other
charges). The cigarettes were transferred to a state-owned
freight company called "Zetatrans," which transported them to
the Montenegrin ports of Zelenika and Bar. From there, and with
the authorization of the Montenegrin police, Italian speed boats
carried the cigarettes to Italy, where Italian criminal
structures allegedly sold or re-exported them without paying
import duties. Djukanovic also is accused of providing shelter
in Montenegro to mafia figures wanted by Italian police.




3. (U) The investigation into Djukanovic's activities was
completed in June 2007, but Italian judiciary bodies apparently
have still not decided whether or not to formally indict. At
the time, they gave the suspects a 20-day deadline to present
their defense before the Italian judiciary.




4. (U) In addition to Djukanovic, the Italian judiciary opened
investigations against 14 other Montenegrins, including Miroslav
Ivanisevic, former Minister of Finance and current Chairman of
the Senate of the State Auditing Office, Dusanka Jeknic, former
Head of the Montenegrin Trade Mission to Italy, and businessmen
Stanko Subotic, Veselin Barovic, Branko Vujosevic, Brano
Micunovic, and Andrija Draskovic. Eight persons (Ivan Krcmaric,
Nikola Milosevic, Jovica Randjelovic, Dusan and Milan Rankovic,
Slavko Zecevic, Zoran Dzajic and Miloje Sarac) were charged with
transferring 500 million euros, allegedly earned from cigarette
smuggling and laundered through banks in Switzerland and
Lichtenstein, from Montenegro to a Cypriot bank (account number
03854109703949).




5. (U) The Italian press says Montenegro earned about 25% of its
gross national income during the 1994-1999 period from cigarette
smuggling (which continued until about 2002, but with less
intensity),while Italy lost about four billion lira annually
due to non-payment of taxes on cigarettes. Italian investigators
believe profits from cigarette smuggling reached seven million
dollars per month.




6. (U) According to the media, two separate investigations by
police and prosecutors in Bari and Naples were unified in 1999,
and the Directorate of the Special Prosecutor in Bari was given
responsibility for the final phases of investigation. The
evidence presented by Italian prosecutors reportedly was based
on statements collected by mafia informants ("pentiti").



Related Trials

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7. (SBU) In Serbia, the state prosecutor's office opened an
investigation several years ago of Marko Milosevic (son of
Slobodan Milosevic),Stanko Subotic (the controversial
businessman also being investigated by the Italians),and Sinisa

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Stojicic (brother of Radovan Stojicic Badza, deputy Minister of
Interior of Serbia murdered in 1997) for their alleged
involvement in cigarette smuggling . The Belgrade press claims
Djukanovic was mentioned in the investigation of Subotic and
Milosevic.




8. (SBU) In 2000 and 2002, the EU Commission filed a lawsuit in
the U.S. against RJ Reynolds Tobacco, Japan Tobacco, and Philip
Morris on charges that they had caused several billion dollars
in lost tax revenues in EU countries. According to the lawsuit,
during the 1990s, RJ Reynolds sold cigarettes to Montenegro and
earned an unspecified but enormous profit. Large sums of money
were allegedly paid to Djukanovic and other Montenegrin state
officials for transport of the cigarettes through "Zetatrans."
A Federal Court in Brooklyn rejected the lawsuit, but the EC
Commission has appealed that ruling.



Djukanovic Denies Allegations

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9. (U) Bari prosecutors questioned Djukanovic for six hours on
March 31. Djukanovic's defense attorney Tucilo told journalists
on April 1 that Djukanovic asked to talk with the prosecutor's
office in Bari over a year ago "in order to clarify the
situation." According to Tucilo, Djukanovic had responded to
all the Prosecutor's questions and had denied all accusations.
Italian and Montenegrin media reported that Djukanovic appeared
before Bari Deputy Prosecutors Eugenia Pontasula and Giuseppe
Selzi at his own initiative.






10. (U) Tucilo told the media that Djukanovic had explained to
the prosecutors that he did not know anything about the presence
of Italian mafia figures in Montenegro, that the Montenegrin
government had never been involved in criminal activities, and
that Montenegro had in fact fought against mafia clans. Tucilo
said Djukanovic had asserted that the cigarette business in
Montenegro in the 1990s was legal, and that the licensing of the
transit of cigarettes had been essential for Montenegro's
financial survival at a time when the country was under pressure
from both Milosevic and international sanctions against the
former Yugoslavia. According to Tucilo, Djukanovic also said
that if there were questions about what happened to the
cigarettes once they left Montenegro, those questions should be
dealt with by the Italian judiciary. (Note: In response to
questions about the Swiss and Cypriot bank accounts, Tucilo
noted that at the time Montenegrin ministers were permitted to
open foreign bank accounts.)




11. (U) Djukanovic told the press on April 2 that he appeared in
Bari on his own initiative to put an end to the allegations.
According to a GoM press release issued after Djukanovic's
return from Bari, "despite his immunity and the obligations that
he has as the leader of the strongest party in the upcoming
elections, Djukanovic insisted on giving his testimony. He
believes that Montenegro, and he, will be absolved of the
unfounded accusations which damaged his reputation for years,
and which were also abused for political purposes."



Fate of Case Unclear

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12. (U) Vesna Cejovic, a Montenegrin expert on Italian law, told
the media that once the Italian prosecutors completed the
investigation, they were obliged to forward the case to a judge,
who would then decide whether to issue a formal indictment.
Citing unnamed sources in the Italian judiciary, ANSA reported
that the Italians would shelve the investigation of Djukanovic
because of the PM's diplomatic immunity. (Note: Djukanovic
denied that he knew that he would be cleared of the charges
because of his immunity.) Cejovic noted that the case could be
formally closed only if the state prosecutor requested it.




13. (U) The Montenegrin weekly "Monitor" claimed Djukanovic had
reached a deal with the Italian prosecutor, according to which

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Djukanovic would not be indicted while the other suspects in the
case could be held accountable. (Note: Monitor did not identify
its source.)



Comment

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14. (SBU) The Montenegrin opposition quickly jumped on
Djukanovic's appearance in Bari, which occurred just a few days
before Montenegro's April 6 presidential election, as evidence
of the PM's past wrongdoing. The opposition daily "Dan" alleged
that the Italians had been prepared to issue an arrest warrant
for Djukanovic unless he testified. It is unclear what will
happen next, but most Montenegrins believe the Italians will
quietly shelve the case, or go after lower-level suspects,
rather than take on a sitting PM with diplomatic immunity. In
the event, the scandal did not hurt Djukanovic's DPS, whose
candidate Filip Vujanovic won the presidential race with a
landslide 52%. Even so, the case continues to dog Djukanovic,
and raises questions about rule of law in Montenegro at a time
when the country is seeking to speed its integration with
Euro-Atlantic institutions.
MOORE