BOSNIA: INDICTMENT EXPECTED AGAINST HEAD OF

C O N F I D E N T I A L SARAJEVO 000708 SIPDIS E.O. 12958: DECL: 06/11/2019 TAGS: ECON EFIN BK SUBJECT: BOSNIA: INDICTMENT EXPECTED AGAINST HEAD OF FEDERATION DEVELOPMENT BANK REF: SARAJEVO 310 Classified By: DCM Judith Cefkin for reasons 1.4 (d) ¶1. (C) The Federation Financial Police shared with us in confidence the full investigation prepared for the prosecutor regarding allegations against the director of the Federation Development Bank (FDB),Ramiz Dzaferovic (Reftel). Forty-two individuals are named in connection with the case, and an indictment is expected against Dzaferovic for abuse of office. The investigation unearthed more than twenty examples of conflictof interest, whereby companies that received loas from the FDB subsequently signed contracts forauditing services with Dzaferovic,s private audit ompany (many of which were never conducted). Many of the companies named in the investigation are construction companies, but the list also included publishing, trade and retail companies, and one government institute. Given the overwhelming evidence, the case should be fairly simple to prosecute. Sources tell us the prosecutor who will most likely move the case forward is young and dynamic. ¶2. (C) Comment. The case illustrates the depths to which corruption is endemic in BiH. As noted in reftel, Dzaferovic was removed by OHR from his position as director of the Federation Tax Administration in 2000, but subsequently rehabilitated in 2006. He was personally appointed to head the FDB in 2007 by SDA leader Sulejman Tihic. The businesses named in the investigation run the gamut from the well-known Avaz Corporation (although its owner Fahrudin Radoncic is not personally named) to the entire governing board of the Federation Employment Institute. More worryingly, Dzaferovic,s advisor is Mustafa Mujezinovic, who was selected this week as the Federation,s Prime Minister-designate. Mujzinovic has only served as Dzaferovic's advisor for a few months. In a June 9 meeting, the DCM asked Tihic about Mujezinovic's association with the FDB, noting the serious accusations of corruption that have tainted the institution. Tihic strongly rejected any notion of Mujezinovic being caught up in the scandal. (We hope he is right.). While the Dzaferovic case seems a slam dunk in terms of evidence, he may be difficult to prosecute if Tihic decides to extend his political protection. On the other hand, if the prosecution is successful, Tihic and SDA may reap the long-term benefits of their willingness to cut loose a corrupt official. End Comment. ENGLISH