Bosnian Police Arrest Top Muslim Tycoon

On Friday night, August 4, television viewers in Bosnia were treated to the rare spectacle of local police in Sarajevo arresting one of the country's richest Muslim tycoons. Alija Delimustafic, 46, who has twice served in the Bosnian government and currently owns several major companies and a shopping mall, faces charges of forgery and abusing his position.

The charges concern the affairs of the BH Bank, set up by Delimustafic and his brothers. The bank, declared bankrupt over a year ago, shut down owing customers, including the United States government and several Western organisations, hundreds of thousands of dollars.

The Federal Prosecutors Office said Delimustafic would be detained for at least one month, pending investigation into charges of abuse of position and forgery. An official said the businessman had been arrested in connection with the failed BH Bank. An arrest warrant for his brother Mirsad, co-owner of the bank, has also been issued, officials said.

Joseph Ingram, head of the World Bank in Bosnia-Herzegovina, said, "You can see that in the struggle against corruption arrests have begun. This will continue."

Delimustafic's arrest comes just as public probes into alleged corruption among Bosnia's politicians, government bodies, officials and state-run businesses are on the increase. The main impetus behind this anti-fraud campaign has come from western agencies, which warn the country's widespread corruption and tax evasion could soon result in bankruptcy.

The Office of the High Representative, the International Monetary Fund and the World Bank agreed recently the Muslim-Croat federation faced a budget deficit of 140 million German marks. In Republika Srpska the situation is even worse - the anticipated budget gap could be as high as 200 million German marks.

The international agencies have pointed to excessive government expenditure, tax evasion and smuggling as the main reasons for the short fall. The IMF and World Bank are insisting both Bosnian entities adopt urgent legal, fiscal, financial and structural reforms ahead of further financial assistance. Otherwise, the agencies warn, the governments will not be able to pay pensions and salaries.

From humble beginnings as a policeman and small shopkeeper, Delimustafic enjoyed a meteoric rise, coming from nowhere to secure the position as Bosnian interior minister in 1990. Once in the "big league" he also served as a foreign trade minister and founded the Cenex import-export company along with his brothers.

The company reportedly did business with Bosnian Serbs and Croats across the front lines during the war. Cenex's glass headquarters, situated in Sarajevo's industrial area, survived the three-and-a-half year siege without a scratch, leading to much speculation that the Delimustafic brothers were "protected" through their dealings with "enemies." Delimustafic actually left Sarajevo for a while due to the hostility provoked by these rumours.

By renting out the Cenex HQ and other nearby luxury properties to international organisations, Delimustafic earned a considerable fortune.

The BH Bank meanwhile was the only bank to continue processing money transfers into and out of Sarajevo during the war. A commission of 10 per cent was levied on each transaction, but provided the money continued to flow in and out, no one really complained.

It is this bank, however, that may finally prove Delimustafic's undoing. The bank is suspected of laundering money for the Mafia and corrupt officials from the ruling Muslim nationalist Party of Democratic Action, SDA.

In a report released in June, the U.S. General Accounting Office said the U.S. government had yet to recover $900,000 deposited with the bank to cover Embassy operating costs. The report said the bank had been involved in corruption.

Nevertheless some analysts have interpreted Delimustafic's arrest as little more than a pre-election ploy by the tarnished SDA party. Recently defeated in local elections, largely due to its poor reputation on corruption, such a high-profile collar, the analysts argue, could regain valuable votes in the upcoming general elections.

In a first for Bosnia, several media organisations were tipped off ahead of the arrest operation. Reporters, photographers and television crews were therefore at the scene when police removed Delimustafic from his office at the Cenex shopping mall on the outskirts of Sarajevo.

Legal experts have also pointed out the charges brought against Delimustafic have little chance of standing up in court. Responsibility for the actions of the BH Bank should rest with the executive manager, the experts say - Delimustafic was "only" the owner.

The investigation and trial are expected to last for months, well beyond November's general elections. In the meantime the SDA can use the Delimustafic arrest as proof of its anti-corruption credentials.

As a result there is growing public support for western agencies, such as the Office of the High Representative or the Organisation for Security and Co-operation in Europe, to closely scrutinise the investigation and trial right from the start.

Janez Kovac is a regular IWPR contributor.