Croatia: Tudjman Croneys 'Pocketed' Diaspora Funds

Tuesday, 6 September, 2005

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Drago Hedl

Zagreb has asked the Viennese authorities to help with its investigation into the whereabouts of Croatian diaspora funds deposited in an Austrian bank, which Croatia intended to use for weapons purchases during the early Nineties.

The account was set up to circumvent the international arms embargo on the former Yugoslavia that prevented Croatia from buying munitions legally.

The investigation, which has already alleged that officials in the then ruling Croatian Democratic Union, HDZ, misappropriated a significant amount of the money, is being seen as an attempt by Ivica Racan's government to remind the public of the failings of the former right-wing regime in advance of next year's elections.

Interior ministry spokesperson Zinka Bardic told IWPR this week that Croatia has called on law enforcement authorities in Austria to assist with its enquiries into the missing funds, deposited in the bank für Kärnten und Steiermark, in the town of Villach. She confirmed that the equivalent of 50 million euro had been placed in the government account a decade ago, but was unable to say how much of it remains. The investigation has so far accounted for a small proportion of the money.

Bardic last week claimed the Austrian account was managed by three HDZ officials, all stalwarts of the ex-president and HDZ chief Franjo Tudjman. Two of the three, the former defence and finance ministers Gojko Susak and Jozo Martinovic have since died. The third was the long-time chief of Tudjman’s cabinet, Hrvoje Sarinic, who has retired from politics. Sarinic denied the claim in a statement read out on Croatian Television prime-time news last Saturday.

The interior ministry spokesman said that as part of its investigation, the government has launched a legal action against an HDZ foundation, the Croatian State Fund, over 2.7 million marks it says it unlawfully withdrew from the Austrian account.The foundation's bank account has now been frozen.

Für Kärnten und Steiermark representative Magister Helfried Wagner told IWPR that banking secrecy rules prohibit him from commenting on the Croatian investigation. However, a source at the bank confirmed that they had been in contact with the Austrian courts.

The investigation, which has no set time limit, alleged late last month that large sums from the Villach account were used by Tudjman’s HDZ croneys to buy up companies that were being privatised, such as banks, hotels and other important assets.

Tudjman floated a plan to former associates, including current president Stipe Mesic, to sell off most state assets to an inner circle of around 100 families - and as they lacked the money to make the purchases, ways had to be found to put the scheme into effect, Mesic had told the Croatian media on numerous occasions.

Investigators claimed, for example, that 1.6 milion US dollars, 500 000 Australian dollars and 700,000 German marks were switched from the Austrian account into that of an HDZ official named Ferdinand Jukic, enabling him to buy up a well-known drinks manufacturer. They also said they have evidence that 3.25 million US dollars were transferred into the accounts of two HDZ officials, Marinko and Zeljko Mikulic, as a result of which they bought up a paper factory in Zagreb. Jukic has denied the claim against him, and the Mikulics have refused to comment on the allegations levelled at them.

In another new development in the case, Radovan Smokvina, a Croatian expatriate in Switzerland who contributed 60,000 Swiss francs to the Villach’s account, told the daily Jutarnji list that the diaspora never received the financial statements it asked for concerning how the money was spent.

Little of it, however, was used for its apparently intended purpose. In an IWPR interview, General Martin Spegelj, Tudjman’s defence minister from August 1990 to June 1991, said reports at the time of huge amounts of cash being spent on arms purchases for the military were simply untrue.

“The Croatian army is still using the weapons that were captured from Yugoslav army barracks, where we got at least 200,000 pieces of modern infantry weapons and around 250 tanks," he said. " The money that was collected for the purchase of weapons disappeared - God knows where.”

Political analysts believe it is no accident that Racan's government has publicised the affair a year before the elections. Officials have long known about the Austrian account and President Mesic has referred to it repeatedly since the centre-left coalition took power in 2000.

Recent polls have shown a resurgence of support for the HDZ. About 22 per cent of voters say they now back the party, well ahead of the Racan's Social Democrats, on about 14 per cent.

The government has alienated a good proportion of the electorate by promising to extradite Hague tribunal suspects who are widely seen as national heroes. It has also failed to deliver much in the way of economic improvement. Racan hopes to woo the mass of floating, undecided voters through its investigation into the missing funds.

The HDZ has generated political capital from accusing the government of “criminalising" the 1990s independence struggle through its pursuit of alleged Croatian war criminals. Now the government wants to prove that the HDZ stole money that was collected for that same war.

Drago Pilsel, a political commentator from an emigre background in Argentina, said locating the missing money is not the authorities' main motive. “Racan’s government are engaged in acrobatics to stay in power," he said. "They have known about the HDZ account for a long time. Only now have they decided to start an investigation.”

Drago Hedl is an Osijek-based IWPR contributor.