A March 11 article about investigations into alleged corruption in Yugoslavia mischaracterized remarks made to The Post by Pambos Ioannides, a lawyer in Cyprus. Ioannides said that Yugoslav officials had created firms in Cyprus for private business reasons. His statement referred generally to Yugoslav-owned firms registered in that country, not specifically to firms created with assistance of his law firm. (Published 3/13/01)
The gold bars arrived at the airport here in the trunks of passenger cars under police escort, investigators say. Brought from Yugoslavia's immense Bor mining complex, the bars were packed inside custom-built, velvet-lined wooden boxes. But on Yugoslav export documents, the bars were listed as copper.
In several such shipments between 1998 and last year, Swissair jets flew the gold to Switzerland, where it was sold on metals markets. The proceeds totaled at least $6.8 million, much of which was transferred to a tiny company in Cyprus, MCC Overseas Trade Ltd., which refuses to name its owners.
The shipments were strictly illegal, according to the Yugoslav central bank, because gold produced by the Bor mines must go to the national treasury. Central bank governor Mladjen Dinkic says his staff is investigating who benefited, with a focus on aides of former president Slobodan Milosevic and possibly Milosevic himself.
The probe is part of an immense worldwide hunt for Yugoslav treasure set in motion by Milosevic's fall from power in October. Chasing leads are investigators from the new democratic government of Yugoslavia, the U.S. Treasury Department, Western intelligence agencies and the United Nations' chief war crimes prosecutor.
Investigators say evidence so far suggests that Milosevic's family and perhaps 200 loyal businessmen-politicians who controlled most of the nation's state-run companies skimmed anywhere from hundreds of millions to several billion dollars of public money for personal use.
Much of it, investigators say, was sent out of the country, sometimes as cash stuffed into suitcases, sometimes as seemingly legitimate electronic transfers. Officials say the trails point not just to Cyprus and Switzerland, but also to Greece, France, Germany, Italy, Russia, China, Britain, Liechtenstein and South Africa.
Milosevic "stole a big amount of money, really huge," says Carla Del Ponte, chief prosecutor for the U.N. International Criminal Tribunal for the Former Yugoslavia in The Hague. Her staff is scrutinizing 25 cartons of bank records that she obtained two weeks ago from the Cyprus central bank.
Swiss authorities have already disclosed that two Milosevic family members and 35 officials close to him held accounts in Switzerland, several of which had balances of more than a half-million dollars last year.
In perhaps the biggest single case, Yugoslav officials are attempting to find roughly $200 million of the $1 billion paid in 1997 by Italian and Greek phone companies for the state-owned cell phone company PTT Serbia. The $200 million was never deposited in state accounts, Dinkic says. An additional $350 million of the payment allegedly went to companies controlled by the president's friends and has never been accounted for.
In an interview last month with an Italian newspaper, his first with the foreign press since October, Milosevic denied enriching himself while in office. He told La Stampa newspaper that "everything that has been written about us is a lie" and that the new government was planning to try him for "crimes that they invent sitting at their desks." He had "only my salary" and no foreign accounts, he said.
Nearly six months after he lost a re-election bid and was forced from power by a popular uprising, Milosevic remains free, living under police surveillance in a comfortable Belgrade house and meeting with members of his Socialist Party.
The last of the communist-era leaders in Eastern Europe, Milosevic presided over devastating wars in neighboring Croatia and Bosnia and national economic ruin; he endured a 78-day NATO bombing campaign over Kosovo, and indictment by Del Ponte's tribunal on war crimes charges.
Senior officials in the new government predict that Milosevic will be arrested on corruption charges later this month. Still, officials acknowledge that they have not discovered direct evidence that ties him to the looting of the country.
Instead, an examination of the main elements of the case emerging against the former president and his colleagues reveals a web of circumstantial evidence that investigators say bears all the marks of Milosevic's influence, if not his fingerprints.
The Gold Source
The Bor mining complex is a sprawling network of 19 companies at the foot of a mountain called Black Top. With more than 20,000 workers, it is Yugoslavia's largest employer and its biggest source of foreign currency.
Today the complex is mostly an idled wreck, like many industrial facilities in Yugoslavia. It owes suppliers more than $500 million, mine officials say.
Officials in Belgrade accuse Milosevic and Nikola Sainovic, a former deputy prime minister also indicted by the war crimes tribunal, of having run the mine as their fiefdom. Workers say that Sainovic visited Bor almost weekly; acting manager Mira Antic describes him as a "gray eminence" with a key role in its decision-making.
Because Milosevic's government classified all gold production data as a military secret, central bank investigators say they learned only last month that the Cyprus firm MCC and a Zurich-based subsidiary of the mine called RTB Copper had organized the export of about 1,600 pounds of gold in the past three years.
"This is a minimum," said Dinkic, the central bank governor. "We suspect much more was transported," concealed by fake documentation. Dinkic added that no one knows for sure who profited, but said that a preliminary accounting indicates "the money for the gold stayed abroad."
Five additional shipments of gold in September and October last year were discovered separately by Swiss investigators, who say they traced some revenue from the sales to a Cyprus bank account held by MCC. Belgrade officials say a close Milosevic associate, Dusan Matkovic, has confirmed that a steel company he controls owns a fifth of MCC, but they have not identified the other owners.
In Nicosia, capital of Cyprus, finding the Cyprus-registered firm is not easy. It has no office. Its name is not listed in phone books or posted on a building. Its registration documents list as an address a mail drop -- the offices of a law firm, Cosmoserve, that has many Yugoslav clients.
To find someone to speak for MCC, it's necessary to go to Zurich. There, Edo Alibegovic, who is listed in MCC's registration as its director, wears a dual hat as a director of Bor mining's office in Zurich. After declining for several days to speak to a reporter, he said the firm had only minor involvement in gold exports and said nothing was illegal about MCC's activities.
Alibegovic said he saw no conflict in directing public and private firms that did business together, because his sole aim was to boost Bor's productivity. MCC's revenue was only enough to meet its expenses, Alibegovic said, but he could not site significant expenses at the company, which maintains no office or staff.
He refused to divulge the company's ownership. "The only reason to be offshore is not to be a known owner," he explained. "It is a business secret."
'The Plumbing' In 1993, the United Nations imposed broad economic sanctions on Yugoslavia as punishment for its role in the war in Bosnia. The measures froze Yugoslav assets abroad, instructed foreign companies to halt commercial transactions with Yugoslav firms and blocked the shipment of goods through Yugoslav territory.
But investigators' findings suggest that many of these efforts were futile. Milosevic saw the sanctions coming and more than a year in advance began creating a web of companies, banks and accounts abroad to evade them and carry on.
At first, the accounts were mostly used to hide state funds and let state companies continue doing business in international markets, according to James O'Brien, special adviser on the Balkans to former president Bill Clinton. Later, O'Brien said, evidence emerged that the firms were being used to move personal funds.
Western and Yugoslav officials say the epicenter of this effort was Cyprus. The island offered Milosevic several advantages: There were no legal limits on the importation of cash at that time, and laws allowed front companies to be created in a matter of days for a few hundred dollars. Moreover, many Cypriots sympathized with Milosevic, seeing his wars against Balkan Muslims as comparable to their confrontation with Muslim Turkey, which claims half of the divided Mediterranean island.
Investigators say that dozens of "false-front" companies and a branch office of Yugoslavia's Beogradska Bank were created in Cyprus. Often handling the setup was Borka Vucic, a financial adviser and former colleague of Milosevic's at Beogradska Bank, where Milosevic worked when he was young.
The Cyprus companies were "the plumbing through which the money flowed," O'Brien said. "We heard stories of cash being put on [Yugoslav airline] JAT flights to Cyprus and deposited in Beogradska Bank and Cyprus Popular Bank." Vucic has told investigators that she often went to the airport in Larnaca, Cyprus, to meet the flights and pick up the money; but she has declined so far to give other key details, officials say.
Officials at the U.S. Treasury Department's Office of Foreign Assets Control have obtained evidence that more than $1 billion passed through just one account Vucic controlled at the Cyprus branch of the Beogradska Bank between 1991 and 1995, which they view as a suspicious amount.
Some firms that war crimes prosecutor Del Ponte has identified as suspected vehicles for illicit money were created at a Nicosia law firm headed by Tassos Papadopoulos. A wealthy, anti-American politician who chairs the Cypriot parliament's foreign affairs committee, he and several colleagues are listed as directors in registration documents.
Pambos Ioannides, a partner in the law firm, said that Yugoslav officials who owned the firms were often "exploiting their connections with communist or East European countries [by] trading on their own." He said any money laundering would not have come to their attention because their links to the companies were a mere "formality."
But Ioannides added that in 1994, when the U.S. ambassador in Cyprus asked him to sever his ties with suspect firms, he refused because it was not up to America "to decide who we act for. . . . All Cyprus was pro-Serb."
Greece, another place where Milosevic enjoyed broad support, was also a major destination or transit point for illicit money, Yugoslav investigators say. Milosevic aides brought trunkloads of money to Greece, according to two senior Greek officials who spoke on condition they not be named.
Greek bank officials say that 75 accounts held by top Yugoslav officials were blocked in late 1999 at the request of the European Union, but that virtually all of these funds were released in recent months as the Western alliance lifted sanctions against Yugoslavia.
Some of the proceeds from the sale of Bor gold last year landed in an Athens bank account controlled by Greek businessman Evangelos Mytilineous, a prominent investor in Yugoslavia during the Milosevic era. In an interview, Mytilineous said the transaction was legal because the gold was refined from copper slurry he had previously supplied to the plant and contracted to get back. The Yugoslav national bank also says that the arrangement appears legal.
Yugoslav investigators say that neither Greece nor Cyprus has helped their probe. In a Dec. 15 letter, Dinkic wrote to his counterpart on the island, central bank governor Afxentis Afxentiou, "We believe that the majority of the foreign currency sent offshore [after 1992] was channeled at one point or another via banks on Cyprus."
But Afxentiou said that over the past decade "we did not trace anything which was suspicious to us" about the Cyprus accounts. His deputy for sanctions enforcement, Andreas Philippou, noted that U.N. sanctions against Yugoslavia had "a lot of gray areas. . . . It was possible for people to weave through these sanctions and do transactions that maybe the spirit of the legislation would have stopped but the letter would not. . . . This is what happened in Cyprus," Philippou said.
Last year, as Cyprus sought to win support for its campaign to join the European Union, the government began to bend to Western pressure to move against the companies. It blocked the arrival of a banker connected to the Milosevic government and revoked the Beogradska Bank's operating license.
After Milosevic's ouster, Cypriot officials agreed to close bank accounts held by nine companies that the war crimes tribunal linked to money laundering, including a $56 million account controlled by Vucic and two other top Milosevic aides.
Recently, the Cypriot central bank sent Del Ponte secret data identifying who owned the suspect firms and the precise flow of funds through their accounts -- the first such disclosure of such corporate records in the island's history.
The President's Friends In several prominent corruption cases, Milosevic's closest friends and advisers were central players even when the former president was himself invisible.
Not far from the Champs-Elysees in Paris, behind a dentist's office and a few computer firms on the second floor of an old office building, a simple brass plate marks the office of Banque Franco-Yugoslav, the former workplace of one such friend, Miodrag Zecevic.
In 1965, Zecevic was an official witness at Milosevic's wedding; in the late 1970s, Zecevic had an office in Belgrade near Milosevic's at Beogradska Bank. In the late '80s, he was appointed by Milosevic to head the tiny bank in Paris, where he frequented costly restaurants and sometimes handed out Rolex watches to officials visiting from Belgrade.
In 1996, according to evidence developed by French prosecutors, Zecevic secretly transferred more than $1 million from an account at the bank belonging to the National Bank of Serbia into accounts held by his daughter and another person at Barclays Bank and Credit Suisse in Switzerland.
Some of these funds were subsequently transferred to the Cyprus branch of Beogradska Bank, where they were held in accounts owned by two officials of the bank, Belgrade investigators say. Later some of the money was shifted between other accounts more than 20 times, crossing many national boundaries.
"This money had many ports of call," and to this day no one knows who was behind the transactions, one investigator said.
Zecevic was promoted in late 1997 to head Belgrade's JUBMES bank, where many Milosevic allies worked. But Yugoslav investigators say that before leaving Paris, he forged the signature of the Yugoslav central bank's vice governor to guarantee repayment of more than $90 million worth of bad loans given by his bank to Yugoslav companies with close connections to Milosevic's government.
On Aug. 15, 1998, during a brief visit to Paris, he was arrested by French police on charges of violating French law by embezzling Serbian government money. But Belgrade did not welcome exposure of an alleged theft; instead, some 30 top Milosevic aides were dispatched aboard a JAT flight to Paris to appeal for Zecevic's release, Yugoslav investigators say.
The passengers included Foreign Minister Vladislav Jovanovic, Vucic and Milosevic's brother Borislav -- "the whole political leadership," as one official put it. Zecevic was released the following month after promising to pay a hefty bail. Immediately on his return, he transferred $300,000 from JUBMES reserves to the Paris court, Yugoslav investigators say. But then he failed to return there to face the charges.
They add that the French government has spurned requests for help in unraveling the mess. But today, Zecevic is awaiting trial in Belgrade on charges of forging the promissory note and using JUBMES bank funds for personal purposes. He has told reporters that he was "just a banker" and that his arrest in France was politically motivated. "The case against me . . . was a political mess. I made a promise to [the French] that I will not discuss their mistakes."
Last month, Zecevic's wife walked into the Yugoslav central bank and presented a teller with $300,000 worth of German marks. It was, she told bank officials and reporters, repayment of the JUBMES bank loan for his French bail.
Prosecutors are still trying to figure out where she got the money.
'It Is a Ruin' Dinkic, the central bank governor, wrote in 1995 that Yugoslavia under Milosevic was a nation where "paranormal economic phenomena are an everyday occurrence." More than half the nation's revenue was deposited in so-called "special accounts" not listed in its budget, his colleagues say, and few transactions, payments, billings or sales followed normal, legal business practices.
Milorad Savicevic, a new director of the state-run firm Genex, has discovered, for example, that the firm's office in Milan served no discernible function but still managed to spend more than a million dollars a year for a decade.
By the end of Milosevic's rule, the rot reached virtually every level of society. The federal official in charge of resettling refugees from Kosovo allegedly skimmed tens of millions of dollars from public assistance, prosecutors here say; a top foreign trade official allegedly extorted millions of dollars from importers of kiwis and bananas.
"It is a ruin," says Serbian Finance Minister Bozidar Djelic of the economy Milosevic left behind. "Everything is rotten; corruption is rife. . . . Organized crime structures are all around."
Not everyone found the graft easy to tolerate. During 10 years of Milosevic's reign, Milutin Cekic felt like a sheriff in a nation of financial outlaws. With five other people in a small, computerless office in the Finance Ministry, he was responsible for auditing the government's entire budget.
Not long after Milosevic appointed his friend Mikhail Kertes to head Yugoslavia's customs office in 1994, Cekic recounts, auditors found a series of irregularities in customs accounts. Large sums were being disbursed -- often in cash -- from a pool of customs receipts, allegedly because of overpayments. The beneficiaries included a cluster of trading companies and an unexplained account in a state-run bank.
Cekic called for a police investigation. But when he sent some auditors to visit Kertes' office, they were told to wait, served drinks and eventually turned away.
"There are very specific rules for all of this," Cekic said. But Kertes "behaved like an elephant in a china shop and broke them all. He always said there was only one patron he listened to," meaning Milosevic.
Cekic later identified another multimillion-dollar customs account that seemed to him to serve to launder huge sums deposited by the state-run Politika newspaper, which controlled the revenue from the nation's cigarette kiosks. But when Cekic informed the ministry of his concerns, Kertes and Vucic, the Beogradska Bank chief, formally eliminated the auditors' legal jurisdiction to scrutinize the customs accounts.
"We were all tortured by this," Cekic recalled. "We had wages of $50 a month while people were being robbed."
Debate in Belgrade today focuses on how much of the money over the years might have gone to Milosevic himself. By some accounts, he was more interested in power than money. But one investigator said that "at the beginning, he was in love with power. And then he found another mistress."
Last week his wife, Mirjana Markovic, denied that her husband became rich but made no such claim for people below him. "Every director of a good company or mayor of a larger municipality has more material possessions than he does," she told Belgrade's Vreme magazine. "The new regime should look into the accounts, housing square meters, the money spent on children's education abroad" and the actions of prominent companies, she said: "There would be some fantastic surprises."
Justice Minister Vladan Batic said he had little doubt of Milosevic's corruption. "We have a saying here," he explained in an interview. "It's hard producing honey without making your hands sweet."
Correspondents Michael Dobbs in Washington, Keith Richburg in Paris and Sharon LaFraniere in Moscow and researcher Robert Thomason in Washington contributed to this report.