The Blue Star of Red Business

In the tactical game of deceit between the fugitive family Karic and the DOS government in Belgrade - the latest news is that Bogoljub Karic has sent a message from somewhere that he is returning to the country since "representatives of the highest state bodies in the Republic of Serbia have assured him that he can return safely". However, it is highly improbable that we will see Mr. Bogoljub anytime soon on the Surcin airport with luggage containing around 250 million DM or around 100 million dollars, which is approximately how much the overall sum of his duties amounts to according to the Extra Profit Law, the claim for the recapitalization of Astra Bank and the estimated deficit of Mobtel's initial capital.

NO DEAL: If Karic does appear in Belgrade (before this issue of VREME reaches our readers), it will be a sign that someone powerful in Serbia has given hope to the BK company's number one man that a deal is possible and that state financial bodies will be given a signal not to strictly stick to the rules. However, such a speedy happy end of the Karic affair seems improbable, since now not merely money but primarily the credibility of the new government is on the table. A deal with the Karic family, which could in essence only mean that his right is recognized to cover a lion's share of his obligations in installments from the future revenues of his companies, which he had founded and used under privileged conditions, even with the help of certain "murky deals" - for some kind of budget inflow on the basis of that deal - would on the other hand tie the hands of Djindjic's government in undertaking any reforms, especially the unpopular ones. Anyway, even this last strike of state syndicates is in its essence motivated by a suggestion of a "deal" with the working class. And if a deal could be possible with the Karic family, why wouldn't it also be possible with all others, including the workers. In that sense, the government of Serbia is suffering blows for having made a deal with Milorad Miskovic, the head of Delta Bank (and an "in-law" of the Karic family, by their children's marriage), whereupon Karic is demanding the "same methodology" for his Astra Bank, and the speaker of the Serbian parliament Dragan Marsicanin on this occasion warns that the application of this Extra Profit Law commenced with a bad policy of diverse criteria.

An eventual deal with the Karic family probably isn't possible also because Mr. Bogoljub (a fact which he himself is finding it most difficult to comprehend) can't find a single partner in the government of Serbia with whom he could complete this entire business - because the "government within the government" is luckily divided into, for now, a few centers of power, and the media (probably not only because of that) can't be easily silenced anymore. Judging by the statements of Goran Vesic (Djindjic's Berya), the Democratic Party and its leader aren't even showing a readiness to enter into a deal, and they are probably the only ones who could give the Karic family some kind of guarantees that they could make the deal work. Anyway, the circumstance in which the Karic affair is only now opening up in Mobtel, although the basic facts of the "murky" amount of the BK company's initial capital in this joint company have been known for a few years, and they had to have been known to the members of Djindjic's political team - Marija Raseta Vukosavljevic, transportation and communication minister in the government of Serbia and Boris Tadic, the until recent FRY telecommunication minister - lead us to assume that negotiations on a deal could have been in the works, and it's even possible that they were ongoing behind the public's back or behind the backs of the other centers of power - taking into account the circumstance that the aforementioned ministers didn't waste too many words on Karic's mobile operator and had overnight stopped all actions of finding a third mobile telephony operator abroad. Speculation that the story on the third mobile telephony operator only had a goal to warn the Karic family that they have to pay a lot more for their dominant position on the market of mobile telephone services - and that to those who can harm that position most - still doesn't have enough of a basis amongst the known facts. Unless doubt doesn't latch on to the unusual oscillations in the political weight of Boris Tadic within Djindjic's party - which have recently been apparent. That is, however, for now insufficient for any serious assumption - because one cannot even assume whether Tadic was in favor of the plan of "seizing" Mobtel, or for suppressing profit with the help of an able foreigner or maybe he was simply told that the subject was "too complex" and he shouldn't intervene but should rather go after Milosevic's Telekom contract with the Italians and the Greeks.  

THE ROLE OF ADVISOR: All in all, if suspicion can be cast upon the government of Serbia for having hesitated, for some reason, to kick off an action of clarifying the financial web surrounding the Karic family, it now seems that its bodies have entered into the whole case with full force. Anyway, finance minister Bozidar Djelic, who personally performs around 80 percent of all successful government reform operations (at least that's the impression) - didn't at any given time demonstrate a lot of will to enter into any kind of "gray deals" with the Karic family - and following the acute international war complications which now make the volume of foreign funds inflow into the Serbian budget uncertain, an opportunity to scoop something for state needs from the "richest Serbian brothers" now looks like a chance which has to be used.

Still, it won't be easy for the government of Serbia and for prime minister Dr. Zoran Djindjic to follow up the Karic affair to the very end because many people and many companies, now extremely beneficial for DOS's government, are in the game, and a breakdown in the financial flow and endemic flight of the nouveau riche from Serbia (if word spreads that the government here has finally decided to apply its own laws) would definitely undermine an otherwise insolvent system. Only in stable systems would no one pay heed to the fact that the Karic brothers have spent not only money but also the reputation of well known consulting and auditing houses such as, for example, the Belgrade office of Deloitte & Touche, whose expert Milivoje Cvetanovic still claims that he never noticed anything unusual nor did he oversee anything of significance in Astra Bank's books. If laws from developed economies ruled in this country, Karic could now sue Deloitte & Touche and ask for damages, since that house mislead him to believe that all was well in Astra Bank. To go to the very end of the Karic affair would also mean to initiate a series of judicial investigations on the operations of various inspection bodies in Mobtel, to question the role of Vlajko Stoiljkovic, the former police minister in Marjanovic's government, who, in that position and as the former president of Telekom's board of directors, according to the claims of Aleksa Jokic, the former traffic and communication minister and the former PTT Serbia head, had hindered an investigation on the validity of Karic's initial capital in Mobtel. Then one should thoroughly question the role of Milorad Jaksic, the former general manager of JP PTT Serbia, in founding Mobtel, since he signed that company's founding agreement in Cyprus. Followed by Radmila Andjelkovic, an old crony of Slobodan Milosevic and a decade long boss of the board of directors of the Serbian post etc. If this case is approached systematically, half of the judiciary in Serbia will have more than enough to do.

The Karic affair, beside a financial, also has a thriller-like dimension. When in the early afternoon hours last Monday (October 15) word got out that the Karic family have fled the country and put themselves under the protection of "a certain foreign country's" police since, according to the claims of Bogoljub Karic, their "lives were directly endangered" because, allegedly, the previous evening in the vicinity of their house "people armed with snipers and infra-sight" were noticed - it wasn't clear to what evening he was referring and surmises were immediately made on what foreign country they took shelter in and how the evacuation was organized. On Tuesday, (October 16), the police ministry (MUP) announced that the Karic family evacuated on Oct. 12 on a plane headed for Vienna after 3 p.m. (naturally, from Vienna one can travel to Russia and to the majority of the other countries in the world). Some newspapers report that the family dispersed via planes to various airports - Larnaca, Moscow etc. while others claim that Bogoljub Karic is either in Montenegro or in Kosovo.  

OPERATION OF WIDER DIMENSIONS: Let's try to find an answer to a hypothetical question - why did the Karic family members start seeing "snipers and infra-light" on Friday of all days, and not a few days earlier. First we should be reminded of the fact that in the final stages of the financial clarification of Karic's talent for so-called "patriotic wealth accumulation", on Wednesday (Oct. 10) the governor of the National Bank of Yugoslavia Mladjan Dinkic announced that Karic's Astra Bank in Belgrade and its branch in Nicosia have granted, what to Karic's façade companies abroad, what to them personally, an overall amount of around 95 million dollars worth of financial loans, and that that bank can continue with its operations only if Karic, within the time period of six months, returns around 45 million dollars to the country, since Astra Bank's aforementioned investments to its owners were evaluated as "highly risky". Following Dinkic's decision to, due to it all, immediately place Astra Bank in receivership, as is officially called when a bank is put under administration of the Central Bank, it seemed as though this action was being undertaken in order to prevent the further flight of Karic's capital, before extra profit tax has been paid. That goal of Dinkic's action was obliquely referred to in the announcement of the Serbian finance minister Bozidar Djelic on Thursday (Oct. 11), when he announced that the Karic family, on the basis of the Extra Profit Law, is obliged to pay tax of 67.8 million DM or around 30 million dollars and that they have to fulfill that obligation within a time period of two weeks. Following Djelic's announcement it became clear that the Karic family won't want to or won't be able to foot the tax bill (since they were spending like pharaohs in the last few years, constructing for example seven houses in Dedinje, over 1000 square meters each) - so it appeared at that moment, which we already mentioned in this text, that the goal of the state bodies' action was to confiscate half of the family's fairly murky ownership of Mobtel, a company which for the past five years held more than two thirds of all mobile phone services in Serbia with an army of users which is fast approaching one million.

However, the very next day, on that famous Friday (Oct. 12), the police barged into this company and it was announced that the validity of Karic's ownership of Mobtel was in doubt, since indications exist that his investments into this company five years ago were artificially inflated with financial forgeries.  

Namely, in that mysterious agreement which was concluded in Cyprus and whose content up to this fall was classified more than any government secret, the Karic family were obligated to invest into the initial capital of around 130 million dollars one million dollars cash and an additional 65.35 million in equipment, and for that investment they were to receive 51 percent ownership over that new company (control package) and a monopoly concession on the market of Serbia for 20 years. The Karic family gave that million in cash to Mobtel, and what they eventually "added" in cash to other people who had to "push through" this unusual agreement in Milosevic's system (which literally forbade ownership of over 50 percent in companies which dealt with public services), needs yet to be seen. Still, when on the subject of the agreed upon equipment investment, it, according to Zoran Markovic (former owner of Belpagette in Belgrade, whose company was taken over by the Karic brothers with a single maneuver from Canada, which is still an ongoing court case) they brought only obsolete GSM equipment from Russia into Mobtel, which even the Russians no longer wanted to incorporate into their systems, and which was allegedly worth less than 5 million dollars (and what the real cost was is yet another question). Now, on the basis of Ericsson's invoices data appears that they did bring in equipment worth 17 million dollars (although those invoices don't show yet another interesting possibility, that they had received a credit in goods from that company, on the basis of a previously concluded concessions agreement), but it "grew" with forged documents to the required 65 million dollars. Simply put, a doubt exists that the initial investment of the Karic family in Mobtel was inflated by "fraudulent acts" - although it can't be excluded that all of it was later covered from the daily profits which had been rising, allegedly, from two to five million dollars per year, until all of a sudden Mobtel reported losses of around two million dollars last year.

At that moment, i.e. on Friday morning, when investigators barged into Mobtel, it became clear to Karic that the goal of the entire operation of the government bodies isn't to confiscate Mobtel, in order to cover the family's tax bill with it - but rather that an operation of much wider proportions has been launched, in which he perceived that he could be left without property and without money and without any source of new revenues. That's probably when the decision was made on the family's flight, which was quickly carried out. That speed shouldn't surprise anyone since the Karic family had, just like the majority of the people who had amassed great wealth here quickly, prepared an evacuation plan long ago. That is usually the most important plan of all great financial magicians. In those plans the most difficult thing to do is to determine the location of the future residence - so we are left to see whether the Karic family has bought a new address or whether they will return to the country after all, to start anew after paying up all the mammoth bills. Naturally, not like the Blue Star band which launched their future rise, but as skillful people who had until now indebted many people from the Serbian elite who could help them stabilize their business. Unless what always happens happens - that the loyalty of paid debts weakens proportionally to a weakening of the household strongbox.