Serbia: Karic Affair Rocks Belgrade

Three financial trouble-shooters have declared war on corrupt profiteers from the Milosevic era.

Their chief opponent is Bogoljub Karic, a 40-year-old Kosovo Serb who, along with his brothers, started out as a wedding musician in the mid-1980s, but with Milosevic's support and connection, become the richest man in Serbia, with property worth several billion German marks.

Mladjan Dinkic, governor of the Yugoslav National Bank, Bozidar Djelic, Serbia's finance minister and Aleksandar Radovic, head of the republic's taxation department, were never part of the old Serbian establishment. Djelic and Radovic spent the last decade abroad, while Dinkic was a founder of the G17 Group of independent economists, which was critical of the Milosevic regime.

The Karic affair has rocked Belgrade since October 11, when Djelic publicised a list of entrepreneurs who owed taxes on excess profits gained under Milosevic. Karic was at the top with debts of 67.8 million marks.

Using his ties with the regime - Bogoljub became a government minister - the Karic Brothers took over banks, mobile phone networks, construction companies and media holdings in at least 15 countries. In Belgrade, they still own the TV station, BK (Brothers Karic) Television.

The Karics generously supported Milosevic's political projects, at the same time sponsoring several opposition parties. After his downfall, they turned their backs on him, hoping to preserve their fortune by cosying up to the new government.

At first, they tied their fortunes to Vojislav Kostunica, who had replaced Milosevic as Yugoslav president, before switching loyalty to his great rival, the Serbian prime minister Zoran Djindjic.

There is no evidence that Karic funded these two politicians, though this was undoubtedly his mode of operation under Milosevic. In a television interview in May, Karic openly defended this practice. "This has to be done. I'm a businessman. There is no business without politics," he said.

Until recently, public opinion in Belgrade had largely given up hoping that these shady businessmen would be prosecuted, owing to an impression that the wealthy have made their peace with the ruling DOS coalition.

Last spring, the government set up a commission to investigate "Economic Abuse", charged with imposing one-off "windfall" taxes on companies and individuals who had profited excessively under Milosevic.

But no one expected the rich to suffer. The legislation was seen as a gimmick, designed only to show that the authorities were doing something.

But when Radovic, 36, became head of the new commission in June, he showed he intended the law to be put into practice, in spite Kostunica's and Djindjic's obvious unwillingness.

Kostunica wanted the law re-examined, while Djindjic called the entire action a "witch-hunt". In July, Djindjic suggested holding a donors' conference of businesses who had benefited under Milosevic, at which a deal could be struck on the taxes they owed.

Radovic was not deterred and spent the summer struggling to force Karic to pay up. Karic finally offered 67.8 million marks, on condition he could pay in installments.

The conflict went public in September, when Radovic accused Karic of threatening him. "Karic is accusing me of being an irrational technocrat whose mission is to destroy a Serbian holy man," he said on August 24.

A week before Djelic was due to publish a report on Karic's debts, Karic attempted to forestall this by winning Djindjic's support. He dismissed the successful editor of his BK television station and replaced him with Milomir Maric, a known Djindjic ally.

But Dinkic had anticipated this move and appears to have persuaded Djelic to reveal the report to the journalists a day earlier than expected. As a result, the public saw the report before the government could react.

Overdue taxes are only part of Karic's problems. On October 12, the police announced an investigation into the agreement that laid the foundations for Mobitel, the main mobile telephone exchange system in Serbia, in which Karic holds a 51 per cent share. The remainder is held by the state-owned Post Office, Telephone and Telecommunication Serbia, PTT.

The reason for the investigation is that there is a suspicion that Karic may have paid less than was required by law for his stake.

Karic heard on the night of October 11-12 from moles in the Serbian government that his shareholding will be cut from 51 to 10 per cent, spelling a potential loss of up to 900 million marks.

"They intend to take everything," he said. On October 15 he left the country and in a letter to Kostunica, Djindjic and the Serbian police minister Dusan Mihajlovic, he claimed he had been forced to flee as his family's lives were "under threat". He even claimed snipers had been spotted round his home.

As precondition for his return, Karic demanded an independent parliamentary commission to "find out the truth and reveal it to the public".

His flight was almost certainly an attempt to blackmail the authorities, by creating an impression that Serbia is not a safe place for foreign investment. Djelic and Dinkic were not perturbed and in the event Karic returned in two days to pacify his bank customers, who had withdrawn 13 million marks overnight. The tax will have to be paid by October 26.

Three other firms have been ordered to pay up, starting with Simpo of Vranje, in southern Serbia, whose director is Dragan Tomic, a former Serbian deputy president. Simpo owes around 24.9 million marks. Stankom, owned by Zivorad Mihajlovic, a former top official of Milosevic's Serbian Socialist Party, was fined the same amount. The last is Delta, owned by Miroslav Miskovic.

The commission has also announced that Zeljko Mitrovic's TV Pink, a station which fiercely supported Milosevic's wife, Mira Markovic, before switching loyalty to Djindjic, will be taxed.

However, the three campaigners may not survive in their posts for long. The panic inspired by the Karic affair among Milosevic's old business cronies means moves will be made against them. Such action would find discreet backing in both Djindjic's and Kostunica's parties, where the majority of the nouveau riche have found their niche.

On the other hand, Djindjic and Kostunica will have to move carefully, owing to the trio's evident popularity. If they survive, political power might even pass in to their hands, once the post-Milosevic transition era personified by Kostunica and Djindjic is over.

Zeljko Cvijanovic is a journalist with the Belgrade weekly Blic News