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Corruption Watch: July 25, 2002


25 July 2002, Volume 2, Number 27

NOTE TO READERS:
The next issue of "RFE/RL Crime and Corruption Watch" will appear on 8 August.
BOSNIA-HERZEGOVINA
SENIOR BANK EXECUTIVES BEING INVESTIGATED OVER LOANS.
Postbank BiH came under investigation by the financial police in July for allegedly providing illegal loans to bank employees, Bosnia-Herzegovina Federation TV reported on 21 July. "The general director of Postbank, Mufid Lojo, last month was granted a loan of 70,000 convertible marks. The loan was granted by the executive board. At the same time, a loan of 55,000 (convertible marks) was granted to executive board President Halid Galijasevic. They were also each other's guarantors in their loan applications. Lojo was granted the loan for the period of 20 years, while Galijasevic's loan was for five years. Loans by a bank to its own employees are forbidden by law in the federation." (RK)

CZECH REPUBLIC
FORMER SENIOR FOREIGN-MINISTRY AIDE ARRESTED OVER ALLEGED MURDER PLOT...
Four people, including former Foreign Ministry Secretary Karel Srba, have been taken into custody for allegedly plotting to have Czech journalist Sabina Slonkova murdered, local and international media reported this week. Slonkova said on 22 July her murder was planned for 17 July and that three contract assassins were contracted to shoot her with a pistol and slash her face to prevent identification. Srba was forced to resign from his post in March 2001 after Slonkova, a journalist for the daily "Mlada fronta Dnes," wrote a series of articles describing the suspicious circumstances under which the ministry leased the Cesky Dum (Czech House) in Moscow to a private firm. Srba had submitted the lease contract to then-Foreign Minister Jan Kavan for signing. Srba allegedly contracted the assassins through a girlfriend, who is also among those arrested. Writing in "Mlada fronta Dnes" on 23 July, Slonkova said police took her under their protection prior to the planned murder and hid her for 10 days, CTK reported. On 22 July, CTK, quoting prosecution sources from Ceske Budejovice, reported that police were informed of the plot by one of the potential perpetrators. A police search of Srba's home uncovered two guns, and more than 30 million crowns ($989,300) in cash was found in his car, CTK reported on 24 July, citing "Mlada fronta Dnes." According to the daily, Srba was unable to tell investigators how he acquired the money and told police he could not find anyone to whom he could entrust it. Sources from the Prosecutor-General's Office cited by the paper said the price that was to be paid for Slonkova's murder was about 500,000 crowns. The search of Srba's home also led to the discovery of a photo of Slonkova, on the back of which was written "Liquidation." Srba said the inscription was prompted by his desire to become a journalist and "liquidate" Slonkova professionally, the daily reported. Pavel Safr, editor in chief of "Mlada fronta Dnes," told Czech radio on 22 July that the daily's management has taken additional measures to protect its journalists. In November 2000, Slonkova was prosecuted by the state attorney in connection with revealing plans by the government of Milos Zeman at discrediting lower house deputy speaker Petra Buzkova. President Vaclav Havel stopped that prosecution, calling it "nonsense." (Michael Shafir)

...AS SUSPECTED ACCOMPLICE SAYS SHE SPENT YEARS COLLECTING BRIBES RELATED TO MINISTRY CONTRACTS...
Suspected Srba accomplice Eva Tomsovicova told police that for three years she has been working for Srba collecting bribes from companies that secured large contracts from the Czech Foreign Ministry, CTK reported on 25 July, citing "Mlada fronta Dnes." That daily and its sister paper, "Lidove noviny," published reports the same day questioning a recently agreed contract for reconstruction of the Czech Embassy in Zagreb. Both dailies report that police have launched a probe of procurement contracts at the Foreign Ministry involving Srba and close associates. The daily "Pravo" reported on 25 July that police will also examine some old cases of suspected corruption at the Health Ministry, where Srba worked before being appointed Foreign Ministry secretary. Foreign Minister Cyril Svoboda is quoted in the 25 July "Mlada fronta Dnes" as saying his ministry has temporarily suspended new orders and is examining its contracts and preparing a reorganization of its departments in charge of financial management. (Michael Shafir)

...WHILE PRESIDENT SUGGESTS CZECH UN CHAIRMAN SHOULD CONSIDER RESIGNING.
In a statement released to the media, a spokesman on 23 July said President Havel is "shocked and appalled" by the reports. He added that it "would be appropriate for [UN General Assembly Chairman and former Foreign Minister] Jan Kavan to reconsider his ability to carry out some of the functions he holds," CTK and international media reported. Srba was brought on at the ministry by Kavan, whom media describe as a close friend of Srba. Earlier on 23 July, Kavan's predecessor as foreign minister, Jozef Zieleniec, also said Kavan should resign, lest he damage the country's international reputation. Kavan told RFE/RL in an interview on 23 July outside the General Assembly hall that it is "absurd" to link him with the actions of the former aide. "I really see no reason [to resign], and I do think this is just an example of a highly politicized atmosphere, and I do believe that common sense and rational thinking will soon prevail," Kavan said. He stressed he had "nothing to do" with Srba and is not aware of his activities following his departure from the Foreign Ministry 18 months ago, CTK reported. Prime Minister Vladimir Spidla initially commented that the UN chairmanship is important for the Czech Republic, adding that Kavan was personally elected to it and the government cannot dismiss him. But Spidla said on 24 July that he expects Kavan to discuss the Srba affair with him later in the week, when he returns to Prague, CTK reported. "The government considers the affair [to be] important and serious...and wants it clarified regardless of the identity of those involved it in," Spidla told journalists after a cabinet meeting. (Michael Shafir)

POLICE BREAK UP PLOT TO SELL STOLEN SEMTEX.
Czech police, most likely acting on a tip, arrested two men and a woman in a gas station on the highway between Prague and Brno in April. They had in their possession 33 kilograms (73 pounds) of the plastic explosive Semtex, 267 electric detonators, and 150 grams of the highly flammable chemical rubidium, Reuters reported following the 8 July police announcement. The damage that 33 kilograms of Semtex can do becomes evident when one considers that a small amount of the explosive is believed to have brought down the Pan Am Boeing 747 over Lockerbie in 1988. A mere 17 kilograms of Semtex is blamed in the 1995 bombing of a Saudi military building in Riyadh in which seven people, including five U.S. advisers, were killed. Variations of Semtex are currently produced in a number of countries around the world, while Semtex itself is produced in the Czech Republic by Explosia. That company was taken over by the Czech government earlier this year in order to prevent Semtex from falling into the hands of terrorists. (RK)

FOREIGN INVESTORS CALL ON NEW GOVERNMENT TO CRACK DOWN ON CORRUPTION.
The European-Czech Forum, representing commercial and industrial chambers of the United Kingdom, France, Germany, the Netherlands, and Sweden, called on the new Czech government to initiate a radical reform of the business environment's legal framework and to contain economic crime, including corruption, the daily "Mlada fronta Dnes" reported on 16 July. Members of the forum said this can only be achieved through a radical improvement of the Czech judiciary's work and an improvement of the public administration and independent regulators. (RK)

POLAND
PRIME MINISTER VOWS TOUGH ACTION AGAINST CORRUPT COPS.
Polish Prime Minister Leszek Miller told an audience of police and Interior Ministry officials in Warsaw on 20 July that corruption in the ranks of Polish police will not be tolerated and severe punishment will be handed out, Polish TV reported. The main method of punishment will be expulsion from the force, including loss of all benefits, including old-age and pension benefits, Internal Affairs Minister Krzysztof Janik added. The Polish police employ 105,000 officers. About 30-40 individuals are expelled from the service each year. According to a June poll by the Public Opinion Research Center, 64 percent of Poles believe the police are working well.

POLISH NATO OFFICERS CHARGED WITH CORRUPTION.
The military prosecutor's office in Szczecin has charged Polish officers from the Danish-German-Polish (NATO) North-East Corps with bribery, the newspaper "Rzeczpospolita" reported on 18 July. The bribes allegedly took place over the past three years and were linked to tenders for equipment for the NATO unit. If found guilty, the officers face dismissal.

RUSSIA
'OVERINDULGENCE IN BRIBERY.'
"The first legislative restriction on corruption was imposed by Ivan III, and his grandson Ivan the Terrible introduced the death penalty for 'overindulgence in bribery,'" Nikolai Kovalev, the chairman of the State Duma's Commission for Combating Corruption, told "Rossiyskaya gazeta" in an interview published on 29 June. Kovalev, the former head of the Federal Security Service (FSB), went on to give the following views on the nature of corruption in Russian and the ways to combat it:

"Historic experience shows that it is impossible to eradicate corruption completely either by executions (present-day China can serve as an example) or by complete liberalization of the economy (a banker taking bribes was unexpectedly exposed in respectful Switzerland!).

"Nevertheless, it is possible to lower the level of this evil phenomenon, including by means of higher salaries. However, it is unrealistic to sharply raise overnight the salaries of all Russian functionaries of the extremely overblown bureaucratic machine. Therefore, we have to start from the downsizing of the army of bureaucrats.

"In fact, the state itself pushes functionaries toward corruption.

"Russia is currently undergoing not just modernization but radical reform due to its transition from an absolutely centralized to a market economy. Admittedly, we have our purely Russian distinctions, too: the tradition to obey not the law but instructions and bosses."

Kovalev ended the interview with this insightful view on the nature of Russian bribery: "I dare to claim that in Russia in almost all cases there is no extortion, for there is no need for it: People voluntarily offer bribes. Therefore, on the one hand society complains, but on the other hand it provokes corruption and does not want to fight it. It is both an ailment of our society and its diagnosis." (RK)

AUDIT CHAMBER SEEKS GREATER POWER TO BATTLE CORRUPTION.
Sergei Stepashin, chairman of the Russian Audit Chamber, has presented a plan on fighting corruption in Russia, Interfax news agency reported on 21 July. Speaking at a conference on corruption outside Moscow, Stepashin put forth three possible options to help combat the scourge. He said existing economic laws need to be revised, since they currently make it difficult to punish corruption; bureaucratic red tape must be reduced, since "the more officials, the more sources for corruption"; and the influence of state officials in economic matters must be drastically reduced. Stepashin also called for granting the Audit Chamber greater authority to inspect not only the federal component of regional budgets, but local components as well. (RK)

REFORMING THE RUSSIAN CIVIL SERVICE.
"The administration was never accountable to the general public," Mikhail Dmitriev, Russia's first deputy minister for economic development, was quoted as saying in the "International Herald Tribune" on 19 July. "It was never in fact responsible for delivering a high quality of service to society. Ordinary citizens were considered subjects to be ruled who themselves should serve the state." This, he said, is "the mirror opposite of a modern state." According to the paper, the designation "civil service" has always been something of a misnomer in Russia. "Since the formation of a centralized state about 800 years ago, bureaucrats have mainly served the country's leaders, not its people. And they have been anything but civil." The paper continued: "As it is, Russia's civil servants have little incentive to perform. In economic terms, the last decade has left them behind. Many of the most effective state workers left for better-paying jobs in the private sector, especially in Moscow. What remains is a cadre of 1.1 million people who independent analysts said are as corrupt as any bureaucracy in the world's poorest countries," according to Dmitriev. (RK)

MOSCOW PROPERTY OFFICIAL SHOT.
Aleksei Busalov, the chief expert of the Moscow Property Committee, was shot and seriously wounded on 19 July, Russian TV reported. He was reported to be in intensive care. The ambush, which appeared to be an attempted contract killing, took place next to his parked car. The perpetrators reportedly set off the car alarm, prompting Busalov to come out of his apartment, before shooting him four times. Moscow police have several theories as to the motive, the main one being his position. Six years ago, the head of the Central Directorate of the Moscow Property Committee was shot in the hallway of his apartment building. (RK)

KYRGYZSTAN
PRESIDENT'S SON-IN-LAW SUPPLYING FUEL TO ANTI-TERROR COALITION.
The president of Kyrgyzstan, Askar Akaev, said in an interview with the "Financial Times" of 22 July that his son-in-law, Adil Toigonbaev, is involved in selling jet fuel to Manas air base, outside Bishkek, which is being used by U.S. and other forces in air attacks on Afghanistan. Toigonbaev, a Kazakh national, is married to the Akaev's oldest daughter. The report did not include earnings figures, but the president said his son-in-law is "doing well," according to the "Financial Times." According to sources quoted by the paper, the U.S.-led coalition has spent about $27 million in the country, about half of that for jet fuel. President Akaev denied any conflict of interests in the arrangement and told the newspaper: "It is the Americans' business who they buy from," he said. "I do not consider this [a conflict of interest]. Everything was set down in the agreement ratified by parliament." Officials from the Manas air base, however, denied having any knowledge of Toigonbaev's involvement, the paper reported. (RK)

UKRAINE
CORRUPTION IN UKRAINIAN COAL SECTOR TARGETED.
The Ukrainian Prosecutor-General's Office has begun an investigation into irregularities in the payment of wages to coal miners in the Luhansk Region, according to Interfax Ukraine on 17 July. Thus far, the investigation has determined that officials of state holding companies and state-owned coal mines purchased cars and equipment for administrative staff using budget funds while salaries were owed to miners. A criminal case on the basis of the investigation is already in a Luhansk regional court. That case alleges misappropriation, especially large-scale property embezzlement, official document forgery, and bribery by officials from the joint-stock company DonbasVIO and limited-liability companies Spetsstroy and Ukrvodstroy. These officials are accused of misappropriating over 1.6 million hryvnas ($307,700). (RK)

MONEY LAUNDERING
THE HAWALA -- ALIVE, WELL, AND LEGAL IN THE U.S.
According to many international experts on money laundering, the hawala remains the cornerstone of an underground banking system used extensively by both criminals and terrorists. The hawala is a traditionally informal system for money transfers that has been used for hundreds of years, particularly in South Asia and the Middle East. "The Christian Science Monitor" reported on 22 July: "Today's hawala dealers conclude their deals by e-mail and faxes instead of letters of credit, providing perhaps the world's closest example of what Bill Gates called friction-free commerce. Faster than an ATM, hawala has no paper trail and shields customers from tax authorities or intelligence agents." The system is legal in many parts of the world, including the United States. In those countries where it is illegal, it is difficult to close down. "The Christian Science Monitor" cited the case of India, where the hawala is punishable by long prison terms. Still, the paper reported, "in India alone, according to Interpol intelligence sources, the size of the hawala could be nearly 40 percent of India's gross domestic product. In 1998, the latest figures available, the amount of money in India's hawala system was estimated at $680 billion, roughly the size of Canada's entire economy." (RK)

DRUG BUSTS
BULGARIA SEIZES 230 KILOGRAMS OF HEROIN IN BIGGEST HAUL EVER.
Bulgarian customs officials said they seized 230 kilograms of heroin at the Turkish border on 10 July, according to local and international news agencies. It represents the largest-ever heroin bust in Bulgaria. The narcotic was found in a Turkish-registered truck at the Kapitan Andreevo border on 10 July. A total of 410 kilograms of heroin has been seized this year in Bulgaria. Last year, 1,520 kilograms was confiscated. (RK)

RUSSIAN GUARDS SEIZE 164 KILOGRAMS OF HEROIN.
Russian border guards on the Tajik-Afghan border seized over 164 kilograms of smuggled heroin on 14 July, UPI reported. According to RIA-Novosti, this is the single largest drug bust by Russian troops in the last decade. The heroin was seized from a group of smugglers from Afghanistan trying to cross the Pyandzh River on two rafts. A firefight broke out and the smugglers fled. On 5 July, Afghan smugglers tried to bring 154 kilograms of heroin disguised as coffee into Tajikistan but were repelled by a Russian patrol. Two smugglers were killed in the fighting. (RK)

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