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Banja Luka Bank, Controlled By PM, Hands Out Millions To Family, Allies

Milorad Dodik, prime minister of the Republika Srpska, has given his personal approval for large bank loans to companies with apparent ties to Dodik and his government.
Milorad Dodik, prime minister of the Republika Srpska, has given his personal approval for large bank loans to companies with apparent ties to Dodik and his government.
By The Center For Investigative Reporting & RFE/RL

SARAJEVO -- The Republika Srpska Investment-Development Bank (IRB) was created in Bosnia's Serbian entity in 2006 with the aim of putting money into the hands of ordinary citizens looking to buy homes, business owners looking to expand, and entrepreneurs starting new companies.

The bank's start-up funds came in part from 667 million Bosnian marks ($485 million) earned from the sale of the republic's state-owned telecommunications company to Serbian Telecom. The IRB's interest rates average 5.5 percent, more favorable than rates offered by commercial banks, and bank representatives say the venture has proved a boon for the many people who have taken advantage of the loans.

But an investigation by the Center for Investigative Reporting (CIN) has revealed that the IRB program has given most of its largest loans -- with personal approval from the Serb Republic's prime minister, Milorad Dodik -- to foreign-backed companies with offshore bank accounts and assets that exist only on paper.

A review of dozens of the 2,140 loans issued by the Republika Srpska IRB shows that many of the largest loans -- some as large as $3.65 million -- went to companies with apparent ties to Dodik or his government, sometimes within days of application.

All requests for loans of $36,500 and higher are forwarded to a five-member IRB board for approval. Those above $365,000 are then passed to a second five-person board, chaired by Dodik. All agreements are personally signed by the prime minister, or, in his absence, by his finance minister.

Dodik, a former darling of the West during the Bosnian war, has since emerged as a fiery nationalist who has threatened to break Republika Srpska away from Bosnia-Herzegovina. Since coming to power in 2006, he has been criticized by local media and nongovernmental organizations, who accuse him of using political and economic levers in order to turn his republic into a personal fiefdom.

Lender Largesse

CIN's review of IRB's disbursements shows that Dodik signed off on a $2.2-million loan for a business run by his son, Igor. His name also appears on approval for a $3.65 million loan for a Banja Luka newspaper that has given Dodik favorable coverage in the course of an investigation by Bosnia's SIPA state law-enforcement agency into possible corruption in the construction of a lavish new Republika Srpska government building in Banja Luka.

Dodik's office declined a CIN request for an interview, saying the prime minister was on vacation and was unavailable for comment. But IRB spokesman Zoran Popovic defended the bank as a success that cannot be judged on the basis of a few loans. Popovic also said most loans are preapproved by local banks and that Dodik's board serves only to give the final, formal go-ahead.

Farmaland's director said the guards were there to "protect the farm." It is unclear, however, what security threats the farm, which is home to 2,700 cows, might face.
Still, many of the largest loans continue to raise questions. The list of recipients also includes $2.2 million to a dairy farm owned by a firm with bank accounts in Belize and shell companies throughout the United States. The farm is also alleged to be a possible front for the mobilization of a private army with ties to Dodik. Still another recipient is a restaurant owned by the family of a close Dodik associate whose bank accounts were frozen because of suspected ties to war criminals.

Records examined by CIN also revealed discrepancies between companies' stated reasons for applying for loans and what they ultimately delivered.

Ein Shemer, an Israeli rubber company, received $2.4 million in loans, claiming it wanted to upgrade facilities at Fagum, a rubber plant based in the eastern Republika Srpska city of Zvornik, of which it had become partial owner. Ein Shemer issued a press release promising to hire 100 new workers by April 2008, including employees from Fagum's main plant, who were facing downsizing.

Dodik launched what was considered to be a largely toothless anticorruption drive last year.
To date, only 16 people have been hired, none of them from Fagum. Vesna Jankovic, who directs Ein Shemer's projects in Bosnia, said the Israeli firm found Fagum workers were not up to desired standards and couldn't be retained. She also said Ein Shemer's production work with Fagum is still in the testing phase and is currently running at 20-percent capacity.

Ein Shemer's claim to have purchased part of Fagum also appears to be in doubt. A review of court records show no evidence of such a purchase.

Farmaland

Not far from the Dodik family estate in the town of Gradiska, some 45 kilometers north of Banja Luka, sits Farmaland, a dairy farm with a complicated provenance and unusually tight security.

Farmaland is also the headquarters of Elite Security, which local and international investigators claim is manned by a group of former Republika Srpska military and police officers loyal to Dodik.

Farmaland's director, Hrvoje Kapora, told CIN that the guards were there to "protect the farm." It is unclear, however, what security threats the farm, which is home to 2,700 cows, might face.

Bosnian journalists, citing international sources, have alleged in recent years that Dodik has sought to build a private paramilitary force in case he is forced to unite Republika Srpska's police force with that of Bosnia's second entity, the Muslim-Croat Federation. That reform is seen as critical to Bosnia's closer integration with the European Union, and has been hotly resisted by Dodik and other Bosnian Serb officials.

Kapora, however, denied the security personnel at Farmaland are there to protect Dodik, calling the suggestion "unfounded."

Other large IRB loans appear to follow the same pattern -- recipients with close ties to the government and projects that only sometimes come to fruition.
Farmaland received $2.2 million from the IRB in January. In application summaries provided by the bank, the firm was planning to use the loan to buy cattle and make improvements to the property.

Farmaland is owned by a U.S. company, Farmland LLC, which maintains addresses in Wyoming, Delaware, and Florida. According to records filed in Wyoming, the company's sole director is a British investment group, Tylney Directors Ltd.

Tylney Directors has corporate offices in Belize and the Channel Islands, according to records at the office of the Florida Secretary of State. It lists its headquarters as being in London, but the company has no listed telephone number and no website.

In Florida, Tylney manages 10 companies -- including a yacht sales office and an olive oil enterprise -- out of the back of a tiny storefront in remote Orange City belonging to the UPS shipping service. Florida records show a total of 27 companies, all with links to Croatia, list the same Orange City address as their headquarters.

Dharmesh Amin, a store worker, said the address is simply a mailbox, and not home to any company other than UPS. The local tax assessor says none of the companies has been granted operating permits, meaning they were never legal entities.

Tylney's sole public board member is listed as Sandro Stipancic of Croatia. CIN was unable to contact Stipancic.

Farmaland director Kapora says his business was purchased by its U.S. parent several years ago for less than $10,000, plus outstanding debt that he said had reached more than $7 million.

A Friendly Arrangement

Another recipient of a large IRB loan was the Banja Luka daily "Nezavisne novine," which last year was granted $3.65 million in order to finish construction on its new office building and to buy publishing materials.

"Nezavisne novine" gained prominence and international funding in the 1990s for its daring and critical coverage of Bosnian Serb war crimes led by its editor, Zeljko Kopanja. (Kopanja lost both legs in a car bombing in October 1999, an attack seen as reprisal for the paper's investigative work.)

But the paper has experienced a marked editorial shift since Dodik came to power, becoming a firm backer of the prime minister and his policies. "Nezavisne novine" has defended Dodik's integrity throughout the ongoing SIPA probe into allegations the premier rigged bids on more than $100 million worth of construction projects, including the Republika Srpska government building.

The lending patterns of the Investment-Development Bank are likely to fuel Dodik critics who argue that rampant corruption within the entity government comes at a heavy cost to Republika Srpska, and to Bosnia overall.
"Nezavisne novine" and Integral Inzenjering, the construction company behind the revamp of the government headquarters -- whose founder, Slobodan Stankovic, is a close Dodik ally -- last year jointly purchased Republika Srpska's only other daily newspaper, "Glas Srpske."

Kopanja declined to discuss the IRB loan with CIN, saying he was away on holiday.

Other large IRB loans appear to follow the same pattern -- recipients with close ties to the government and projects that only sometimes come to fruition.

When the bank approved a loan of $2.2 million for Fruit Ecco, an agricultural firm co-owned by Dodik's son Igor, the funds were meant to support the hiring of three workers and the planting of 169,000 apple trees and 9,400 pear trees. But Fruit Ecco now refuses to comment on how the loan was spent, and IRB officials say they have not verified whether the proposed improvements were made.

Sinecoop, a lakeside restaurant complex located in Trn, a small town outside Banja Luka, likewise received $2.2 million to upgrade its facilities and add an orchard of fruit trees. The complex is owned by the family of Slavko Roguljic, a Dodik ally who, according to media reports, lets the prime minister vacation at his villa in Montenegro.

Roguljic is a onetime supporter of former Bosnian Serb leader Radovan Karadzic, who is currently awaiting trial in The Hague for war crimes. In 2002, Roguljic was among a group of people stripped by the international community's High Representative to Bosnia, Paddy Ashdown, of travel and banking rights for aiding suspected war criminals.

The High Representative order remains active, as does a similar assets freeze by the U.S. Treasury Department. That did not prevent Dodik and the IRB, however, from granting $2.2 million to the Roguljic family business. (Again, neither the bank nor Sinecoop would confirm the money resulted in the planting of any orchards.)

The lending patterns of the Investment-Development Bank are likely to fuel Dodik critics who argue that rampant corruption within the entity government comes at a heavy cost to Republika Srpska, and to Bosnia overall.

The Transparency International watchdog has named both the Republika Srpska and Muslim-Croat governments as being among the most corrupt institutions in Bosnia. But Miroslav Lajcak, shortly before stepping down as the High Representative to Bosnia early this year, singled out Dodik as the most troublesome of Bosnia's leaders to work with.

Dodik, who has no personal commitment to the notion of an undivided Bosnia, is largely dismissive of such criticism. An anticorruption drive launched by the prime minister late last year appeared to be little more than a toothless response to the SIPA construction investigation.

Still, there are signs that the culture of impunity that Dodik, for many, has come to represent will not go unpunished in the way that hurts most -- economically. A key foreign investor, the Czech energy group CEZ, pulled out of a 1.4-billion-euro project in Republika Srpska earlier this year, citing "repeated breach of the implementation contract" by its Bosnian Serb partners.

Finger-wagging by the international community may do little to sway public confidence in Dodik. A steady retreat of foreign investors may prove far more damaging.

The Center for Investigative Reporting (Centar za istragivacko novinarstvo) is a Sarajevo-based nonprofit investigative group specializing in organized crime and corruption cases in the Balkan region. It is a founding member of the Organized Crime and Corruption Reporting Project, a regional grouping of journalists and media specialists focusing on transnational organized crime.
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by: Prince Igor
August 29, 2009 06:36
This is classic RFE/RL propaganda.<br /><br />Where're the critical articles of the Bosnian Muslim nationalist thugs, who want to dominate Bosnia in a way running counter to what was agreed to at Dayton?<br /><br /><br /><br />

by: Prince Igor
August 29, 2009 19:36
Concerning Brazilian Man's comments:<br /><br />B92 has a Sorosian slant.<br /><br />In Kosovo, try finding something at the same level of criticism of the Albanian nationalists. <br /><br />In Sarajevo, the opposition to the Bosnian Muslim nationalists is lacking.

by: the truth
September 02, 2009 01:18
igor...propaganda? this article is written about the corruption of men who became rich by stealing during the war. why would anyone view this as propaganda? and sure the bosnians want bosnia, and if the serbs dont want it like that, then they should go to serbia, but oh wait, not even serbia wants you.

by: Prince Igor
September 02, 2009 09:55
&quot;the truth&quot;<br /><br />The artilce selectively targets one of three main communities in Bosnia.<br /><br />There's fault to be found on the otherwise (in some circles) teflon Bosnian Muslim nationalist side.<br /><br />Your simplistically selective point on the Serbs can be applied to the Bosnian Croats going to Croatia and the Bosnian Muslims going to the predominately Muslim countries which have supported them.<br /><br />Dayton calls for a federalized Bosnia, as opposed to a centralized Bosnian Muslim nationalist dominated state.<br /><br />

by: Friend of Bosnia
September 03, 2009 19:49
Bosniaks are not Arabs nor Turks and they are not leaving Bosnia, and you serbofascists out there will NOT chase them from their homeland. <br />At least, Bosnia-Herzegovina, inefficient, incompetent and corrupt as its administration may be, dysfunctional as it is thanks to the Dayton appeasement armistice, has left the spectre of totalitarianism behind it, albeit only in the Federation, and only in the Bos&#173;niak-majority areas of it,and the “ancien r&#233;gime” is not coming back. <br />Unfortunately the “RS” is a fascistoid apartheid entity which is being treated by its lead&#173;ership as if it were their own private property with which they are free to do as they please, and they feed the populace with the same old ultranationalist, fascist and chauvinist anti-Bosniak rhetoric with the sole and only purpose that the populace is distracted from their kleptocracy despoiling the land. (True, the thieving and scheming politicians and “fat cats” or “big men” who hold sway over the Federation do that too, but at least in the Bosniak part of Bosnia no one can be thrown in jail just for criticizing them.)<br />So, and also because there will be a Bosniak majority in maybe 10 years, the Bonsian Serbs would be very well advised to stop antagonizing the Bosniaks. Or else

by: Brazilian Man from: S&#227;o Paulo - SP, Brazil
September 04, 2009 11:21
Dodik is one of the worst politicians in foemer Yugoslavia since Slobodan Milosevic.<br /><br />The EU, NATO and the United States must affirm without misinterpretation that Bosnia will not be dissolved as a country, that it will keep the same borders of Yugoslav Republic of B-H, Brcko will not be incorporated to RS ant that an “Anchluss” between Serbia and RS will never happen.<br /><br />And that’s why a strong hand of the Western international community and the accession of Bosnia into NATO must be the goals.

by: Prince Igor
September 06, 2009 08:50
Not long ago, Dodik was considered &quot;moderate&quot; (dupish) enough for the neolib/neocon great power chauvinists.<br /><br />Like this article, the overtly biased policies emanating from the West have been met with an understandable backlash.<br /><br />RS is reality as per 1995 Dayton agreement. Sucking up to Bosnian Muslim nationalists is counterproductive.

by: Antifascist
September 07, 2009 20:10
The Dayton armistice was Bosnia's Versailles, Munich and Yalta all rolled into one. It may have halted the war, but it denies the Bosniaks their freedom to exiast in a sovereign and normal state. One could say that Dayton was basically an exercise in appeasement to curry favor with two pitiful, bankrupt tinpot dictators who are long since dead and gone, and may be valid as a short-term measure to stop hostilities (which by then the opponents of the Serbs were winning). But not as a long-term basis for peace, stability and prosperity and much less to allow people to live normal and productive lives. And while it can be argued that Dayton has in the end produced a failed state, it is unacceptable to use that as a justification to question the very existence of Bosnia-Herzegovina and the Bosnian (OK, majoritarily Bosniak) Nation as such, like the Serbofascists do. They say &quot;Dayton produced a failed state, thus Bosnia is an artificial state and should be dismembered.&quot;<br />The West has sucked up to Dodik (as it did before to Karadzic) long enough. Of all sides involved, the Bosniaks are the least dictatorial and corrupt. (In the &quot;RS&quot; you can get arrested for saying &quot;This is Bosnia&quot;! As happened to a group of girls who protested against the Chetnik fascist manifestation in Srebrenica.) In Bosniak-controlled Bosnia there is at least a bit of a state of right, and not as in Dodik's fief were might makes right. Thus, Dodik represents, as Karadzic before him, evil incarnate: brute force, malice, ethnic and religious intolerance, hatred, apartheid, fascism, bad faith, treachery, oppression, destruction, genocide. That is the &quot;RS&quot; for me, and after having just returned from Bosnia, I gather, for most people I spoke to. Time the West would finally support a unified and sovereign Bosnia-Herzegovina, but in the end the Bosniaks stand alone, but they will be the majority in their own country, and then what is to stop them from getting it back? Of course the Serbs might try to stave off the inevitable with another attempt of genocide. But then they will get the worst of it (At least, the impression I get from what I have seen of &quot;RS&quot; is that they themselves do not, deep in their hearts, believe that it can last).<br />

by: Antifascist
September 10, 2009 19:48
Already in the times of Karadzic &quot;RS&quot; was nothing but a criminal enterprise to distribute ill-gained wealth and under Dodik it is just more of the same.
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