SFO drops Bosnia case

For dodgy-business watchers in the Balkans who have been waiting to see whether Serb electricity mogul Vuk Hamovic faces charges over alleged corruption, the wait is over.

Britain’s Serious Fraud Office (SFO) has dropped its years-in-the-making investigation into Hamovic’s alleged manipulation of aid payments and energy deals in Bosnia – the first and only case dealing with alleged international corruption, and the first such case to be looked into under Britain’s tougher 2002 bribery laws.

New SFO head Richard Alderman agreed June 2 to withdraw his predecessor’s request to the UK’s attorney general for the OK to prosecute the case, which involved Hamovic’s two UK-registered energy finance companies. The SFO inquiry began more than three years ago and spanned six countries; Bosnia’s special prosecutor had also investigated the case.

In Bosnia, the special prosecutor had focused on debt acquired by one of Hamovic’s companies, GML International. It was a complicated case, involving an elektroprivreda (electric company) in Bosnia’s Republika Srpska and another in next-door Montenegro, but worth taking a look at. The following was reported a few years ago by our sister project, the Center for Investigative Journalism in Sarajevo:

In the summer of 1999, Hamović through GML started to buy the debt that Elektropriveda Montenegro owed EPRS (Elektroprivrdea Republika Srpska). The debt was bought directly from EPRS or through three party deals. For instance, in August of 1999, GML paid off suppliers of EPRS $2.27 million USD for the debt they were owed by EPRS. EPRS then assigned GML an equal amount ($2.27 Million USD) of the debt owed to them by EP Montenegro.

At the same time, it was common knowledge that USAID was providing financial assistance to help Montenegro. It was less well known that part of this assistance, $11.9 million USD, had been set aside to pay back EP Montenegro for electricity it had bought from EPRS.

On August 30, just weeks after the debt swap, USAID sent $3.7 million to EPRS to pay EP Montenegro’s bills. However, one week later EP Montenegro sent a letter to EPRS saying it owed them nothing and that the money should be redirected to pay off GML and several other creditors.

This pattern was repeated in 1999 and 2000 with GML obtaining debt prior to payments from USAID.

In all of these transactions, GML earned money by buying the debt at a 30% discount, according to an email to CIN from EFT spokesman Nenad Savić. Savić said the discount only applied to private firms, was a fair price for the market, and that EPRS was paid in full and suffered no financial losses. Ultimately, their loans helped by providing liquidity to the system, he said.

In the process, $4.3 million was repaid to GML through February of 2000 using USAID funds.

(Bosnia State Court prosecutor Jon) Ratel found the trades suspicious partly because of the timing.

“GML only began to purchase EP Montenegro debt right before the USAID transfers. This suggests that GML was aware of the timing of USAID transfers and that GML collected EPRS (debt) only when certain that the aid was going to be wired,” the order for investigation states. The order also states that EPRS and EP Montenegro did not have the authority to use the funding in this way.

The investigators said EP Montenegro and EPRS did not need to sell and trade debt when money from USAID was already available, according to the order.

“The payment scheme was an apparent attempt to misappropriate USAID donor funding for the apparent benefit of GML International, EP CG (Montenegro) and other EP CG (Montenegro) contractors,” the order says. If the facts are true, it may mean managers of the organizations are guilty of embezzlement and fraud, according to the order.

From August 1999 until the end of February 2000, USAID gave EPRS $8.4 million out of a promised $11.8 million for delivery of electric energy to Montenegro. A majority went to GML, who had bought the debt.

In the end, neither Mr Ratel nor any of the other international prosecutors at the Bosnia court charged Hamovic or anyone at his companies with a crime.

The SFO, meanwhile, has not prosecuted a single such international case since Britain’s Anti-Terrorism, Crime and Security Act of 2001 came into effect, making bribery outside the UK subject to punishment under UK bribery laws. This law in effect globalized other British laws, such as the 1906 Prevention of Corruption Act.

At any rate, Vuk Hamovic and his spokesmen at Energy Financing Team have always denied the allegations, saying several years ago that it had suffered “misstatements, innuendos and false allegations,” in a special auditors’ report.

UNMIK officials charged

Six former officials of the UN’s mission in Kosovo (UNMIK) were charged on June 2 with abuse of powers and with embezzling €230,000 intended for humanitarian projects, reported Belgrade-based B92.

Chief District Prosecutor Fliamur Kelmendi said that the charges, brought on Monday, referred to two U.S. nationals, one Brazilian, one Italian, and two other persons of unspecified nationality. The list also includes one Albanian from Peć.

The alleged crimes of the former officials, the article says, took place in and around the western town of Pec (Peja in Albanian) in 2003 and 2004. What the article doesn’t say is how the prosecutor reckons he will bring any of the former UNMIK staff back to Kosovo for their trial.

UNMIK corruption is hardly news. Anyone in Kosovo can tell you about the most well-known case of a sticky-fingered foreign official: German national and UN official Joe Trutschler, convicted of embezzling €4.5 million from Kosovo’s power company in 2003. Trutschler’s trial, however, took place in Germany, not in Kosovo. But foreign officials on trial in Kosovo itself – that would be news.

What would also be news would be if any of the prosecutors in that part of Kosovo – dubbed the “Wild West” by myself and other colleagues – were to actually lay charges against any of the local Albanians there for any one of the myriad crimes that are said to be flourishing in that part of the country.

Trash and the mob

I won’t mention a certain US television dramedy about a certain New Jersey mobster with the initials T.S. here, but doesn’t this sound familiar? A man with an Italian-sounding name owns trash companies that run about 80 percent of the business in a north-eastern American town; to keep his near-monopoly, he or his associates, among other things, set fire to a competitor’s truck and kidnap the driver at gunpoint.

This was the case of James Galante, of Danbury, Connecticut, who pled guilty last week to racketeering and conspiracy to drive up trash prices in the greater Danbury area. He was indicted in 2006 along with 28 others – most of whom have pled guilty, including a former mayor of a nearby town. Mr Galante is reported to be at the center of a federal investigation into mob influence in the trash business.

Why does the mob love garbage? We see the same thing in Naples, where the Camorra controls trash, and we saw the same thing on our US television dramedy. Online magazine Slate explains:

It’s Mob Economics 101: Find a business that’s easy to enter and lucrative to control. Criminal organizations make lots of money from drugs, human trafficking, and counterfeit goods, but creating a monopoly on garbage collection is attractive because the business itself is legal, and public contracts return big profits. Compared with something like running a casino or grocery store, the logistics of taking trash from Point A to Point B are a no-brainer. Anyone with a truck and a couple of strong guys can make good money, and there’s always a demand for the service.

Here’s how it works: The mob organizes the trash-hauling businesses in a given city to prevent competition from driving down prices. They fix prices, rig bids, and allocate territories in such a way that customers can't choose who picks up their garbage.

Besides the Camorra, the article lists other international players in the garbage business: Taiwanese gangs who dig up river gravel, sell it to construction companies and then fill the holes with the trash they’ve collected; Georgian crime bosses who run waste transport in that country’s capital; and La Cosa Nostra’s domination of New York City’s trash collection until the 1990s.

Poll: Mexico losing war on drugs

Also in North America, most Mexicans think that their government is losing its war on the country’s uber-powerful drug cartels, reports the Dallas Morning News.

By a 2-to-1 margin, Mexicans believe that the powerful and well-armed drug cartels are outgunning the government even as the army takes a high-profile and unprecedented role…Analysts generally supportive of (President Felipe) Calderón’s courage in taking on the cartels and their paramilitary enforcers say it’s tough to swallow the government’s victorious message amid greater violence, including more beheadings.

Public opinion is critical to Mr. Calderón’s strategy for the war since he has made it a cornerstone of his 18-month presidency – and because he is asking for sacrifice from the Mexican people, especially families of the more than 450 police killed over that period, analysts said.

One writer from Mexico City’s La Opinion says the reason the war is failing is because Calderon’s officials are not following the money.

The good graces of public opinion also matter to the Merida Intiative, the proposed three-year, $1.4 billion US aid package I brought up here in the May 12 installment. The US Congress added human rights conditions to the bill – that alleged violations by soldiers be prosecuted by civilian authorities rather than the military, and that no officials involved in corruption will receive assistance – which have riled the leadership south of the US border. Mexico has threatened to turn down the first year of the program if it contains the human rights corollaries.