9th Jun 2023

Millions stashed offshore, as Serbian firms lurched toward ruin

  • Agrohem factory hall in Novi Sad in late 2011, a few months after the company filed for bankruptcy (Photo: Zoran Pucarevic)

With accession candidate country Serbia facing EU questions on controversial state sell-offs, newly revealed documents paint a former Macedonian minister as a backstage player in the demise of several big Serbian employers.

Serbia has been a land of mystery and rumour in the years since the bloody Yugoslav wars ended and communism gave way to free markets. As the government sold off state-owned companies over the past decade, workers puzzled over the murky identities of the new owners and grieved over the failures of many privatised enterprises. 

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

At Agrohem, one of Serbia’s largest fertiliser manufacturers, word spread that a shadowy figure from Macedonia was involved in the tangle of firms that took over the company a decade ago. His role in Agrohem remained a question mark as the company ploughed millions of dollars into deals with offshore companies and lurched into bankruptcy, throwing hundreds of employees out of work.

“We had no idea who was really buying the company,” Milojica Hrvacanin, a former Agrohem employee, recalls.

Now, records obtained by the International Consortium of Investigative Journalists, a Washington-based NGO, establish that Zanko Cado - a banker and businessman, who served a scandal-haunted stint as Macedonia’s economics minister - was behind a network of offshore companies that were intimately involved in the acquisition and failure of Agrohem.

Corporate registration records in Serbia indicate Cado was a director of an offshore company in Antigua that secured an indirect ownership stake in Agrohem.

Secret offshore records uncovered by ICIJ also indicate Cado controlled a British Virgin Islands company that, bankruptcy court filings claim, received a $6.9 million wire transfer from Agrohem before the fertiliser maker went out of business.

ICIJ’s findings shed new light on the mystery of Agrohem’s demise - and on the dark tale of what happened in this corner of southeastern Europe in the years after the October 2000 citizens’ uprising forced Serbian dictator Slobodan Milosevic to accept his election defeat.

As the international community celebrated a victory for democracy, powerful insiders quietly cashed in on the sweeping transformation of the formerly state-run economy, stashing millions of dollars offshore and helping push nearly two-thirds of Serbia’s newly privatised companies into distress and ruin.

The behind-the-scenes intrigues that preceded Agrohem’s failure also reflect persisting questions about offshore havens’ role in fuelling corruption and hardship in Serbia and other struggling economies around the world.

Offshore secrecy, financial transparency experts say, promotes onshore economic pain: poverty, corruption, unemployment.

“The shadow system helps keep poor countries poor,” says Stefanie Ostfeld, a policy advisor for Global Witness, an anti-corruption group based in London and Washington.

Takeover artists

Twenty-five former Agrohem workers and a court-appointed bankruptcy trustee have filed written complaints with Serbian authorities alleging that Cado illegally seized control of Agrohem and profited by looting its assets and driving it into insolvency.

It is unclear whether police and prosecutors have taken action on the workers' plea for a criminal investigation. The State Public Prosecutor’s Office and the Higher Public Prosecutor’s office in Novi Sad did not respond to requests for comment for this story.

Reached via phone by ICIJ, Cado declined repeated requests to comment for this story.

He currently maintains an office in Slovenia and recent corporate registration records suggest he has continuing business interests in both Slovenia and Serbia.

A law firm in Belgrade that helped Cado set up offshore entities did not respond to requests for comment.

Court documents and other records show Cado was part of a group of corporate takeover artists who played a role in the purchase and failures of at least three former Serbian state-owned companies that filed for bankruptcy between 2010 and 2012.

Along with Agrohem, the other companies were Fidelinka, a large food-processing concern, and Navip, Serbia’s oldest distiller of its national drink, plum brandy.

Three executives with a company involved in Navip’s takeover have been charged with abuse of the privatisation process and setting up bogus business contracts between Navip and another company. Police allege that the three helped arrange the underpriced sale of Navip-owned commercial property in downtown Belgrade, bilking the distiller out of millions of dollars.

In all, some 1,300 workers lost their jobs in the post-privatisation struggles of Agrohem, Fidelinka and Navip.

They are among as many as a quarter million workers who, according to government statistics, lost their jobs at state-owned companies that were privatised from 2001 to 2010 - roughly one out of every nine workers in Serbia.

Serbia’s population has shrunk in recent years to just over 7 million, with many workers leaving to find opportunities elsewhere.

As the country struggles to put years of dictatorship and war behind it, unemployment remains sky-high, thousands of companies have died or subsist as near-defunct ghosts and tens of billions of dollars have flooded out of the country through offshore hideaways.

For his part, Milenko Sreckovic, who runs Freedom Fight Movement, a non-profit entity that champions workers’ rights, says offshore companies located in palm-fringed tax havens are “one of the biggest generators of the deterioration of the Serbian economy.”

War and hope

The wars of the 1990s inflicted trauma and turmoil on Serbia and other Yugoslav republics, slaughtering as many as 140,000 people, ravaging economies and prompting the United Nations to accuse Serbian leader Milosevic of genocide and war crimes.

Milosevic died before his trial was completed.

Hrvacanin, once an economist with Yugoslavia’s state-owned railway, was among the hundreds of thousands of Serbs who were driven out of Croatia and Bosnia amid ethnic and religious violence.

His boss at the railway, Hrvacanin says, was hacked to death, and his own family’s apartment building was bombed.

Hrvacanin eventually resettled in Novi Sad, Serbia’s second-largest city, feeling fortunate to find a mid-level job in 1998 as an export manager at Agrohem.

The company was struggling because of the economic fallout from civil war, including a United Nations trade embargo targeting the Milosevic regime.

Hrvacanin hoped things would turn around as northern Serbia’s black-earthed Vojvodina farming region returned to a peacetime economy and demand for the company’s fertilizers rose inside and outside the country.

After Serbs took to the streets and forced an end to Milosevic’s rule in October 2000, a wave of democratic, Western-friendly politicians took power, pledging to bring a new era of prosperity.

They began pushing across-the-board privatisation of state-run companies like Agrohem, promising to lure foreign investment, expand exports and boost workers’ pay.

Serbia’s Agency of Privatisation was responsible for making sure buyers were legitimate investors who would not strip the companies of their assets and toss workers on the street.

But Serbia’s privatisation law was designed with a loophole: the buyers were not required to fully disclose their identities and ownership structures.

That led to hundreds of auctions, according to investigative reports by the country’s Anti-Corruption Council, in which the buyers appeared, on the surface, to be foreign investors but in reality were well-connected Serbs using front companies to buy state enterprises and milk their assets for large profits.

In many cases, the council reported, the new owners took out mortgages and loaded the companies with debt, selling or transferring ownership of land, buildings, machinery and equipment to offshore companies or other associated firms.

Almost 2,000 of the 3,017 state-owned enterprises that were privatised between 2001 and 2011 have ceased operations, sunk into bankruptcy or are on the verge of closing down, according to the Social and Economic Council of Serbia, a joint governmental and union body.

“During the privatisation, it was the sort of atmosphere where you should not ask anything and don’t talk about it among the workers, because you could endanger the privatisation deal,” says Istvan Hadji, deputy president of the Autonomous Trade Union in Subotica, which represented workers at many privatised companies which failed.

The Anti-Corruption Council’s reports are crammed with examples of suspect deals that put privatised firms into the hands of domestic political and economic power brokers.

In June, Serbia’s former privatisation and economics minister, Predrag Bubalo, was arrested and charged with abuse of office in the sale of Port of Belgrade, a once-powerful cargo transport company on the Danube that the council says was taken over, via a company in Luxembourg, by some of Serbia’s richest individuals.

Five other Serbian officials involved in the privatisation process - including two former heads of the Agency of Privatisation - have also been charged with abuse of office.

Serbia prosecutors have alleged that the country’s most famous fugitive, Darko Saric, used offshore entities, privatised companies and other enterprises - including hotels, banks and a sugar factory - to launder cocaine money from South America and support an underworld operation involved in cigarette smuggling and other crimes.

Authorities claim that Saric laundered tens of millions of dollars through privatised firms.

Both Bubalo and Saric have denied wrongdoing.

Meanwhile, questions about the privatisation process have become a roadblock to Serbia’s efforts to join the European Union.

The EU says it is concerned about the “illegal acquisition of public assets by private interests” and has asked Serbian authorities to review 24 “controversial” privatisations.

Agrohem is not among the companies targeted in the review. But Hrvacanin and other ex-workers argue that the company’s privatisation and failure also merit attention.

In 2002 and 2003, Serbia’s Agency of Privatisation arranged to sell blocks of government-owned shares in Agrohem to outside investors. Investors also moved to gain control of Agrohem shares that had been distributed to employees earlier in the privatisation process.

The ex-workers’ complaints to Serbian authorities allege that company officials pressured workers to sell their Agrohem shares to outside investors.

Hrvacanin claims that one top Agrohem manager took workers off site to bars and plied them with beer and plum brandy, telling them “that they would lose their jobs if they didn’t sell their stock. My colleagues were afraid, so they did that massively.”

By 2003, two Serbian companies, Pharmachem and SMM Metali i Minerali, had become Agrohem’s majority shareholders, controlling more than 80 percent of its shares.

It was around this time, Hrvacanin says, that a “Mr Cado” became a presence at the company. Agrohem executives described him as “the boss,” Hrvacanin recalls, even though he had no official title in the company.

Hrvacanin soon became aware of what he describes as a series of unusual transactions. He claims Agrohem began selling off equipment and taking out loans and then transferring the loan proceeds to foreign companies and accounts — most of them located in the British Virgin Islands, “which I had never heard of before in my life.”

He filed a report about these deals with local police, but nothing came of his complaint.

He was removed from his job in 2005. Officially, he says, he was part of a large layoff, but he contends that he was let go because he had taken his concerns to the police.

A history of failure

Agrohem’s privatisation was not the first time that Zanko Cado’s business dealings raised questions.

In the 1990s, Cado was a director and shareholder in the London-based parent companies of two banks - Almako and Anglo-Yugoslav Bank - that ended up in bankruptcy.

By the time Almako’s problems became apparent in early 1999, Cado was serving as minister of economics in Macedonia, Serbia’s neighbour to the south. Cado stepped down in April of that year, after just five months in the government post, citing “personal reasons” and dismay he had not received enough international help in his effort to fix Macedonia’s economy.

Some in the Balkan media asserted there was scandal looming behind the story of Almako’s demise and Cado’s departure, charging that the bank had lost millions of dollars in government deposits by doling out sweetheart loans to influential Macedonian politicians and business people.

Cado has never publicly replied to the claims.

After he returned to the private sector, Cado built a reputation as someone who opened the doors for investors who wanted to do business in former Yugoslav republics.

The companies that Cado connected himself to included both SMM and Pharmachem, the two firms that gained control of Agrohem. Serbia’s corporate registry indicates Cado was a director of an Antigua company, Fer Trade, which in turn controlled SMM and Pharmachem.

Agrohem helped provide SMM with the capital it needed to purchase Agrohem’s shares, Hrvacanin and other former employees claim in interviews with ICIJ and in written complaints to Serbian authorities.

Agrohem, they charge, took out a bank loan of €600,000 (just over $600,000) in late 2002 and used it to pay SMM for thousands of tonnes of chemicals which had been stored in Agrohem’s warehouse in Novi Sad. Then, they claim, SMM used the proceeds from the transaction to buy Agrohem stock.

Bankruptcy court records show that Agrohem also engaged in dozens of transactions with companies in the British Virgin Islands, the Marshall Islands, Panama and other offshore sanctums.

The company regularly arranged to purchase raw materials through contracts that called for it to make payments in advance but put off delivery of the materials for months or even years, according to documents filed in court by Ninoslav Simic, the bankruptcy trustee appointed to deal with the wreckage of Agrohem.

In 2006, for example, Agrohem sent $887,000 to British Virgin Islands-based Highland International Investment Holding, according to export records compiled by the National Bank of Serbia that are now on file in bankruptcy court.

The scheduled delivery date for the materials from Highland International: 730 days in the future.

In many instances, the goods that Agrohem paid for were never delivered and the transactions were converted from purchases of goods to loans, according to legal claims filed by Simic.

The offshore companies never repaid the “loans,” stiffing Agrohem out of a total of $4.6 million, records filed in court by Simic show.

Simic told ICIJ that he has been trying for two years, with little success, to recover money that Agrohem sent out to offshore firms. His demand letters frequently get returned marked “Addressee Unknown.”

It is unclear who was behind Highland International or many other offshore companies that did business with the fertiliser maker.

But records obtained by ICIJ do show who was behind Alysun Marketing, a British Virgin Islands company that received a large wire transfer from Agrohem: Zanko Cado.

Cado was a director and shareholder for Alysun, records uncovered as part of ICIJ’s “Offshore Leaks” investigation show.

In December 2007, bankruptcy court records show, Agrohem wired €4.77 million ($6.9 million) to Alysun, ostensibly to purchase 37 percent of shares of Fidelinka, the food-processing concern, according to bank transaction records filed in court by Simic, the bankruptcy trustee.

Simic believes the transaction was “business malpractice.”

Fidelinka stock is now worthless; the money was paid out for something that had little or no value, Simic said in an interview.

He believes the evidence shows that Cado and others involved in the takeover of Agrohem were less interested in keeping the company operating than in siphoning away the company’s assets.

“Obviously, they were not there to produce fertiliser,” Simic said.

Criminal charges

By the time Agrohem had begun its path toward bankruptcy, another big Serbian firm - Fidelinka - was also coming into Cado’s orbit.

Fidelinka was one of Serbia’s leading milling and baking companies, with a history dating back to 1947. By the early 2000s, one business publication reported, its annual sales topped 12.5 million loaves of bread and 100,000 tons of sweets.

The government privatised Fidelinka in 2005. Once again, offshore companies chartered in the British Virgin Islands were key players in the process.

Cado’s Alysun Marketing snapped up just over 19 percent of Fidelinka’s shares. Another British Virgin Islands company, Mowbray Systems, picked up nearly 25 percent of Fidelinka’s stock. A Swiss-based mining company, Mineco, obtained nearly 20 percent.

Both Mowbray and Mineco are connected through Serbian businessman Dimitrije Aksentijevic. He was a shareholder and director in Mowbray, according to secret offshore documents obtained by ICIJ, and a director of Mineco, according to corporate registry records in Switzerland.

Aksentijevic has an interesting backstory.

Before Mineco, Aksentijevic worked for Glencore, the Anglo-Swiss mining and commodities conglomerate whose history, the Australian Broadcasting Corporation has said, “reads like a spy novel.”

Its founder, the late Marc Rich, dodged US racketeering and offshore tax fraud charges for nearly two decades before winning a controversial pardon from the then president Bill Clinton.

More recently, Aksentijevic has been linked to a bribery case in Romania.

The Organized Crime and Corruption Reporting Project, a regional network of investigative journalists, reported in July that Aksentijevic is under investigation in a corruption case in which a Romanian judge was jailed for pocketing bribes from a Romanian mining executive and a representative of a Mineco subsidiary in Bucharest.

Fidelinka seemed, on the surface, to thrive after its takeover by new owners. It launched a chain of storefront bakeries, Bread & Co,and announced it was spending tens of millions of dollars to modernise and was working to build trading ties with Glencore.

The relationship with Glencore never materialised and union officials and media in Serbia claim that, as in the Agrohem case, the new owners loaded Fidelinka with debt and then transferred money out of the company.

Hadji, the labor official in Subotica, asserts that the various domestic companies operating under Fidelinka’s umbrella guaranteed loans to each other, creating a web of debt that makes it almost impossible “to see who is there who owes whom and who is the guarantor of the loans.”

Fidelinka filed for bankruptcy in 2010, putting as many as 700 employees out of work.

Aksentijevic’s company, Mineco, also played a role in the privatization and bankruptcy of Navip, the Serbian brandy producer.

Navip - which owned hundreds of acres of vineyards and orchards and other valuable real estate - filed for bankruptcy last year. At least 150 workers lost their jobs.

Serbian authorities charge that the takeover was tainted by corruption.

Police allege that three executives who work for Mineco subsidiaries in London and Belgrade helped arrange an underpriced sale of 27,426 square feet of Navip’s commercial properties in downtown Belgrade.

The bogus deal cost Navip more than $2.6 million, police claim.

Mineco founder Aksentijevic also could not be reached for comment.

A Mineco spokeswoman declined to comment on firm’s role in the bankruptcies of Fidelinka and Navip. She said the three executives facing criminal charges “are fully participating in the relevant process and all three deny all wrongdoing.”

Out of luck

Agrohem met the same fate as Fidelinka and Navip. By the time Agrohem filed bankruptcy in 2011, the company had long since shut down operations, with 450 workers losing their jobs.

The story of layoffs and misery has been repeated across Serbia.

The country’s jobless rate is one of the highest in Europe - 27 percent in February, according to the EU. The Vojvodina breadbasket region, Agrohem and Fidelinka’s home ground, is one of the hardest-hit provinces.

Whether Serbia can turn around its economy around may depend in part on whether it can stop money linked to corruption and tax evasion from streaming out of the country.

A study by Global Financial Integrity, a research and advocacy group, estimates that $51 billion in “illicit financial flows” left Serbia from 2001 to 2010, the 16th highest total among 150 developing nations.

The British Virgin Islands, a Caribbean outpost known as a haven for dirty money, took in nearly $900 million in transfers from Serbia in 2012 alone, according to the National Bank of Serbia.

For former Agrohem workers, the flow of money from Agrohem to offshore way stations provides evidence of back-room deals that bled their company’s resources and capital. Some have joined rallies protesting Serbian authorities’ failure to defend workers from shady business practices.

“We expected the police and the courts to protect us,” said Zivan Krstic, a former Agrohem employee who now serves as the president of the Association of Minor Shareholders of Agrohem, which represents workers who hung onto their shares in the company.

“But that didn’t happen,” he added.

Most of his former coworkers now live on the edge of poverty, out of jobs and out of luck. Not long ago, Krstic said, he saw one of them sneaking around trash containers, rooting around for old electric devices so he could strip out the copper and sell it to get money to feed his family.

Hrvacanin is among the ex-Agrohem workers who have hit hard times. After years of working indoors as a railway economist and export manager, the only job he could find after Agrohem let him go was as a bricklayer.

“I’m really struggling now, because I’m almost sixty,” he said. “Nobody here wants to hire someone like me with a degree when I’m close to retirement.”

Recently, he made a small step up - to a temporary job as a custodian at a company in Novi Sad. He works from 7am to 7pm and barely earns enough to buy food, pay bills and rent a small apartment.

With new leaders now in power in Serbia, Hrvacanin and other workers hope the government will finally respond to their complaints.

“We will not stop fighting to expose what happened to us at Agrohem,” he said. “It’s simply injustice.”

Djordje Padejski is an investigative reporter and founder of the Foia Machine, an online tool for accessing public records. Michael Hudson is a senior editor at the International Consortium of Investigative Journalists in Washington. Milan Dudvarski, Branislav Sovljanski and Blaz Zgaga contributed reporting to this story


EU defuses Balkan time bomb

Local elections in Balkan towns rarely make international headlines. But when masked men used baseball bats to smash ballot boxes in Kosovo's north Mitrovica, the world took note.


Why are cross-country train tickets in EU still so complex?

Why no price-aggregating website for international trains in Europe? Why is it almost impossible to buy a single ticket for a cross-border train? It's easier to go by plane - and governments are making sure it stays that way.

Latest News

  1. Belgian bâtonnier on Russia: 'You can have a client you don't like'
  2. EU's proposed ethics body 'toothless', say campaigners
  3. Study: 90% of Spanish inflation 'driven by corporate profits'
  4. If Spanish economy is doing well, why is Sanchez poised to lose?
  5. EU lawyers for Russia: making 'good' money?
  6. The 'BlackRock exemption' has no place in the EU's due diligence directive
  7. Europeans don't see China as a rival, but weapons to Russia is a red line
  8. Cleaning workers urge Parliament: 'Europe should lead by example'

Stakeholders' Highlights

  1. Nordic Council of Ministers20 June: Launch of the new Nordic Nutrition Recommendations
  2. International Sustainable Finance CentreJoin CEE Sustainable Finance Summit, 15 – 19 May 2023, high-level event for finance & business
  3. ICLEISeven actionable measures to make food procurement in Europe more sustainable
  4. World BankWorld Bank Report Highlights Role of Human Development for a Successful Green Transition in Europe
  5. Nordic Council of MinistersNordic summit to step up the fight against food loss and waste
  6. Nordic Council of MinistersThink-tank: Strengthen co-operation around tech giants’ influence in the Nordics

Stakeholders' Highlights

  1. EFBWWEFBWW calls for the EC to stop exploitation in subcontracting chains
  2. InformaConnecting Expert Industry-Leaders, Top Suppliers, and Inquiring Buyers all in one space - visit Battery Show Europe.
  3. EFBWWEFBWW and FIEC do not agree to any exemptions to mandatory prior notifications in construction
  4. Nordic Council of MinistersNordic and Baltic ways to prevent gender-based violence
  5. Nordic Council of MinistersCSW67: Economic gender equality now! Nordic ways to close the pension gap
  6. Nordic Council of MinistersCSW67: Pushing back the push-back - Nordic solutions to online gender-based violence

Join EUobserver

Support quality EU news

Join us