From Smuggling to Lobbying

Cigarette trade is again a hot topic among the Serbian public, this time not because of smuggling scandals, but a scandal surrounding tax changes. Soon after the government recommended a tax increase for all brands of cigarettes, the ruling Socialist Party of Serbia and its president, Interior Minister Ivica Dacic, had a sudden change of heart that raised turmoil throughout the country. Their proposal: to raise levies more for expensive brands and less for cheaper ones, so as to protect the interests of poorer citizens who can afford only low-quality tobacco.

The suggestion was seconded by Nenad Canak's League of Vojvodina Social Democrats, which is also in power, and the amendment was passed in Parliament with the support of opposition parties. However, the assembly will likely have to vote on the issue again and adopt the initial proposal, as the Phillip Morris corporation, which bought the Nis Tobacco Industry in 2003, has threatened to leave Serbia and move its cigarette production to Russia. The budding scandal was then set off by claims that the disparate excise tax increase would bring most benefit to the company Monus, the country's main manufacturer of the cheap cigarettes (namely of the Fast brand) and which happens to belong to one of Serbia's many controversial businessmen, Predrag "Peconi" Rankovic.

The statements of anonymous MPs soon filled the newspapers, claiming that the managers of Rankovic's companies had recently frequented the parliament, lobbying for the contested amendment, all of which forced Dacic to publicly deny that Rankovic is funding his party.

Although never charged, Predrag Rankovic has been often mentioned before the courts by members of the so-called Zemun clan, some of whom have been convicted for the 2003 murder of Serbian Premier Zoran Djindjic. According to them, Rankovic was a top-ranking player in what was once a well-organized and unified criminal organization, headed by Ljubisa "Cume" Buha, from Belgrade's Surcin suburb.

What seems apparent from the entire excise tax case is that, in the past several years, Serbia has managed to move from irrepressible smuggling to lobbying for the interests of dubious businessmen. The inner circle of interest-holders, however, has suffered little change, which is well illustrated by the current trial of a group led by Stanko "Cane" Subotic -- perhaps the country's most controversial entrepreneur, who is on the run -- accused of garnering EUR28 million and US$28 million by smuggling cigarettes during the mid 1990s.

The Subotic case also featured several prominent Socialist party officials, while witnesses claim that individuals close to Canak's Social Democrats were also involved in the scam. Officially, the police uncovered Subotic's group in operation Mreza (Network), launched after the late Slobodan Milosevic was removed from power in October 2000. The trial, however, revealed that the Subotic group was in fact uncovered while still actively smuggling, thanks to a clash within the Socialist party and the diligence of several Novi Sad Police inspectors. The investigation into the smuggling had been stopped by the state security service -- which is legally obliged to defend the constitutional order.

Police Officers Held Hostage

In October of 1996, financial police officers arrived at a warehouse in Rumenka for an unexpected inspection of the facility where, according to the indictment, Subotic had been storing smuggled goods, and from which he had been distributing them to small-scale dealers. Subotic's men captured both the initial team of officers and those who arrived later to check on their colleagues. The seven police officers where held hostage at gunpoint throughout the night, and were released the following day at noon, only after all the cigarettes had been removed from the premises.

Mirko Kulic, at the time head of the Revenue Directorate and an official of the Socialist Party of Serbia, told the court that he had sent the financial police officers to Subotic's warehouse without notifying the police because he did not trust them. Kulic said that he had fallen out with then Customs Directorate chief Mihalj Kertes -- now indicted as Subotic's associate -- and that the dispute had arisen over insufficient budget revenues. Kulic believed that the low budget was a result of losses due to smuggling, and held the Customs Directorate responsible for the situation. In an attempt to prove his theory to Kertes, Kulic sent a team to the Rumenka warehouse - a move that ultimately cost him his job.

The Customs Directorate head, however, had been unaware that certain Novi Sad Police inspectors were also interested in Subotic's activities. Thus, Zoran Pandurov, an inspector of the Economic Crime Department, told the court that he had had a complete case with plenty of hard evidence back in 1995 -- one year before the Rumenka incident. "We found an enormous amount of cigarettes. We found more than we had expected, because the cigarette boxes had papers under the company name Mia Ub, according to which [the boxes] had left the country [and been sent to] Republic of Serb Krajina, while they were actually in Futog. You can't get harder evidence than that," Pandurov said.

Pandurov soon learned, however, that there was to be an immediate stop to all police investigations of Subotic, per orders of the state security service. The inspector also said that he and his colleagues had discovered in 1993 that another controversial businessman, Mirko Vucurevic -- who publicly boasted of his friendship with Jovica Stanisic, the head of the state security service for many years -- had also been involved in large-scale cigarette smuggling. According to Pandurov, Vucurevic's associate was also one Bosko Palkovljevic, the son of the former Vojvodina Police chief and, the inspector has been told, a person close to Canak's League of Vojvodina Social Democrats.

Reprimanded for Doing Their Job

The investigation of Vucurevic and Palkovljevic was also stopped by the state security service, while Pandurov and his commanding officer Miodrag Zavisic -- who, too, has been indicted as Subotic's accomplice -- had to come to Belgrade and answer to their superiors for taking the two of them into custody.

"We brought them in, but someone intervened momentarily. Zavisic and I were called to Belgrade, where in the building of the Federal Police Department (Saveznog SUPa) a man from the security service threatened to arrest me for negligence and yelled that we kidnapped Vucurevic, and that we could write what we liked but that Vucurevic had to be released," Pandurov said. The inspector's story was reiterated by former Novi Sad Criminalistic Police chief Velimir Grahovac, who added that the city's police officers were later surprised to see top police officials attended the opening of Vucurevic's soccer club.

Vucurevic has not been charged for cigarette smuggling, and, when asked in a rare interview how he manages to survive "when everyone is against him," he reportedly said: "Because I'm smart."

It is interesting that financial police officer Dusan Vlahovic testified that before he was illegally arrested, he saw Zika "Crnogorac" Jovanovic near Subotic's warehouse. Jovanovic was a member of the state security service's Special Operations Unit, whose presence at the scene Vlahovic explained as coincidental, claiming that "Zika had nothing to do with the case, but came for a visit." Vlahovic later asked his contacts in the military security service regarding Subotic and Jovanovic, but was told to "forget everything and stop asking questions."

Just how the police force operated at a time when the current interior minister's party held sole power is perhaps best illustrated by a detail from Pandurov's testimony in which he claims that the heads of police did not interfere much with the work of economic crime inspectors because they knew little about their field. One could conclude that the Novi Sad Police inspectors took their job too seriously, and investigated smuggling without being told to do so, ending up in an unpleasant situation. It has taken over ten years to show that their initiative, and that of the financial police, was not pointless.

Inspector Bogdan Pusic had also initially worked on the Subotic case, taking the statements of the captured financial police officers, and questioning them again in 2000 and 2003, at the Directorate for Combating Organized Crime. The work of the Novi Sad Police inspectors has certainly been of great help to the Special Prosecution for Organized Crime, which finally managed to raise an indictment in 2007, and begin a trial in May of 2008. The defendants, aside from Subotic, are Mihalj Kertes, Milan "Mrgud" Milanovic -- founder of the Scorpions unit, Miodrag Zavisic, and Milovan Popivoda, the former head of the Novi Sad Security Service Center.

Two more groups charged with large-scale cigarette smuggling are standing trial at the Special Court concurrently to the Subotic group. One, headed by Montenegrin citizen Anton Stanaj, has damaged Serbia for EUR63 million, while the other, led by Sinisa Stojcic, is accused of damaging the state for US$2 million. Mihalj Kertes is also indicted as a member of the Stojicic group. Stojcic's brother, Radovan "Badza" Stojcic, was killed in 1997, while working as assistant minister for internal affairs.