With last week’s sentencing of HDZ tycoon Miroslav Kutle to six and a half years in prison for embezzlement in Tisak, Ninoslav Pavić, Ivić Pašalić and Vinko Grubišić, his secret partners in the Grupo cartel and many other of Kutle’s “business partners” will likely not be able to sleep peacefully anymore. Just after the sentencing, Kutle was escorted off to his jail cell with a grimace on his face, and he will likely be spending a lot more than six and a half years behind bars if the sentence passed by Judge Koraljka Bumči is made binding.

Miroslav Kutle became a father again two weeks ago. Dunja Pesić, his second wife, gave birth to a son, Maksimilijan. Pesić, an attorney, is a relative of Davorin Sobjeslavski, one of the members of the so-called Zagreb mafia convicted for drug dealing. Kutle’s first marriage ended soon after his release from detention. He still has problems with accessing his remaining assets. For example, the 400 m2 villa in Markuševac, with a swimming pool and tennis court, cannot be sold due to unresolved ownership issues.The trial epilogue for Kutle will in no way be pleasant, and this became clear to him as soon as he appeared before the court. Though his associates, lead by the optimistic forecast by attorney Anto Nobilo, had already reserved a table at a restaurant to celebrate Kutle’s acquittal, Kutle sensed before the verdict that he would not be eating dinner as a free man on Friday night. Parked before the court, he saw a large number of automobiles and the judicial police van intended for transporting prisoners, as well as an ambulance.

In her ruling, Judge Bumči stated that Miroslav Kutle, Božidar Marić, Petar Anić, Krunoslav Marčinko, Ivan Majić and Milena Šenator had committed several felonies, damaging Tisak by 44 million kuna. They extracted money out of the company in the form of loans which Tisak granted to other companies, which was never intended to be returned. Such an epilogue to the uncertain four year trail is the symbolic announcement of the beginning of a new era for the Croatian justice system. Prison sentences for Kutle and his associates, given during Sanader’s mandate, is the first concrete step in the task of addressing the criminal legacy of the Tudjman years. If the justice system continues untangling Kutle’s web of embezzlement, Kutle could soon have company in prison, with all his “associates” and secret partners joining him behind bars.

Back in 2001, Nacional argued that the State Prosecution could easily prove the existence of criminal ties between Kutle and his secret media partners Ninoslav Pavić, Vinko Grubišić and Ivić Pašalić in the Tisak and Grupo affairs. A number of companies, whose controversial arrangements with Tisak have still not been investigated, form the assets of the Grupo company, owned by Kutle, Pašalić, Grubišić and Pavić. As it was their companies who, thanks to Kutle in Tisak, illegally funneled millions out of Tisak, there are concrete indications that the Grupo affair was not only the creation of a media monopoly, but also a secret partnership realized through classic embezzlement, and this formula lead to Kutle’s six and a half year jail sentence.

Well informed sources have confirmed for Nacional that State Prosecutor Mladen Bajić is preparing new charges for Kutle’s crimes in Tisak. These charges will be concerning the remaining illegal contract between Tisak and the companies he granted loans to. There is a total of 105 such loans, and the court case which so far has brought Kutle six and a half years in jail covered only 29 of these loans. At first the criminal charges were simple, and later due to the complexity and extent of the case, and partly due to the political calculations and fear of the media octopus Grupo, the prosecutor separated the contracts and investigated only 29 contracts.

Legal sources close to Tisak claim that Mladen Bajić is preparing charges concerning the illegal contracts between Tisak and Slobodna Dalmacija, which is why the announced sale of Slobodna Dalmacija to Ninoslav Pavić, Kutle’s partner from Grupo, should be put on hold until the case can be completed. On 1 January 1998, Tisak took over the obligation from Slobodna Dalmacija to pay a 41.95 million kuna debt to Dubrovačka Bank. At the end of January of the same year, Tisak purchase shares of Slobodna Dalmacija for 34.84 million German marks. On 11 May 1998, it took over the payment of 5,357,109 German mark and 20.1 million kuna debt that Slobodna Dalmacija had towards Dalmatinska Bank. One day later, Tisak withdrew a total of 31 million kuna on two different contracts – nos. 13/98 and 73/98 to settle the debts of Slobodna Dalmacija. In these transactions alone, Kutle sucked out a total of 40.1 million German marks and 91 million kuna out of Tisak, which significantly exceeds the amount for which he was sentenced to six and a half years in prison.

It will be particularly interesting to see whether after last week’s judicial epilogue of the Tisak affair, whether the Ukus case will come to trial. Back in 1999, attorney Mladen Golojuh sued Kutle on behalf of the Tisak Union for malversations in the purchase of the company Ukus, from which he funneled 4.5 million marks for himself and the Grupo gang. In September 1995, Ukus was purchased for 450,000 marks by the Medjunarodna Novinska Korporacija (MNK), owned by Ninoslav Pavić and Zdravko Jurak. Only one month later, MNK resold Ukus for 950,000 marks to the company Mreže, also controlled by Pavić and the remaining partners from Grupo. In December of the same year, Mreža sold Ukus, an anonymous company which had long been bankrupt, to Tisak for an astronomical 4.5 million marks. At that time, the media partners from Grupo waited for Kutle to take over Tisak, so that the new supervisory board would approve the transaction on his orders.

For the time being, the contracts that Kutle signed in 1995 as owner of Tisak granting loans to the local Zagreb television station OTV have also not been processed. A few years before the signing of these contracts, this station was supposedly purchased by Vinko Grubišić and his friends with money sucked out of Kutle’s other companies. Furthermore, Kutle used Tisak’s money through fictitious loans he never intended to collect on to finance TV Marjan, the company Mreže and numerous others. Many of the contracts between Tisak and the banks are also suspicious. At the end of 2000, the Tisak attorneys sent the State Prosecutor’s office a complete list of those loans and their status, as well as their view of the complex criminal activities which brought Tisak to the brink of bankruptcy under Kutle’s management.

The letter the Tisak attorneys forwarded to the Prosecutors office states, “There are many elements which suggest that the banks were involved in illegal conduct. The accused could not have carried out the acts they are suspected of without the assistance of the banks, in particular, Glumina Bank, Croatian Postal Bank, Splitska, Dalmatinska, Dubrovačka, Istarska and Privredna Banks. According to our suspicions, the banks used three methods to help the accused and the Globus Group (Kutle’s Globus included ownership of Tisak) to cover up the true standing of the loan. In the first scenario, it helped in the recovery through the government decision on recovery. Then the banks carried out illegal share releases by which they closed various claims. The illegality of the share releases was in the fact that they were not followed by increases in the base capital with payments but rather with fictitious legal affairs. And finally, the banks, in conjunction with the accused, exchanged creditors of poorer profitability with better ones with the assistance of the accused, or rather with the main staff of the Globus Group, thus covering their insecure and lost placements within the Globus Group… Tisak was thus burdened by claims by creditors (primarily banks) which in fact did not exist.”

Last week’s interim epilogue of the act one of the Tisak affair is not pleasant for either Kutle or his attorney Ante Nobilo. Just before the verdict, he claimed to his client that poor business management is not a criminal offense and that Tisak at the time its granted loans to other companies was a private company and that this is not illegal. Nobilo claimed that the law of the time protected only state owned assets from abuse, and Tisak was not state owned. “In four years, the prosecution has not identified a single fact which would indicate that Kutle acted with the intent of personal gain or non-payment of the loans,” said Kutle just before the verdict was granted. For the hundreds of families that were left without an income because of Kutle’s self-will and funneling money from dozens of companies under his control, Nobilo’s claims as such are offensive, just as his statement that the charges against Kutle are against the law and against common sense.

Nobilo seems to have forgotten that Kutle came into possession of Tisak in a criminal way. If Nobilo’s suggestions are taken up and it is confirmed whether Tisak was private or state-owned, this could only further harm his client, now in jail. Last week’s ruling has opened a series of new questions. Until the written version of the ruling with its explanation are made available, it will not be clear why the accused Mladen Štrukan or Jurja Hrvačić were acquitted, even though they played important roles in Kutle’s embezzlements. It is also not clear how the decision to seize 23 million kuna illegally obtained by Kutle’s Globus Group. That company has long since been in bankruptcy, and its bankruptcy manager claims that it has no assets. However, this is not exactly correct. It is still unknown whether the State Prosecutor’s Office will prosecute those untouched responsible persons in the companies which had contracts with Tisak where it was proven that they profited by funneling money out of Tisak. In as much, it will soon be seen whether the State Prosecutor’s Office is up to the political calculations that have protected some of the criminals surrounding Kutle from prosecution thus far.

The list of assets not included in the privatization value assessment could significantly alter the ownership relations within Tisak. Nacional is in possession of several documents concerning the Tisak privatization that suggest this. The government has information that 33 properties of Tisak in Croatia and BiH were not included in the asset assessment during the privatization. That was discovered by the Tisak bankruptcy manager, whose task was to compile a systematic review listing and comparing the items in the bankruptcy funds and the liabilities of Tisak. This discovery has opened the door for the government to again take over a significant share in Tisak, thus changing the current ownership ratios.

The bankruptcy manager claims that the Tisak management failed to include all the companies properties in the assets assessment procedure, as many of those properties had complicated legal status. 20 of those properties are on Croatian territory, while 13 are in BiH, and their joint value is assessed at 3.24 million euro. New shares should be issued to recapitalize their value. Were Tisak to be recapitalized by the state, which is a possible variation with the approval of the current owners, the Privatization Fund share would increase by 8%, from 13.93 to 21.9%. Meanwhile the current ownership shares would decrease: the Adris group would have 23.47 instead of 25.86%, the EPH Group would have 23.29 instead of 25.79%, and Veltrade would have 23.36 instead of 25.75%. With such a recapitalization of Tisak, the current majority shareholders, which together have a decision-making majority of 77.39% and individually have the right to veto certain decisions which require a 75% vote, they could lose their controlling package. Such a scenario of increasing the state share in Tisak could be hindered by the current owners in several ways. However, if the state proves to be decisive, it could make this a condition on the possible EPH takeover of Slobodna Dalmacija, if that transaction is not halted by announcements of new charges against Kutle and his associates for funneling money out of Tisak to benefit Slobodna Dalmacija.