Published in Nacional number 724, 2009-09-29

Autor: Berislav Jelinić

EPILOGUE to the Grupo affair

Kutle - Pavic: A final showdown

MIROSLAV KUTLE should get 20 to 25 million euro for his stake in Europapress Holding

MIROSLAV KUTLE The secret Grupo partner who is expecting the rightful payout of his millions
MIROSLAV KUTLE The secret Grupo partner who is expecting the rightful payout of his millions Miroslav Kutle, the best known tycoon of the 1990s, and Ninoslav Pavic, the well known Croatian publisher and the nominal co-owner of the Europapress Holding Company (EPH), should in a few days time finally resolve their dispute over the ownership of EPH, the country's biggest publishing house, publisher of the Jutarnji list and Slobodna Dalmacija dailies, Globus, Glorija and many other print media publications. As Nacional has been told by people close to Miroslav Kutle, Ninoslav Pavic should on October 1st pay Miroslav Kutle a rightful monetary compensation for his secret partnership stake in EPH. Miroslav Kutle believes that this the final deadline for the settlement of his claims, and the date was set for the payment on the basis of a verbal agreement between Kutle's and Pavic's negotiating teams. It is estimated that Kutle should wind up with 20 to 25 million euro for his 25 percent stake, which would be a compromise solution.

Kutle initially estimated his stake to be worth 40 million euro, and Pavic allegedly initially claimed that the value of the stake should not exceed 16 million euro. Kutle is not certain whether Pavic will be able to pay out the claim by the agreed upon deadline, because he believes that Pavic does not have the money. As a result of the recession and other serious management errors EPH is in dire straits, and the company's debts are estimated to be in excess of 120 million euro. If there is no payment by the start of October, Kutle will most likely file charges and take the case to court, where he will document his claims. It could all further complicate their relationship, and Kutle is almost certain that he could once again face a wave of the legal problems that dogged him in the past if that were to happen, which is in fact what has been happening over the past few months precisely at the time that he was, in the negotiations with Pavic, hurrying the payout of his stake in EPH. Kutle has endeavoured to monitor most of the business activities Ninoslav Pavic has been involved in these past months.

Kutle was interested in seeing if it was realistic to expect that Pavic would pay out his claims, because he knew that there was no money in EPH itself to settle the claim. Kutle also hopes to avoid any further complications in his relationship with Pavic because he has heard from a number of business sector and political sources that Pavic may be on the verge of resolving his problem with the cash that he should be paid for his stake in EPH. Besides the close associates of Miroslav Kutle, a number of business and political sources have confirmed for Nacional that Ninoslav Pavic in fact expects his problems with Kutle to be resolved indirectly at the expense of the taxpayers. According to the information from these people, Kutle's departure from EPH ownership should in fact be indirectly resolved by businessman Robert Jezic, the majority owner of DIOKI, which would, in one scenario, take a 25 percent stake in EPH. They say that Jezic would secure the money for the payout to Kutle from the profits DIOKI made selling storage space to the state-owned Janaf company, led by HSS member Ante Markov. On 3 June Janaf purchased part of the real estate DIOKI owns at Zitnjak. The property includes storage facilities that are allegedly needed by Janaf, because Janaf undertook the obligation to secure tanks for the storage of the mandatory reserves of crude oil required by the state of a total capacity of 640 thousand cubic metres. That same day Government recapitalised Janaf with almost 100 million euro, and the company's equity rose from 2 to 2.7 billion kuna. Business people close to Janaf have confirmed that there would be nothing out of the ordinary about this story had Janaf not been asked to pay several times over the value of the storage facility. Markov was allegedly asked to pay 20 million euro for the storage facility.

Jezic has declined to tell Nacional at what price DIOKI sold the storage space, and Ante Markov has opted to remain unavailable. The pressure on Markov allegedly came at the time from the HDZ leadership, which was very interested in seeing the transaction carried out quietly, as soon as possible. Jezic has told Nacional that he is not interested in buying a stake in EPH, but explicitly refused to give more detailed commentary on the sale of the storage facility to Janaf. He asked not to be mentioned at all in connection to speculation on the sale of the Janaf storage facility and the other financial combinations linked to EPH. The Janaf investment into the DIOKI storage facilities can also be considered problematic for another reason.

According to a Poslovni dnevnik daily issue in November of 2008, DIOKI itself sought and was granted the rezoning of a part of its land in Zitnjak from an industrial zone to a commercial zone for the construction of a shopping centre. After Zagreb's general zoning plan is amended, the land will go up in value. The DIOKI management declined to comment what their intentions were with the land. But the move to rezone the land broaches the question of the possible departure of DIOKI from this location, as there will be a growing number of shopping malls in the area. In this context the question is whether Janaf did in fact have to invest millions in taxpayer money into a storage facility for crude oil derivatives precisely at this location, just ahead of the impending transformation of this part of Zagreb into a practically entirely commercial zone. Some say that with a part of this money Jezic could have helped Pavic resolve his obligations towards Kutle.

According to the documentation available to the public, the sale of the storage facility is formally over, but since the protagonists refuse to give any details about the deal other than that a contract has been signed, the question that arises is whether Janaf has to date paid DIOKI the money for the storage facility. Perhaps this is why people close to Kutle have told Nacional that the situation is still not adequately resolved, and that there has been new pressure on Ante Markov of late. If this is true, then it is possible that the pressure on Markov is in part indirect, through pressure exerted on businessman Andrija Kevic, close to Markov and the HSS, a political party Kevic has also allegedly provided finances to. A few day ago the Jutarnji list daily and the State Attorney's Office again launched a campaign against Kevic. Gordan Malic, a reporter close to the State Attorney's Office, wrote early last week in his articles in the Jutarnji list daily that the State Attorney's Office would seek that Kevic be detained by the police on suspicions of money laundering in an allegedly bogus transaction. Kevic has submitted all of the relevant documentation to state institutions, showing that the theories of the State Attorney's Office were unfounded. Business people in the know have confirmed for Nacional that Ninoslav Pavic sent a message to Andrija Kevic to the effect that t would be a good idea if they did business together.

Kevic was allegedly asked to give Pavic a part of his hotel company, and what Pavic was offering Kevic in return is not known for the moment, if he offered anything at all. Ninoslav Pavic has already made various efforts at finding the money he needed to pay Kutle off. Kutle moved to collect what he felt was his from Pavic in November of 2008. He then submitted documentation to his legal team on the basis of which he sought his share of EPH. Kutle initiated this final round of negotiations after earlier deals had fallen through. Before the recession it was alleged that Kutle had sought 40 million euro from Pavic for his stake in EPH.

ZELJKO KERUM Pavic allegedly at one point offered a stake in EPH to the Split-based businessman
ZELJKO KERUM Pavic allegedly at one point offered a stake in EPH to the Split-based businessman Nacional has learned from well-informed banking figures that this took place prior to the sale of the Hypo Alpe Adria Consultants company, the real estate of which was estimated in 2007 to be worth over a billion euro. When he learned that Pavic was present in the transaction as one of the buyers, Kutle suspected that Pavic might be using money from EPH, on which he has claims certain rights, to cover a part of the deal. It is alleged that the relations between Kutle and Pavic were very strained at the time, and that Pavic had as a result even complained to President Stipe Mesic. After this, say well-informed banking figures, Mesic's protégé Tomislav Karamarko, now the Minister of the Interior, organised a meeting between Pavic and Kutle. A deal was allegedly reached then that Pavic would pay Kutle 700 thousand euro a month. Pavic allegedly abided by the deal only two months, and then stopped paying him on account of investments into real estate. Kutle then waited for a time, and then initiated a new round of talks, which should reach their culmination at the start of October.

In April of 2009 the two were already engaged in intensive negotiations, and leading the negotiations on Kutle's behalf, among others, were the lawyers Mladen Dragicevic and Mladen Gajski. The Kutle and Pavic negotiating teams met not only in Croatia, where for a time they held negotiation sessions at Zagreb's Regent Esplanade hotel, but also abroad. Also taking part in the negotiations were the representatives of German based WAZ company, and they were shown documentation on the basis of which Kutle is seeking 25 percent of EPH. Kutle had initially been willing to accept an ownership stake in EPH, but this option turned out to be unrealistic. Kutle was interested in an ownership stake in EPH in order to bolster his social standing, as he had over the past years been under planned attacks from some EPH publications, probably with the intention of weakening Kutle's position and of creating media pressure that would result in Kutle once again finding himself behind bars. When Pavic said that he intended to pay him out, he began a frantic search for the money needed to see through this sensitive operation. He was in fact looking for people to pay Kutle instead of him.

In return these people were to get half of Pavic's stake in EPH, i.e. 25 percent of the company. Nacional has learned from business sources that Pavic back in the spring contacted at least two addresses inquiring whether there was a possibility that someone other than he pay Kutle out. First he discreetly offered this to Split-based businessman Zeljko Kerum. He allegedly responded favourably to the initiative, but asked Pavic to be patient because of his political involvement in the local elections. People close to Kerum have told Nacional that the only thing unclear in the matter is how Kerum would finance this. Nacional has also learned from business sources that Pavic made the same discrete offer in the spring to Croatia's leading businessman, Ivica Todoric. Pavic and Todoric have for some time already collaborated at various levels and their continued collaboration would raise no eyebrows.

And while in a time of recession Todoric too would be hard pressed to come up with the money to buy up an ownership stake in EPH, this scenario was allegedly directly opposed by then Prime Minister Ivo Sanader. Well-informed business sources have confirmed for Nacional that Sanader was not well disposed towards any further expansion of the Agrokor company and other Todoric companies linked to it in Croatia. Sanader's position was backed by claims that Todoric was present as an owner in too many business sectors. It is possible that Sanader's opposition to Agrokor taking a stake in EPH had other reasons, and these could be some connections to Robert Jezic. Jezic is allegedly championing Sanader as the future co-owner of EPH, which should guarantee the continuity of Sanader's influence on Croatia's leading publishing house. In early July Pavic sent his director Stipe Oreskovic to the national electric power authority HEP with the mission of getting to the money there.

Sources close to HEP have confirmed for Nacional that Oreskovic went to the meeting with former Government spokesman Ratko Macek, who has worked as a lobbyist for years, and whose forte was his closeness to former Prime Minister Ivo Sanader. The meeting was held in the morning hours of the first day of July, at the HEP headquarters, at Oreskovic's initiative. According to the information from sources close to HEP, Oreskovic offered the, until recently, CEO of HEP Ivan Mravak that HEP buy the EPH building on Koranska Street, some one hundred metres from the current headquarters of the national energy company. As the construction of a new HEP headquarters on Kupska Street was halted on the long term as a result of a cave-in on the construction site two years ago, Oreskovic's idea was that HEP back out of the project and purchase the EPH building on the neighbouring street. In one version, Pavic sought 220 million kuna for the building, which about covers the amount Pavic owes Kutle. Mravak rejected the offer, and he was later allegedly visited on several occasions by delegations from EPH who said that there would be negative write-ups about him, which could be stopped if the transaction in question was seen through. As of a few weeks ago HEP has found itself under the harsh scrutiny of EPH periodicals, who spent days covering Mravak's malversation in HEP. The number of articles published far surpasses the significance of the revelations published, and the entire campaign subsided only after Mravak was sacked. Kutle has so far restrained himself from undertaking direct legal action and an open confrontation with Pavic, partly because he is convinced that Pavic in some inexplicable way indirectly using the authorities of Chief State Attorney Mladen Bajic. Kutle is convinced that Pavic back during this summer used his social position to demand of then Prime Minister Sanader that state institutions help protect him from Kutle's claims against him.

In this scenario Pavic would be helped by carefully planned judicial pressure on Kutle, and that happened this summer when Kutle was arrested preventively and without procedural grounds in southern Croatia in order to prevent him from leaving the country ahead of the reading of the verdict in the trial on the malversation in the Gradski podrum company. Kutle has had serious legal problems for years, and they are the legacy of his way of doing business in the 1990s, when political backing saw him take power in a vast number of companies, and then to extract money from some of them using questionable means. Miroslav Kutle's 1990s business model contributed to serious economic problems in Croatia, and the final bill for the expansion of his operations was paid for by the employees that found themselves out of work. As a result it is hard to speak today of Kutle in a positive light, regardless of the fact that he has maintained a low profile over the past years and developed new business ventures. There are nine trials ongoing against Kutle, and the total damages he is charged with in these proceedings amounts to some 500 million kuna. Kutle has already been in police detention, and has been convicted of criminal activity at the Tisak company, although that case is under retrial. In the Grupo scandal, Kutle and Pavic, together with film director Vinko Grubisic and politician Ivic Pasalic are suspected of a joint criminal enterprise aimed at gaining control of the media, but the proceedings have never gone to court. The protagonists have denied the allegations, but have been settling their secret partnership relations for years.

MEETING ON CVJETNI SQUARE Stipe Oreskovic and Ratko Macek: allegedly the two were offering Mravak the EPH building
MEETING ON CVJETNI SQUARE Stipe Oreskovic and Ratko Macek: allegedly the two were offering Mravak the EPH building During that period there were attacks against Kutle and Pavic, their close aids were shot at, and over the past few years their relations have slowly cleared up. Kutle has for some time now been trying to collect on his stake in EPH, and as these negotiations neared their end some of the court action against Kutle picked up in its pace. What objective observers find hard to see as such, Kutle sees as Pavic's efforts to render his negotiating position more difficult. Ninoslav Pavic is an influential newspaper publisher who has developed EPH as a respectable company in Croatia. Pavic enjoys a significant amount of social influence and has even greater ambitions. In developing his publishing empire he has worked with many controversial figures, but in spite of it enjoys a measure of social standing. And while their reputations as businessmen differ, that does not mean that Kutle's claims towards Pavic are not legitimate. Little is said f them only because their relations have always lacked transparency. That could change soon, and in this atmosphere the question that arises is who will in the mean time become a collateral victim of their unresolved relations.

Secret stakes

That Miroslav Kutle is one of the secret co-owners of EPH has been known since the end of the year 2000, when the Republika daily broke the story on the Grupo affair and published the contracts on secret co-ownership of the publishing house. Among the secret partners, hidden behind coded names, was Kutle, and also mentioned in this context along with Ninoslav Pavic was Vinko Grubisic, and a person known to all of the other co-owners, believed to be Ivic Pasalic.

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