Asking himself in public whether there was anyone in Austria with an interest in protecting Austrian bankers who helped rob Croatia, President Stipe Mesic has again broached the issue of the role played by Austrian bankers in the misappropriation of Croatian money meant for the defence effort, part of which wound up on secret bank accounts held by Croatian clients who opened these accounts there in the 1990s. At the end of last week Stipe Mesic said publicly of the issue: "There are many interested in not having Zagorec extradited. There is excitement in Austria. If someone can illegally record conversations and claim that the order came from the Austrian secret service, the question is are they protecting someone in Austria wanted by Croatia or are they protecting Croatian interests". The roundabout suspicious in the dishonourable role of Austrian banks in the misappropriation of money for the defence of Croatia was expressed somewhat prior to Stipe Mesic by Chief State Attorney Mladen Bajic.

In a request for legal assistance in the Zagorec case he asked on 15 March of his Austrian colleagues that they freeze all of Vladimir Zagorec's bank accounts in Austria, that they forbid him of having free use of real estate he owns, or is owned by his companies, and that they propose to the Austrian tax authorities that they investigate Zagorec's business affairs and the way in which he acquired his property. Bajic asked his Austrian colleagues to react as quickly as possible, in order to leave Zagorec as little time as possible to, in collaboration with Günther Striedinger, the former head of the Hypo bank in Klagenfurt, try to destroy and harmonise documentation with the documentation in Croatia. The request for legal assistance from Austria was signed by deputy Chief State Attorney Lazo Pajic.

The integral contents of that document reveal that the "Gem Affair", for which Zagorec first found himself in legal straits, served the State Attorney's office only as a basis for a significantly wider processing of all of Zagorec's suspicious business activities, above all lucrative construction projects, for which the State Attorney's office suspects that they are a front for the systematic laundering of money in cooperation with the Hypo Alpe Adria bank.

The Austrian State Attorney's office announced not long afterwards an investigation into Zagorec and his associates at the Austrian Hypo Alpe Adria bank. It is not yet known what they have undertaken since then. In the request for legal assistance the State Attorney's office asked of its Austrian colleagues that they submit them data on several accounts opened at various Austrian banks. The first account is in the Kärntner Sparkasse in Klagenfurt. Both are coded "Dragica". The State Attorney's office has documents from which it is evident that 2,813,837 US dollars were deposited to that account from 11 September 1991 to 16 April 1992, from the account of the Unterstützungsfonds Kroatien at the Bank für Kärnten und Steiermark in Villach.

The other account is in the Bank Austria in Graz, Am Eisernen Tor 1. the accounts are numbered 760-128-435/00/200 Aritmo Inc. Companies House, Tower Street, Ramsey/Isle of Man and 095-01117/00 Aritmo Inc. Conutry of New Castle, Wilmington, Delaware 1982. According to what the State Attorney's office knows 10.5 million dollars were deposited on that account from July 1994 to May 1996. The money was deposited by RH Alan, then led by Vladimir Zagorec. There is another account also at the Bank Austria in Graz numbered 760-128-404/00/200. This is the account of the Edokom Company from the British Virgin islands. On it, according to what the State Attorney's office knows, RH Alan remitted 5 million dollars in 1995. The last account is at the Bawag bank. This is the account mentioned by Hrvoje Petrac in his statement at a court hearing, and which allegedly had 35 million dollars on it.

The State Attorney's office asked its Austrian colleagues when and at whose orders these accounts were opened and closed, and what persons were authorised to have access to the money on these accounts and who had powers of attorney. They also sought information on the transactions made on these accounts, from which deposits and withdrawals on these accounts could be seen, and the overall transactions on these accounts. And finally they sought information that would help see based on what deposits and withdrawals were made on these accounts, what legal and natural persons did so and with what amounts. The State Attorney's office also asked that it receive any other existing documentation that could help in reconstructing the flow of money on these accounts.

The State Attorney's office, by all accounts, suspects that money from these accounts went to some accounts in Lichtenstein, opened by, among others Günther Striedinger. In the request for legal assistance there is a detailed description of the connection between Striedinger and Vladimir Zagorec. Lazo Pajic wrote the following of the relationship: "We have information that Zagorec by way of various companies in Croatia from 2001 to the present purchased construction-zoned land for the construction of business-commercial-tourism buildings, and that construction has been launched in Zagreb, Pula, Rovinj, Dubrovnik and Hvar, and that these projects are financed by Hypo Alpe Adria Bank International AG of Klagenfurt in the total amount of 260 million euros. The loans were approved on the basis of deposits, which is concealed by the claim that the basis of the approval were the projects, without any kind of monetary deposit or other property submitted to the bank's deposit. We have learned, however, that it was in fact the money Zagorec misappropriated while serving as assistant defence minister that was used as the deposit in Austrian banks. This follows from the statements of persons who claim that the executive director of the cited bank, Striedinger, together with his relative, the tax advisor at the cited bank, Gabriel Hermann, financed Zagorec's projects as they knew that he had funds deposited in Austrian and in the Duchy of Lichtenstein.

For the moment we have information that Hermann and Striedinger opened companies in Lichtenstein. One of these was the Sambuca Establishment with an office in Vaduz, on whose account money from Croatia was deposited and that money served as a deposit based on which loans were approved by the cited banks for the Sambuca Company and companies in Croatia. These actions indicate a grounded suspicion that classic money laundering is in question, by the deposit of money gained by the abuse of Zagorec's position and authorities in accounts abroad unknown to us. Then, allegedly without deposits, the Hypo bank pays out a loan to Zagorec's companies, these companies buy land in Croatia, and after the conclusion of these projects the money of criminal origin is "laundered", and is returned to the system as legal funds after the sale of the real estate on which these commercial and residential buildings were built

If the suspicions of the State Attorney's office are shown to be correct, the Hypo group above all would find itself in the centre of a money-laundering scandal involving money stolen from the defence of Croatia. The bank's officials certainly knew what the possible risks of that turn of affairs would be, and have already done away with the compromised bank officials - Güenther Striedinger above all. Only a few weeks after it became public knowledge what the contents of the request for legal assistance from Austria were, it was announced that the entire Hypo Group had a new owner. The Hypo group was purchased for more than 3 billion euros by the German Bayerische Landesbank. Experts estimate that the reasons for the sale of the bank should be sought in part in salvaging the results of the negative publicity coming from that and other scandals that have plagued the bank's operations. With the takeover of the Hypo group the Germans have invested into a bank whose assets have reached 30.6 billion euros and have increased from the year before by 26 percent. It was assumed that this had been done also because of the scandals that had begun to undermine the bank's reputation. This relates above all to last year's discovery of 300 million euros of losses, on which account a parliamentary investigation had been led up to a few days ago in Austria. Partly as a result of this the director of the Hypo bank in Croatia, Heinz Truskaller, was fired. The parliamentary investigating commission also questioned Vladimir Zagorec on 2 July, but he was unwilling to answer questions concerning his dubious dealings with the bank. He justified this with the fact that judicial proceedings had been launched against him. A few days before Zagorec, Striedinger also faced the parliamentary commission. He cited the obligation to preserve bank secrets.

The Croatian State Attorney's office had already a few years ago shown great interest for the fate of money that had been spirited out of Croatia and which ended up on Austrian bank accounts. Five years ago, at the height of the fierce conflicts between the Grupo media cartel, Miroslav Kutle filed for Austrian citizenship. He did so through his Austrian attorney Walter Brunner, largely doctoring his biography and glossing over his participation in al of the larger scandals in Croatia in the 1990s. With this in mind Kutle asked the justice ministry on 2 February 2002 that he be issued confirmation that he had never been convicted in Croatia. The confirmation was issued to him on 27 February by Antun Pontoni, then head of the criminal evidence department at that ministry. Although Kutle stated that he wanted Austrian citizenship because he is the owner in Austria of the Handelsgesellschaft WELL Handelsges and RA-BAU Gesellschaft companies, the situation was commented by newspapers as one in which there was a good chance that someone against whom an important and large court proceeding was being led in Croatia wanted to disappear. At the same time that the Split-based Feral Tribune wrote of it, on 11 May 2002 an article with the same key information and almost the same content appeared in the Austrian weekly Format. In the article reporter Hannes Reichmann warned of some details from Kutle's biography he intentionally left out, like ownership stakes in the Vecernji list daily and the VIP-net mobile provider.

That article in the Austrian weekly Format, however, revealed another very interesting detail, which had even then especially intrigued the Croatian police and justice department. It read that the Austrian financial authorities had information that Kutle had as much as 2 billion euros in his Austrian accounts, and that he had told a close circle of people that the money belonged to the Catholic church in Croatia. What is more, Kutle in his request for citizenship wrote that he enjoyed the trust of top church officials and stated that he would get special references from church circles. various documents were offered at the time to the Croatian authorities, and they were brought by people who offered their services and connections in Austrian financial circles, but for lucrative fees.

Not long after the publication of the story of Kutle and his ties to church money, a Croatian citizen met informally with representatives of the Austrian police and showed them copies of documents on stolen money that were already available to the Croatian State Attorney's office, but there was no way, or real occasion to try and check if these documents were authentic. The Austrian side was not surprised when it saw these documents, saying it knew of them, and that they were probably not fakes. There was an agreement in principle then to organise un informal meeting between representatives of the Croatian State Attorney's office and their Austrian colleagues. The topic of the meeting was to have been informal Austrian assistance to the Croatians and providing directives on how to formalise an official request for international legal assistance on that case. The Austrian side, at least through that informal go-between, simply did not call back with a date for that meeting.

In the meantime the stolen money has started to come back to Croatia via construction investments, above all under the auspices of the Hypo group. The protagonists of the big scandals, like Ivic Pasalic and Vladimir Zagorec, have publicly started their transformation into construction businessmen. The State Attorney's office has begun to reconstruct the flow of that money. Pasalic has shown his capital through an entire series of complicated and untransparent business loans, but is for the moment not under the investigation of the State Attorney's office. Zagorec is in a much more uncomfortable position, but after having clouded the issue with lies and manipulation with the aim of showing that his case was entirely politically motivated, President Mesic publicly indirectly singled out the Austrian banks.

Some Austrian circles consider this move on the part of Mesic to be counterproductive, because the impression one can get thanks to the headlines in the Vecernji list daily is that Mesic is sharply accusing all Austrian banks of robbing Croatian money. They feel that this kind of sweeping accusation could mobilise influential Austrian financial circles in an effort to lobby out of spite that Zagorec remains out of the reach of the Croatian judiciary. Besides, in Austrian diplomatic circles they say that the atmosphere in Austrian is such that there can be no word of anyone wishing to protect the dishonourable actions of any banker. Wide sweeping parliamentary investigations were led until up to a few days ago in Austria on banking malversation at the Bawag bank, but also at the Hypo bank. Various opposed political options locked horns through these investigations, and the Austrian press wrote of it all in detail. In this atmosphere there was much written concerning the very unusual business policy of the Hypo bank, which is actually in Austria a small regional bank, that saw very dynamic development on the Croatian market, from where it launched its operations in the area of the former Yugoslavia. Supporting the claim that there are no obstacles in Austria to the investigation of dubious banking operations the fact is mentioned that the Hypo group was sold to the German Bayerische Landesbank, even thought here had been interest for it in some Austrian banks with strong political connections. As they did not manage to purchase the Hypo group, the top management of competing Austrian banks who missed out in the transaction, certainly would not use their political influence to cover up any earlier dubious dealings by the Hypo group, says one Austrian diplomat. That is why in Austrian diplomatic circles they believe that bankers will certainly not influence the process of Zagorec's extradition to Croatia.