Bloomberg News

Croatia Gets Boost From Graft Conviction Ahead of EU Report

November 21, 2012

Croatia’s conviction of Ivo Sanader, the highest-ranking official in the former Yugoslav region ever sentenced for corruption, helps quell criticism of the Adriatic nation’s justice system and pushes the country closer to European Union entry next year.

A district court in Zagreb yesterday found Sanader, a former prime minister, guilty of bribery and abuse of power involving Hungarian refiner Mol Nyrt. (MOL) and Austria’s Hypo Alpe- Adria-Bank International AG. Sanader, who was sentenced to 10 years in jail, will appeal the verdict, his lawyer said.

Croatia, which is set to become the 28th member of the EU in July, has prosecuted corruption cases in the past three years, targeting government officials and members of the former ruling party. The nation needs to improve its judicial system and fight corruption as it approaches a final assessment by the European Commission early next year.

“The fight against corruption is one of the cornerstones of rule of law in any country, and Croatia has made great strides in this area,” the commission said in an e-mailed response to questions yesterday, adding it has “taken note” of the verdict.

The yield on the bond maturing in 2019 declined to 4.213 percent at 2:08 p.m. in Zagreb from 4.285 percent yesterday, according to mid-pricing data compiled by Bloomberg.

International Arrest

Sanader, 59, was the leader of the Croatian Democratic Union, which ruled the country for 17 of 22 years after the end of communism in 1990. He was elected premier in 2003 and 2007, and left office without saying why in 2009. He was arrested in December 2010 in Austria on an international warrant and was extradited to Croatia in July 2011.

He was indicted for allegedly taking a bribe of 10 million euros ($12.7 million) from Hungary’s largest refiner Mol Nyrt. between 2008 and 2009, when he was premier. The judge found him guilty of taking 5 million euros. In exchange, he arranged with Zsolt Hernadi, Mol’s chief executive officer, to give the Hungarian company controlling rights over INA in a January 2009 shareholding agreement, Judge Turudic said.

“The message here is that crime doesn’t pay and that the perpetrator will be punished,” Turudic told Sanader after reading the verdict yesterday. “Since you committed crime as a high-ranking official, this verdict is a message to all the bearers of political power.”

Mol Response

Mol “categorically rejects” the accusations, which were formed as part of a “political case” and were lacking evidence, crime or motive, the company said in a statement on its website after the verdict.

Sanader was also found guilty of taking a bribe of 3.6 million kuna ($610,000) from the Austrian bank between 1994 to 1995, when he was deputy foreign minister. In exchange, the Croatian government at the time took a loan of 140 million Austrian schillings ($14 million), the Alpine nation’s currency at the time, from Hypo bank, the court said.

Sanader is also being tried, along with his former political party, on bribery and corruption charges in another case, related to allegedly siphoning money from state companies. The party is accused of illegally gaining 31.6 million kuna, while Sanader received 15 million kuna, prosecutors have alleged.

“Obviously yesterday’s verdict is a positive sign showing that the judiciary in Croatia has been reformed and that Croatian courts feel up to the task of fighting high-level corruption cases,” Steven Blockmans, at analyst at the Center for European Policy Studies in Brussels, said by phone.

Sanader also has to return 5 million euros and 3.6 million kuna of received bribes, and pay court costs of 36,000 kuna, the court ruled yesterday.

To contact the reporter on this story: Jasmina Kuzmanovic in Zagreb at jkuzmanovic@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net


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