INVESTIGATION BY CIN-CG AND VIJESTI PRIVATISATION OF THE MONTENEGRIN ELECTRICITY UTILITY AND DEALINGS WITH THE ITALIAN A2A- WHITHER THE BRIBES? MILLIONS SENT TO A MAILBOX IN LONDON

“The entire privatisation sale of the national Electricity Utility of Montenegro (EPCG) to the Italian A2A company, along with minority stocks of the privatisation investment funds to the Italian A2A, was directly steered by then Prime Minister Milo Djukanovic and his cabinet confidant Branimir Gvozdenovic” says Dusko Knezevic in his interview with CIN-CG & Vijesti. Knezevic’s Atlas Mont Fund had 3.8 million EPCG shares in its portfolio. Montenegro lost over €100 million in the sale of EPCG, whereas a London-based offshore company River Financial Trading Limited (whose owners remained anonymous) stashed a whopping commission.

CIN-CG & Vijesti obtained documents which show that the tender for the EPCG controlling stake of shares was a mere simulation as A2A was already privileged over other bidders in the midst of the tender process, since it was allowed to acquire 15% of EPCG shares owned by four privatisation investment funds before the deadline for submission of bids for the state owned stake.

Dusanka Jeknic as an intermediary?

“All activities on behalf of the London-based intermediary company River which charged € 7 million for brokering the sale of EPCG shares of privatisation investment funds were steered by Dusanka Jeknic. She directly talked to me about the commission that Atlas Fund was to pay to River Ltd. Her cousin Damir Dado Asovic who lived in Milan, was the authorised representative of River Ltd.“ stated Knezevic

Other minority shareholders had already claimed for a long time that top ruling party (DPS) officials were behind the whole transaction that helped the bank of the Djukanovic's family come out of big trouble. The Italian media claimed that the EPCG handover was directly agreed between Djukanovic and then Prime Minister Silvio Berlusconi during his official visit to Montenegro which took place several months before the EPCG privatisation.

This is how it all happened: River Ltd. was imposed upon investment funds as a broker to sell their shares to the pre-selected buyer, the Italian A2A. That happened in the midst of the tender for sale of the state owned shares. River Ltd. committed itself by contract to find a buyer who will pay at least €7.1 per share in return for a commission of €0.35 per share, an unusually high commission of 5% for this type of transaction. Thereby, River Ltd. netted €6.8 million.

Atlas Mont Fund sold its stock of shares for €27.5 million, Eurofond for €44.4 million, Trend for €27.7 milion, Moneta took €23 million, while HLT Fund got  €114 thousand.

Eurofond was facilitator for other funds

According to available documents, Atlas Mont signed the contract with River Ltd. via Eurofond which was under control of Vesko Barovic, a close friend of Milo Djukanovic. Barovic is also a close friend with Dusanka Jeknic, a long-time business associate of Milo Djukanovic. She was his most trustworthy person in Italy and Milan where she lived for years. Her name and the name of Djukanovic pop-up in conversations recorded by Italian prosecutors at the time when they were investigating cigarette smuggling. Barovic’s and Asovic’s names also turned up in these transcripts.

CIN-CG & Vijesti contacted Dusanka Jeknic and asked her to confirm and explain her role in the EPCG privatisation. She replied “I am not the right interlocutor for this topic, thus I cannot help you”. President Djukanovic, in turn, did not reply to our questions about his involvement. Asovic was out of reach.

According to the documents of the Securities and Exchange Commission of Montenegro (SEC), the commission was paid directly to the account of River Ltd. However, the 2009 income report submitted by River Ltd. to the British authorities has no reference to a commission amounting millions of euros. Their balance sheet shows only £24.587.

The pre-agreement already declared the winner

The murky River Financial Trading Limited is registered in Great Britain. It has changed addresses and names several times. The contract between River and the privatisation investment funds was allegedly agreed in order to find a buyer for their EPCG shares for at least €7.1 per share. Nevertheless, the subsequent paragraph states that if A2A walks out River will subsequently find another buyer. That points out beyond doubt that the agreement was rather fictive, as the buyer was already preselected and the price already agreed upon. Two months on, at the end of July 2009, A2A paid the government  €8.4 per share, which was €1.3 above what the investment funds had been paid. That raises suspicion that the “winner” also payed River Ltd. a nice fee.

The fact that Greek consortium of the state owned energy company Public Power and private company of Victor Restis offered a much higher bid of €11.1 per share didn’t matter at the end of the day. A2A already purchased the shares of privatisation investment funds and thereby secured its seat in the EPCG management at the time when the management was deciding on the best bidder for the state controlled stake. That triggered a formal complaint from Russia’s Inter Rao which was also interested to purchase EPCG shares from the government.

Removal of trace through a jungle of companies in the Caribbean

It will be up to independent investigators one day to determine who brought in River Financial Trading Limited. However, there are many murky things about the said transaction. To start from River itself it suffices to say that the company is nothing more than a “mailbox” in London and its address is W1W 7BL. Such companies usually serve to conduct hidden and fishy transactions. The most illustrious world media have already reported about its representatives which further reinforces suspicion about the said company.

When it comes to the contract between our investment funds and River, the intermediary was represented by two persons, directors Edward Petre-Mears and Sarah Louise Petre-Mears. London-based Guardian and Washington-based International Consortium of Investigative Journalists (ICIJ) published a series of articles about off-shore companies. They also reported that the aforesaid persons were running over two thousand off-shore firms. These actually serve to hide the real owners and their money transactions while they themselves only sign the papers arriving by mail. Although River Ltd. is registered in London, the seat of its representatives is the Caribbean island of Nevis. Most companies that they represent are registered in Great Britain. They were also in the focus of other global media in 2012 as the representatives of one of the largest network of fictive companies in the world. Guardian wrote the same  year that then 38 years old Sarah Louise Petre-Mears from Bradford was running one of the “biggest business empires“ in the world made of more than 1,200 companies stretching from London over the Caribbean all the way to New Zealand. Guardian wrote that the woman’s real businesses were shrouded in mystery.

Her business partner Edward Petre-Mears is of the same calibre, being a director of 1,026 companies. The firms in their business empire usually last as long as it takes to conduct a single or just a few transactions in order to conceal the real owners, property, money origin and to enable tax evasion.

The main role of this company in the EPCG deal was likely to conceal the real recipient of almost €7 million commission paid by the investment funds, as SEC documents show.  The privatisation investment funds representatives agreed to speak to CIN-CG & Vijesti but they said that they could not remember the names of River representatives. On the other hand, they say that they do remember that they were communicating in English.

Sotra cannot remember who put him in touch with River Ltd.

“I don’t remember the manager’s name of the company that we were negotiating with over the sale of EPCG shares. I do know that we spoke English and that the contract signer was an Englishman from London” says Eurofond’s director Bojsa Sotra.

“All privatisation investment funds were in debts up to their neck, most of their money was owed to the Prva Bank. The only asset that we could instantly turn into cash were the shares of EPCG. We were looking for a buyer for months and then Rived Ltd. turned up with its offer”. He claims that “some brokerage firm” put them in touch with River. “I think it was Monte Adria Broker” says he.

Monte Adria Broker was run by Damjan Hosta, a partner of Veselin Barovic. Hosta also had connections with the Prva Bank’s owner Aco Djukanovic (prime minister's brother).

“If the funds had not sold the shares before the end of the tender process (for the government owned stocks) the Milan-based company probably would not have taken part in the EPCG privatisation“ claims Sotra.

Asked whether River Ltd. was just a cover for powerful Montenegrin officials who actually took the money in the form of commission, Sotra replied that “everything is possible“ but the funds only cared to get a good price for their shares.

The contract signed by Atlas Mont on 15 April 2009, contains a statement that the deal with River is made via Eurofond. The purchase agreement was signed on 18 May 2009. It is stated that Atlas Mont shall pay €1.35 million to River Limited for its brokering services.

Radusinovic- Two foreign visitors turned up on behalf of River Ltd.

Director of former MIG Fund Dragan Radusinovic said in the interview for CIN-CG & Vijesti that the investment funds had agreed to seek the buyer together so that they could sell their stocks. He wouldn't answer who put them in touch with River Ltd. He only said that the firm’s representatives were foreigners who expounded their offer to seek a buyer. He stated that the stock market price of EPCG shares was lower than the price offered by River Ltd. Thus he believes that the funds suffered no damage because of the transaction.

In early 2009 the stock market price of a single EPCG share was around €2 even though the nominal price stood at €7.9. MIG Fund joined the River Ltd. package deal somewhat later, i.e., after the bids were opened. A2A offered €8.4 per state owned share.

Bojanic: Now it’s all clear that the deal was illegal

"A mysterious international intermediary, a high fee, the timing and manner of transaction and the price for which four privatisation investment funds sold their EPCG shares to A2A that are documented in the contract lead to conclusion that these were unlawful acts against the interest of shareholders of privatisation investment funds. A2A was given an unfair advantage over the other bidders” said Mladen Bojanic, an economic expert and the executive of E-novativa in his interview with CIN-CG & Vijesti.

The EPCG deal- salvation for Prva Bank

The EPCG deal saved not only the privatisation investment funds but also the bank of the Djukanovic brothers which was in dire straits due to many risky loans it had granted to the regime’s friends that they could not pay back. At the end of 2008 the government helped the bank with €44 million injection in the form of a favourable loan which was approved just prior to the EPCG privatisation process. Most money paid to the privatisation investment funds came via Prva Bank as well as subsequent transactions of the government and minority shareholders. The EPCG kept its money at Prva Bank. A2A also put its €96 million for EPCG capital increase on Prva Bank account for years thus enabling the Djukanovic’s brothers bank to maintain liquidity for years. Besides, Prva Bank was the exclusive escrow agent for A2A for which the Italians were paying commission to the bank.

The then executive of Prva Bank Predrag Drecun said upon finalising the EPCG handover that the deal turned the bank into the most liquid in Montenegro while the year before the bank was on its knees. Once the transaction was finalised, there was enough money in the bank to pay back the rescue loan granted to it by the government.

There were other indicators that pointed out to the government’s bias in favour of A2A. On 2 Feb 2009 the government published the tender for the EPCG stocks which was to be closed by 30 April. However, the tender process was extended in early April while the terms and conditions of the tender were also changed. Now we can see in the revealed contracts between the privatisation investment funds and A2A that the Funds were negotiating the sale of shares with River in April while the contracts were signed in May. That raises suspicion that the government, by extending the deadline, wanted the A2A to acquire the shares of privatisation investment funds before the tender conclusion.

Apart from A2A, the bids arrived from Russia’s Inter Rao (its bid was declared invalid) Norway’s NTE (which was rejected) and Greek consortium which made the highest bid.

Minority shareholders objected to the selection of A2A and instigated legal proceedings as they felt that they were at loss since the Greeks offered a significantly higher price per share. The government retorted that the Italian bid was better while the Greeks were flawed because they lacked one notary signature and did not declare how many employees they would keep under new circumstances.

Greeks give up on lawsuit and obtain Saint Stephan Island Resort in return

The Greeks announced a lawsuit, but the company of Greek tycoon Restis suddenly decided not to wage battle in courts. Instead, to the surprise of many,  Djukanovic agreed with Restis to hand him over the island of St. Stephan which was under Aman Resorts management. Mladen Bojanic claims that “all those developments lead us to believe that everything had been organised and coordinated from one place so to install A2A in command of EPCG and to discourage other bidders. I don’t believe that those masterminds cared about national interests. They only cared about their own private interests”

There is an obvious pattern of how the most important Montenegro’s assets and enterprises were sold to pre-determined partners. Millions in commissions were paid through elusive, far-away offshore companies, including in the case of the Telecom privatisation.

Had the offer from Greeks been accepted the state would have earned a lot more- €170 million

The experts believe that it would have made sense to sell jointly the stocks of the government, the funds and minority owners. However, in the cases of Telecom and EPCG, the sales were conducted separately. Thus, it can be asserted that minority shareholders in these instances suffered a loss.

The privatisation investment funds sold their stocks for €138 million in total. Nonetheless, if the price of €8.4 which was paid to the government and small shareholders was also paid to the funds they would have received €163 million.

Even though €138 milion arrived at the accounts of privatisation investment funds, the money was swiftly spent by their managers whereas ordinary citizens that invested their vouchers in the funds had not benefited from the sale.

Had A2A not been favoured and had the Greek bid been accepted (€11.1), the state, the funds and other shareholders would have received €608 million in total. That is €170 million above what A2A paid.

Goran KAPOR / Milka TADIĆ-MIJOVIĆ