Salvaging Croatia’s Biggest Private Company Reveals History Of Ingrained Corrupt Practices

Corruption is the abuse of high-level power that benefits the few at the expense of the many, and when corruption occurs on a grand scale it causes serious and widespread harm to individuals and society. The terrifying thought is that corruption on a grand scale often goes unpunished, often gets lost in an uneasy but nevertheless “accepted” as a reality of nebulous political pursuits. Corruption concerns countless number of victims as its effects seep down to impoverished and/or jeopardised livelihoods of ordinary people. Whether the Croatian government’s relatively recent take-over of administration of the country’s troubled largest employer – Agrokor – will eventually reveal cover-ups of corruption on a grand scale through decades, involving perhaps some political elites of the day, is anyone’s guess at this stage but inklings of that nature have certainly got tongues wagging on city squares and town streets.

Past days have seen Russian Sberbank (largest Agrokor creditor) deputy president Maxim Poletaiv visit Croatia for meetings regarding saving Agrokor from bankruptcy. A rather telling fact that reeks of dishonesty and most likely corruption in and around Agrokor is embedded in Poletaiv’s revelation that he was being lied to for a long time, by the Agrokor’s head honcho’s (Ivica Todoric) family through presentations of incomplete accounts balances, which has led to Sberbank’s loss of trust in Agrokor.

And so, this week, the Croatian government has entered talks to save Agrokor (an employer of some 60,000 people), Croatia‘s biggest private company and employer, from bankruptcy.

Agrokor’s biggest creditor, Russian bank Sberbank, wants the Croatian government to take over the company’s loan obligations before it considers further financing of the troubled company. It goes without saying that having lost trust in Agrokor, Sberbank will seek that trust in the company (now administered by the government) be restored as trust is undoubtedly the foundation upon which Sberbank’s (or anybody’s) further support will depend.

But one’s mind does boggle – why have we not seen any action yet from the government seeking to sue and/or sanction otherwise Agrokor’s head honcho Ivica Todoric for presenting incomplete (even maybe doctored) accounts to the major creditor in the past? The case reeks of corrupt and/or fraudulent behaviour that is manufacturing likely victims (possible massive job loses) that will shake Croatia to the core. It has become evident that Agrokor’s fiscal documentation had been misrepresented with view to deceive and that spells out falsification that any government has the duty to swiftly act upon. So why is Croatia’s government not dealing with this yet? What is it waiting for?

Sberbank’s deputy president, Maxim Poletaev, said after meeting Croatia’s Prime Minister Andrej Plenkovic that future loans to Agrokor will depend “on the level of cooperation” of the government. In other words, genuine and transparent cooperation – the elements of trust – are the ingredients that have so far been lacking in Sberbank’s dealings with Agrokor and if the Croatian government demonstrate dedication to those elements of trust this may save Agrokor from bankruptcy.

An optimistic sign emerged as Poletaev said this week in Zagreb: “We had a very straightforward meeting, We talked about many issues and I think we should find a solution.”

Sberbank has said it will not provide new financing for Agrokor until an agreement is reached with the government, which has since April 2017 via extraordinary measures in order to take over the company’s administration been trying to prevent the collapse of the company and to oversee a debt restructuring.

Indeed, Sberbank’s Executive Director Herman Gref (former minister of economics and trade – Russia) has in recent days criticised Croatia’s hastlily whipped-up law “Lex Agrokor”, which enabled the government’s take-over of the company’s administration and sought that the Croatian state takes over the company’s debts, since it took over its administration!

Agrokor has accumulated an estimated $6.5 billion (5.8 billion euros) in debt, or six times its equity, while rapidly expanding its operations. It owes some 1.1 billion euros ($1.2 billion) directly to Sberbank.

The company needs new loans to pay its suppliers. If they stop delivering goods, the company, which has stores in several neighbouring countries, would have no choice but declare bankruptcy.

The Croatian prime minister sounded an optimistic note.

“We are in talks and new financing will come, probably under better conditions,” Andrej Plenkovic said.

Agrokor, under government administration, expects to complete talks with creditors on a new loan soon, the company’s crisis manager special Commissioner, Agrokor crisis manager, Ante Ramljak said on Monday.

The company received an initial cash injection worth 80 million euros (US$89.34 million) in mid-April to keep the business running. A new injection is expected to be worth up to 350 million euros.

“We’re at the end of talks on a new loan for Agrokor. You can soon expect to be given a concrete figure and names of the creditors which include both local and foreign banks,” Ante Ramljak told reporters.

“All the creditors are offered a roll-up option. It means that for each kuna offered as a new loan the creditors will be granted a senior status for each kuna or less from previous funding,” Ramljak said after talks with Russia’s Sberbank.

To draw a line under Agrokor affair, which has caused a very jittery inflation of the Croatian political crisis, one cannot but fret for Croatian national interests when a Russian bank (Sberbank in this case) (or any other foreign body for that matter) controls important aspects in solving the crisis. Will Croatian leadership be placed in the position of making compromises or allowances to Russian interests is a question that must be asked? If the answer is yes, then are we most likely looking at politically and procedurally elaborate and costly cover-ups of grand corruption that has occurred via Agrokor’s channels throughout the past years? As anticipated, much ugliness has yet to be revealed in the Agrokor saga and the grovernment’s intervention – regretfully.

Written by Ina Vukic