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News 11 Oct 17

Croatian Parliament to Investigate How Agrokor Failed

After an agreement between the two biggest political parties, the Croatian parliament will set up an investigative committee to shed light on what happened to fallen economic giant Agrokor.

Sven Milekic
Agrokor's logo at the company headquarters in Zagreb. Photo: BETAPHOTO/HINA/Lana SLIVAR DOMINIC/MO

The Croatian parliament on Wednesday will support the establishment of a special investigative committee tasked with revealing what happened to fallen private company Agrokor and its commercial group.

The committee, made up of MPs from both the governing and opposition parties, will start work on October 30 and will investigate how the whole Agrokor group was created in the 1990s, with a special emphasis on the role of politicians and state institutions during more than 20 years of its existence.

It will also investigate the role of various politicians and institutions in the passing of the Law on Procedures for Extraordinary Management in Companies of Systematic Significance, which was adopted in April, enabling the state to take control over the company.

The committee is an initiative of the opposition Social Democratic Party, SDP, which reached an agreement with the governing Croatian Democratic Union, HDZ on the issue on Tuesday.

However, SDP MP Arsen Bauk refused to comment on the matter to BIRN, explaining that the committee’s tasks are outlined in the SDP’s proposal that was filed to parliament in July.

The proposal says that the task of the committee is to “establish the facts regarding the circumstances of the emergence of the Agrokor group… the emergence of its business problems, especially [its] debts towards suppliers and other creditors; the role of regulatory bodies on markets connected to Agrokor’s business activities and the circumstances that led to the activities of the government” in proposing to assert state control over the troubled company.

The goal is to establish if the government, in passing the law allowing the state takeover of Agrokor’s management, “worked to protect the property and national interests of the Republic of Croatia in the best possible way”.

The committee is being set up after Agrokor’s state extraordinary manager Ante Ramljak disclosed on Monday that he filed criminal charges against the former management of the company, led by its owner and founder, Ivica Todoric.

Agrokor’s biggest creditor, Russian state-owned Sberbank, also filed criminal charges against Todoric in August.

Ramljak filed the charges after financial reviews of the Agrokor group’s activities in 2015 and 2016 showed large-scale irregularities in the company’s financial books.

The review showed that the former management showed a profit of 160 million euros in 2015, but the group actually ran up losses of 480 million euros.

The former management also inflated the capital worth of Agrokor’s subsidiary companies in 2015 by some 1.2 billion euros.

The financial report showed that the group’s debts are 1.9 billion euros bigger than its capital. The group’s value fell by 2.9 billion euros in 2015 and 2016.

The report also showed that the former management did not show 520 million euros of financial obligations – debts and loans – and 300 million euros of operative and financial costs in its previous financial records between 2010 and 2015.

In the same period, around 200 million euros of loans were showed as the company’s money.

Ramljak also admitted that around 133 million euros of company’s money were spent for the private purposes of the Todoric family.

A government statement on Monday said that the accounting irregularities “could point to potentially illegal activities”.

Dinko Cvitan, chief state attorney, confirmed last week that the reports would be important for state attorney office’s work on the Agrokor case, but there have been no interrogations so far, no arrests made or indictments filed.

On Monday, Ramljak also confirmed that “a lot of private lawsuits” from former and current Agrokor stock owners can be expected against Croatia, which now runs the company, because the company was listed on the stock exchange based on irregular financial reports.

The company's role in the economy of Croatia is massive, with revenues of 6.5 billion euros in 2015 – almost 16 per cent of Croatia's total GDP – and around 40,000 employees.

Agrokor employs another 20,000 people in neighbouring Bosnia and Serbia, while it is believed that suppliers and companies for the Slovenian retailer Mercator – which Agrokor bought in 2014 – employ around 70,000 people in Slovenia as well.

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