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Investigation 14 Apr 15

Drugs, Diamonds and Bullets: Balkan Arms Firm Linked to Criminal Investigations

The Montenegrin government sold its multimillion euro defence firm to an Israeli-Serbian consortium linked to businessmen embroiled in criminal investigations into alleged drug smuggling, money laundering and arms trafficking, BIRN can reveal.

Ivan Angelovski and Dusica Tomovic
BIRN
Belgrade, Podgorica
Serge Muller
Photo by: Rex Mining

Corruption, money laundering, unpaid bills, illegal arms sales to Libyan Islamists and involvement in a cocaine smuggling ring – these are just some of the allegations that have been made against controversial businessmen linked to the privatisation of one of the Balkans’ most powerful arms dealers.

Montenegro Defence Industry (MDI) was sold on March 4 to Belgrade-based CPR Impex and Israeli ATL Atlantic Technology Ltd for 680,000 euro without fanfare.

An investigation by the Balkan Investigative Reporting Network (BIRN) has since  discovered how a Belgian arms and diamond dealer Serge Muller was arrested just hours after leaving the signing ceremony in Podgorica as he attempted to cross into Albania.

Multiple sources have told BIRN how Muller plays a leading role in the Israeli firm and MDI’ privatisation.

However, ATL and its partners deny that Muller, who is suspected of cocaine trafficking and money laundering by the Belgian authorities, is officially part of the deal, although they concede that he visited MDI three times in the past year  “as a friend” of ATL and attended the signing ceremony.

Petar Crnogorac, the owner of CPR Impex, faces his own legal problems after it emerged last week that the UN was investigating whether his firm Tehnoremont, a subsidiary of CPR Impex, and MDI broke an arms embargo by exporting weapons to Libyan Islamists. Crnogorac argues the deal never took place.

End of the party

A glitzy ceremony to mark the sale of MDI at the Hotel Podgorica on March 4 was ditched without explanation at the eleventh hour, with guests instead invited to attend a low-key celebration held in a drab office at the Privatisation Agency’s headquarters.

Who is Serge Muller?

Serge Muller made his name in the diamond business in Belgium, joining his family company S. Muller and Sons Diamonds NV, a famous Antwerp-based firm, decades ago.

For years, he dealt in diamonds across the world - from Canada to South Africa – building up considerable wealth and an international network of companies.

His best known company, Rex Mining, was incorporated in 1990 in Canada, with a licence to trade in diamonds in Belgium and shares in a mine in South Africa and Sierra Leone, a country infamous for so-called ‘blood diamonds’ - illegally mined gems traded for weapons destined for use in brutal civil wars.

“We have never made a direct connection between Muller and ‘blood diamonds’,” said Salvatore di Rosa, Belgian journalist and co-author of the book Black Diamond, which investigated the illegal trade in the gem. But Di Rosa added that it is likely Muller had, perhaps unwittingly “done business with people who were dealing with them”.

It was the deal in Sierra Leone that brought Muller to the world’s attention.

Muller’s role in the Sierra Leone murky diamond trade role was documented in The Heart of the Matter, a seminal report by NGO Partnership Africa Canada which brought the issue of blood diamonds to the fore in 2000. According to the report, Rex Mining worked on the edge of the diamond business, providing an “anarchic element” to the industry.

Muller was also involved in supplying weapons to Sierra Leone. In 1998, he sold engines, parts and ammunition for the state’s only combat helicopter, which the government used to fight the Revolutionary United Front (RUF), Sierra Leone’s rebel army, in an eleven-year war from 1991 to 2002.

He is cited in a Washington Post article published in 1999 as saying that “the arms deals were unrelated to Rex's Mining activities”.

But it is widely believed that the weapon's job was linked to concessions in the Zimmi and Tongo diamond fields.

According to Rex mining’s annual reports, which are still available on its website, the war brought serious security problems for the firm’s mining activities. Then in 2003 and 2004, the government of Sierra Leone cancelled leases claiming that Rex Mining did not comply with the conditions of the original agreement.

Muller failed to inform his Canadian shareholders of issues related to the licence and, in 2009, the Ontario Securities Commission ordered him to resign as director of Rex Mining for a 10-year period and pay a 40,000 Canadian dollar costs to the court.

He returned to Sierra Leone in 2012, as elections loomed, again supplying the government with weapons. Another of his Sierra Leone companies, Amylam, sold Chinese weapons worth $5m to the paramilitary police structure - Operational Services Division. The deal raised concerns over whether the weapons would be used in securing election victory for the president Ernest Bai Koroma and drew criticism from the UN, although it was not illegal.

Amylam was also embroiled in a court case in South Africa over the supply of allegedly poor quality weapons.

His business associate Petar Crnogorac told BIRN that prior to his recent arrest in Montenegro, he had been questioned by the US Drug Enforcement Agency and Belgian police.

“His lawyers told us that Mr. Muller was interviewed by Belgian police in his Swiss home in August 2012 when he gave detailed information about all of his professional activities,” he said

“Also, of his own volition, he went to the USA to be interviewed by special agent Michael Menzer of the Drug Enforcement Administration.”

Court documents from Belgium obtained by Salvatore di Rosa show that Muller’s firm Rex Mining was linked to an alleged major cocaine smuggling case.

The alleged traffickers were freed on appeal, but Muller was listed as an “interested party” and it emerged that police found a 10-carat pink diamond worth 500,000 euros in a safe linked to the group.

It also emerged that Muller had lent the leading member of the cleared group, named as Bruno M, 1m euros.

Muller was also renowned for his sponsorship of the Diamond Bullet, a Flemish literary prize for the best Dutch language crime novel.

His story could easily form the plot of one of the many page-turners which he has helped to promote in the past decade.

The final twist in this real-life tale remains unwritten.

But the subdued event had a dramatic twist when Muller was arrested just hours after the meeting.

Muller, a well-known figure in Europe’s diamond capital of Antwerp, had left the Privatisation Agency’s offices with Crnogorac’s chauffeur-driven car.

The Serb was due to be dropped at the small Montenegrin airport at Tivat while Muller was to be driven across the Albanian border to Tirana to catch a plane to Israel, his base in recent years.

Muller, 59, never made the flight as Montenegrin police officers arrested him on the basis of an Interpol Red Notice issued from Brussels the previous day.

A former pillar of Belgium’s diamond trading community, Muller has previously attracted much controversy over his involvement in mining the blood-soaked diamond fields of Sierra Leone and questionable arms deals [see profile].

He is now in custody in Podgorica awaiting the outcome of an extradition hearing that could see him handed over to Belgian prosecutors to face charges of participating in a cocaine smuggling ring, having links to organised crime and money laundering.

“The arrest warrant against Muller said that he was suspected of criminal offences of ‘participation in a criminal organisation, illegal drug-trafficking and money laundering, punishable under the Criminal Code of the Kingdom of Belgium’," the Podgorica High Court told BIRN.

An Antwerp-based court official with knowledge of the case told the Balkan Investigative Reporting Network (BIRN) it centred on alleged cocaine shipments from South America to Antwerp and suspected money laundering.      

According to the source, judge Bruno De Hous “is investigating all Muller's activities in which he
earned, or could have earned and laundered dirty money: diamonds, weapons and drugs”.

Muller is also accused of attending a meeting in Chile between members of drug cartels and a member of the Colombian terrorist organization FARC, according to the same source.

Muller, who denies all the charges, can be held for up to six months in Montenegro but his lawyer told BIRN that the evidence presented by Belgium was “poor” and he hoped his client would be released soon. An extradition hearing is expected later this week.

Muller: ‘The man behind ATL’

ATL Atlantic Technologies is a major Tel Aviv-based arms company established in 2009.

Its sole owner and CEO is Israeli Agmon Shaked, according to official Israeli documentation, but BIRN’s investigation has discovered the firm is closely tied to the powerful figure of Muller, who has made repeated journeys to MDI on the firm’s behalf in the past year, it is claimed.

Little is known of Shaked apart from details contained in a small-claims court case in Tel Aviv in 2014. The 40-year-old was found to have left a rented flat – his home according to ATL Atlantic Technology’s official registration papers – without paying his bills and was ordered by the judge to settle up.

But numerous sources and official documents suggest that Muller, who has been involved in the arms trade for at least 15 years, is at the very least a close associate of Shaked and ATL.

Muller was officially joint-owner of ATL’s Bulgarian subsidiary, ATL Bulgaria, for more than a year to June 2014 when he offloaded his shares, according to records from the Bulgarian company registry.

ATL’s website also listed an office in Antwerp’s Diamond Exchange Building, the address of several of Muller’s companies, according to an investigation by a Belgian journalist in 2012. The address was later taken down.

And a Serbian military expert, who asked to remain anonymous, told BIRN that Muller was known in arms circles to be ATL’s “financier”.

Despite his disappearance from ATL’s paperwork and website, BIRN has learned that he attended MDI’s offices three times on behalf of the Israeli firm with CPR Impex owner Crnogorac.

In an interview with BIRN, Crnogorac first admitted that Muller is “the man behind ATL”. However, during the meeting he received a telephone call after which he insisted Muller was simply a friend of the firm.  

“Mr Serge Muller is in the same work as we are, he has important businesses, he’s very influential and as such he’s a respectable member of the Jewish community,” Crnogorac later explained in a statement. “ATL Atlantic is completely run by Mr Agmon Shaked, who was involved in negotiations on buying MDI, and who eventually bought this company along with me.”

However, a senior, well-placed source at MDI told BIRN Muller was presented as “the boss” of ATL during the three visits to MDI made last year.

Crnogorac refused to say which company Muller represented in these meetings and rejected claims he was introduced as “the boss”.

“How can anybody know what we discussed?” he said.  “There were only three of us in the office - Muller, [MDI director] Zoran Damjanović and me. No one else knows what we were talking about.”

Damjanović, director of MDI, initially confirmed that Muller visited MDI’s offices in Podgorica as an ATL Atlantic representative but later said that Muller was present as “a friend of the Tel Aviv company”.

Muller’s son, Benjamin Muller, who met BIRN at CPR Impex offices in Belgrade, declined to comment.

ATL and Shaked did not respond to our requests for a comment while BIRN was unable to ask Muller directly about his involvement with the Tel-Aviv firm.

The Libyan link

MDI’s Serbian owner CPR Impex is facing its own legal woes.  

The Belgrade-based weapon trading firm established in 2005 has exported arms to all corners of the world.

Its owner and CEO, 35-year old Petar Crnogorac, is the son of the former marketing director at Zastava Arms, the state-backed weapons factory which produces the Yugoslav version of the AK-47.

Crnogorac was arrested in July 2014 by Serbian police on charges of abuse of office over a series of military tenders between 2011 and 2013 to buy surplus army equipment during which, it is alleged, he received confidential information on other bidders.

He has been released from custody, but the case remains under investigation.

“[The] charges against me are nonsense, which is clearly proven by witnesses,” said Crnogorac.

The Serbian businessman could possibly face more serious charges this month after it emerged the UN was investigating whether Tehnoremont, a CPR Impex subsidiary, via MDI had supplied weapons to Islamist fighters in Libya. The deal was allegedly brokered in December 2014, before the privatisation took place.

Documents obtained by BIRN show that the UN Panel of Experts on Libya began a probe after it obtained a suspicious “end user certificate”, one of the key documents required to receive an export licence.  

The documents show a list of ammunition, rocket launchers and mortar shells to be exported by Tehnoremont and MDI to an official named as Khaled Sherif, apparently acting on behalf of the Libyan Ministry of Defence.

The Sherif referred to is believed to be better known as Khalid al-Sharif, a former Libyan deputy minister of defence who visited Serbia in 2013 and who has close ties to Islamist fighters.

Sharif is a former member of the Libyan Islamic Fighting Group, is known to have been detained by the CIA, and, according to the UN, “has clear links to Operation Fajr”, also known as the Islamist Libya Dawn which has set up a parallel government in Tripoli.

The UN imposed an arms embargo on Libya in 2011 to prevent further human rights abuses, although sales to the internationally recognised government in Tobruk are currently allowed if approved by the UN in advance.

Head of the panel of experts, Simon Dilloway, has requested copies of contracts, if they exist, from Serbia by the end of April in order to conclude whether the embargo has been breached.

In Montenegro, the state prosecutor told BIRN that it had also opened an investigation into the claims.

MDI and Crnogorac have rejected the allegations, saying that they have made no exports.

Crnogorac told BIRN that while discussions had been held on exports to Libya, no deal had been signed and as a result there had been no reason to ask permission from the UN.

One of the few conditions in the sale of MDI was that bidders could not have been found in breach of UN sanctions.

Middle East Arms Rush

The sale of MDI opens up stockpiles of ex-Yugoslav equipment to new customers, according to a source at the arms broker.

Rabbi’s request

The head of Montenegro’s Jewish community has unwittingly been drawn into the remarkable story behind the sale of MDI and its links to Serge Muller.

Jasa Alfandari attended the signing of the sales contract on March 4 after the Israeli embassy declined to send a representative to mark the investment of Tel Aviv-based ATL Atlantic Technology in Montenegro.

"I asked why should I attend and they [MDI] told me that the Israeli company insisted," said the head of the small Jewish community in Montenegro, which numbers around 100.

The event passed without incident and it was only two weeks later that Alfandari discovered that Muller, whom he had never met prior to the event, had been arrested just hours after the ceremony.

The news was broken in a letter from the Chief Rabbi of the Israeli town of Eilat, Yosef Hecht Rabbi, who urged him to help Muller observe the Jewish festival of Passover that began Friday, April 3 and ends April 11 this year.

With its links to the highest political echelons in Montenegro, access to Yugoslav-era weaponry and direct links to the port of Bar, MDI has played a major role in the Balkans arms industry since it split from the Yugoslav-era Yugoimport SDPR.

But the firm was struggling to maintain its staff of experts as finances were squeezed by its owner, the Montenegrin government.

MDI made the case for privatisation to Prime Minister Milo Djukanovic, who agreed to place the firm on the market.

Director Zoran Damjanović then liaised directly with CPR Impex, a close trading partner for some years, who brought ATL on board in order to meet the tender requirements of a revenue of at least 5m euro in 2013.

The consortium was, in the end, the only bidder, offering 680,000 euros with a commitment to invest a further 400,000 euros.

A high-ranking source at MDI told BIRN that the Montenegrin firm is a “small player in ATL's huge global arms business”.

“MDI and CPR [Impex] are useful as they still have access to the huge amounts of Yugoslav surplus weapons in Bosnia, Montenegro and Serbia and… Albania – tens of thousands of tonnes of ammunition and weapons which could be sold in third world countries,” he said.

MDI has previously attracted controversy for alleged links to conflict zones.

Documents published by Belgian NGO the International Peace Information Service in 2010 detail the controversial import of weapons from Zimbabwe to Montenegro, while reports in the Montenegrin press in 2012 suggested dubious deals may have been struck by MDI to export arms to Syria and Libya.

The firm has strenuously denied these allegations, claiming some of the documents are falsified. But with conflicts erupting across the Middle East – including Libya, Yemen, Syria and Iraq – it is boom time for arms dealers, particularly those in the Balkans and Eastern Europe.

Weapons expert Aleksandar Radic told BIRN these firms had access to the kind of equipment needed in these types of warzones.

“Middle East states often need cheap sources of large amounts of weapons useful for equipping units with limited skills. That kind of weapon comes from the Balkans and Eastern Europe,” he said.

Arms dealers told BIRN that western firms shied away from supplying small arms to such controversial conflicts, leaving businesses from the Balkans and former Soviet states to maintain the supply lines.

Montenegrin opposition MP Velizar Kaludjerovic called for BIRN’s findings to be investigated by the parliamentary committee on security and defence, of which he is a member.

"Question of arms smuggling from Montenegro must be thoroughly investigated because the latest affair is just one of many in the last 10 years,” he said.

“It is time to dispel or confirm suspicions on its illegal action.”

To read all the documents used by BIRN in this investigation visit our online library BIRN Source here http://birnsource.com/en/folder/191.

This investigation is produced by BIRN as a part of Paper Trail to Better Governance project.


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