Investigation 25 Jan 13

Jeremic Faces Questions over Procurement Violation

Two state institutions led by Vuk Jeremic engaged in dubious practices when buying plane tickets from the same travel agency.

Bojana Barlovac
Vuk Jeremic, Photo by Pietro Naj-Oleari/European Parliament

Serbian Foreign Ministry officials flew round the world on business with a Belgrade-based firm that the ministry had hired illegally, state auditors say in a report for 2011.

The ministry at the time was headed by Vuk Jeremic, now President of the UN General Assembly.

Over the past two years another state institution, the Tennis Association of Serbia, also headed by Jeremic, also hired Aeroklub, BIRN can reveal.

The criteria by which Aeroklub was chosen as a partner for the ministry remain unclear. What is known is that the small travel agency secured contracts worth about €1 million over the past two years from two state institutions, both headed by Jeremic.

Serbia’s State Auditors have for years cited violations of public procurement laws as one of the biggest problems facing state institutions.

The 2011 report, which the State Audit Institution, DRI, published on December 26, said illegal acts in public procurement in 122 audited entities had a value of about 47 billion dinars (about €413 million). 

Auditors found the worst irregularities in terms of travel expenses in government ministries in 2011 in Jeremic’s ministry.

A senior member of the former ruling Democratic Party, he ran the ministry from 2008 until the party lost power in the May 2012 elections.

The report said that the ministry had spent 194,856,000 dinars (about €1.7 million) on business trips that year.

The 2011 budget, in Article 7, Paragraph 422, set aside 114,504,000 dinars (around €1 million) for Foreign Ministry travel.

The amount was raised to 134,560,000 (about €1.2 million) in the budget revision of September 18 2011.

After state auditors checked 87.51 per cent of the total amount listed for trips to foreign countries, they found that most of the tickets purchased were for business class.

Photo by John Creasey Flickr

The ministry bought the tickets through Serbia’s national carrier, Jat Airlines, and through Aeroklub, but the auditors said the irregularities were confined to Aeroklub.

“In the period from 01/01 to 31/12/2011 payments were made to the company ‘Aeroklub’ Ltd. from Belgrade totalling 42,433 thousand dinars [about €360,000] for invoices without a signed written contract and without a public procurement procedure,” the report said.

Radoslav Sretenovic, chair of the DRI, told BIRN that the ministry broke two laws in purchasing tickets through Aeroklub: the 2009 Law on the Budget System and the 2009 Law on Public Procurement.

Under the Law on the Budget System, Article 56, budget beneficiaries are obliged to act based on signed contracts.

The Law on Public Procurement, meanwhile, stipulates that all purchases in excess of €3,300 must go through an open public tender.

“An open public procurement of airline tickets should have been conducted,” Sretenovic told BIRN.

The ministry failed to respond to BIRN’s questions concerning the criteria by which Aeroklub was chosen as a partner, despite several phone calls and an email containing questions.

A source in the Ministry told BIRN that the mood in the institution was panicky when the auditors arrived last March to examine the paperwork.

The mood now is chastened, since Ivan Mrkic, of the Progressive Party, took over the ministry, following the May general elections, the same source added.

“The new set of people did not want to make the same mistake [as Jeremic’s staff], so they have called a tender for aeroplane tickets,” the source continued.

Numerous efforts to contact Ivan Novcic, the 40-year-old director of Aeroklub, have drawn a blank.

According to Serbia’s business registry, APR, Aeroklub Ltd has a staff of only eight. Novcic is cited as sole owner of the firm, which is registered at Bulevar Mihajla Pupina, 87.

However, only a residential building with apartments appears to exist at that address, and BIRN has since learned from Aeroklub that they are based at Bulevar Umetnosti, 2A. The travel agency does not have a website.

Radoslav Sretenovic, Photo by Media Centar

Tennis club tie:

The Foreign Ministry is not the only state institution connected to Jeremic with which Aeroklub has conducted business.

In 2011 the firm won the tender - as the only bidder - to purchase travel tickets for the Tennis Association of Serbia, TSS.

The fact that only one bidder applied for the contract appears unusual, as a public tender was carried out and the so-called “open procedure” allowed all interested parties to apply.

In September 2011 Aeroklub and the tennis club signed a contract for 40,000,000 dinars (about €360,000), almost the same amount that Aeroklub got from the Foreign Ministry the same year.

Dusan Orlandic, director general of the Tennis Association, told BIRN that he knew nothing about the deal and that the association had never had problems in the past with procurements procedures. To avoid any irregularities, they had asked the Serbian Sport Association to call a tender, Orlandic said.

Slaven Radonic, in charge of procurements for the Sport Association, told BIRN that two companies in 2011 bought tender documentation for the bid.

One was Aeroklub, while the other was a firm called Odeon Plus Travel and Service, which later pulled out.

Misa Rovic, Odeon’s director, told BIRN that they dropped their bid after hearing rumours about the Tennis Association’s finances.

“We have to take into account the creditworthiness of our customers,” Rovic said, refusing to go into details about these reports.

The Tennis Association and Aeroklub drew up a similar contract for a similar amount, namely 40,000,000 dinars, in July 2012.

The travel agency again was one of two firms to buy tender documentation, and again it was the only actual bidder.

The other firm that bought tender documentation this time, the Belgrade-based Intertravel travel agency, failed to apply for the contract.

Ivan Markovic, Intertravel’s chief of finances, said that colleagues working on the case had stopped working for them at the time, so the firm failed to apply to the tender in spite of having bought the documentation.

A source in a travel agency that works for a number of state institutions told BIRN, on condition of anonymity, that key players in the field often reach silent agreements with state bodies.

“Everyone [in the travel agency world] knows who is doing business with whom, so it is unlikely to expect a random travel agency to apply for a tender,“ the source explained.   

The timing of Aeroklub’s businesses with the Tennis Association of Serbia corresponds with the timing of Jeremic’s chairmanship of that association.

As a major tennis fan with close ties to the family of top world player Novak Djokovic, Jeremic has been acting head of the Tennis Association since January 2011, a post to which he was officially appointed in November 2011.

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