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Corruption in Croatia

Croatia is the European Union member with the highest level of corruption in public procurement and, along with Romania and Bulgaria, it ranks among the most corrupt countries of the EU, a 23 March 2016 survey commissioned by the European Parliament and carried out by the non-profit RAND Europe institutes shows. Croatia, Romania and Bulgaria led a group of 14 EU countries that have above-average levels of corruption, and the highest risk for corruption among public procurement contracts was observed in Croatia.

The survey showed that Croatia, Bulgaria, Romania and Latvia lose about 15 percent of GDP to corruption, and that corruption costs the EU between EUR 179 billion and EUR 990 billion in GDP terms on an annual basis.

Fighting corruption was one of the key criteria Zagreb had to meet to join the European Union. Corruption in Croatia is perceived to be pervasive in major public companies, the health sector, universities, public procurement systems, the construction sector, land registry offices and the Agency for Management of State Owned Property (formerly the Privatization fund). Foreign investors, including U.S. companies, have expressed general complaints that the level of corruption is a barrier to investment.

Corruption remains a serious problem in Croatia, but the number of high profile corruption prosecutions increased significantly in 2009 and 2010. As of early 2010 Chief State Prosecutor Mladen Bajic was under orders from PM Kosor to deal with five priority cases involving state-owned enterprises (SOEs): Hrvatska Elektroprivreda (HEP or Croatian Electric), Hrvatske Zeljeznice (HZ or Croatian Railways), Hrvatske Autoceste (HAC or Croatian Highways), Hrvatske Vode (Croatian Water Company), and Hrvatske Sume (Croatian Forests Management Company). Chief of Police Oliver Grbic told reporters in mid-January 2010 that police were running twelve investigations during the past six months into CEOs and management officials of public companies.

Minister of Interior Tomislav Karamarko and Minister of Justice Ivan Simonovic have also been spearheading a public relations campaign to publicize the "war on corruption" in Croatia. Simonovic said on Croatian Radio that "no one can be above the law -- either former or present or future presidents or prime ministers." He went on to add that "there have always been untouchables, but this is the first time in the history of Croatia that there won't be untouchables anymore."

On 09 December 2010, former Prime Minister Sanader fled the country in the face of an investigation of corruption during his 2003-2009 tenure in office. Sanader fled Croatia after prosecutors asked parliament to lift his immunity from prosecution. Austrian police arrested him a day later near Salzburg, and he was held in detention pending a separate investigation by Austrian authorities and possible extradition to Croatia. An Austrian court ruled that Sanader was a flight risk and must remain in custody while awaiting extradition to his homeland. On July 18th, 2011 Sanader was extradited from Austria back to Croatia Monday to face charges of corruption.

Sanader faced several charges including money laundering and stealing funds from government-owned companies. On September 23rd, 2011 Croatian prosecutors indicted former prime minister Ivo Sanader for taking a bribe from a Hungarian energy company that secured the firm a dominant position in Croatia's market. The prosecutors said Mr. Sanader reached the deal with Hungary's MOL energy group in 2008 for $13.5 million, giving the company about a 47-percent share in Croatia's oil and gas firm INA. Sanader was accused of taking part in a criminal activity and abuse of power for personal financial gain. Sanader is the first Croatian prime minister implicated in a corruption scandal. He held the job for six years before resigning.

The Hypo Bank case indicates that Sanader allegedly arranged a DM 4 million loan for his neighbor, Miroslav Kutle, in the 1990's and received a DM 800,000 kickback from Kutle in return. Kutle's cashier is cooperating with the anti-corruption prosecutors (USKOK), and her story has been corroborated by a former tourism minister with knowledge of the transactions. The illegal mediation charge for receiving gifts and benefits while abusing an official position to secure business transactions carries a prison term of one to five years.

Sanader is also implicated in several corruption cases involving the Transportation Ministry. By early 2010 Transport Minister Bozidar Kalmeta had been under fire for several months due to corruption cases involving Croatian Highways and Croatian Railways, both of which are overseen by his Ministry. Sanader often bypassed Kalmeta and gave instructions about how to handle certain cases directly to (former) Transportation State Secretary Livakovic.

The government of Croatia recognizes this as a problem and, at the highest political levels, has shown a willingness to combat corruption. The GOC continued to give special attention in 2010 to the legal and institutional framework used to combat corruption. Following revisions to the Criminal Procedure Act in July 2009, which granted additional authorities to corruption and organized crime prosecutors, Croatian prosecutors launched investigations which targeted high level GOC officials, including a former Croatian Prime Minister, former Deputy Prime Minister, other ministers, high ranking officials and senior managers from several state owned companies.

The State Prosecutor's Office for Suppression of Corruption and Organized Crime (USKOK) is tasked with directing police investigations and prosecuting corruption and organized crime cases. USKOK is headquartered in Zagreb with offices in Split, Rijeka and Osijek. In addition, the National Police Office for Suppression of Corruption and Organized Crime (PN-USKOK) conducts corruption-related investigations and is based in the same cities as USKOK prosecutors. Specialized criminal judges are situated at the four largest county courts in Croatia, again in Zagreb, Rijeka, Split, and Osijek, and are responsible for adjudicating corruption and organized crime cases. The cases receive high priority in the justice system. The Ministry of Interior, the Office for Suppression of Money Laundering, the Tax Administration, the Anti-Corruption Sector of the Ministry of Justice and the National Council for Monitoring the Implementation of the National Strategy for Suppression of Corruption all have a proactive role in combating and preventing corruption.

Croatia has laws, regulations and penalties to effectively combat corruption. Revisions to the Criminal Code and the Criminal Procedure Act in December 2008 strengthened USKOK and PN-USKOK and increased the tools available to authorities to fight corruption. The asset forfeiture section of the 2008 criminal code broadened the possibility for asset seizure and forfeiture, especially for USKOK cases. If a case falls under USKOK's jurisdiction, it is assumed that all of a defendant's property was acquired through criminal offences unless the defendant can prove the legal origin of the assets in question. The pecuniary gain in such cases shall also be confiscated if it is in possession of a third party (e.g. spouse, relatives, or family members) and it has not been acquired in good faith.

These Criminal Procedure Act and Criminal Code reforms have increased both the number of high level corruption investigations and the speed with which investigations are completed. Delays still occur during the trial phase, but the creation of special panels of judges to hear USKOK cases has reduced backlogs in corruption cases. The Croatian criminal code covers such acts as trading in influence, abuse of official functions, bribery in the private sector, embezzlement of property in the private sector, and concealment and obstruction of justice. In 2010, the legal framework to combat corruption has been further improved. Amendments to the USKOK Act extended USKOK's authority to prosecute tax fraud linked to organized crime and corruption cases.

Additional laws that deal with suppression of corruption include: the Act on the Office for the Suppression of Corruption and Organized crime (Law on USKOK); the states attorney’s office act; the public procurement act; the budget act; the courts act; the conflict of interest prevention act; the corporate criminal liability act; the money laundering prevention act; the witness protection act; the personal data protection act; the right to access to information act; the act on public services; the code of conduct for public officials; and the code of conduct for judges. A revised Croatian Labor Act contains new whistleblower protections, but the changes are too new to determine effectiveness. Croatian laws and provisions regarding corruption apply equally for both domestic and foreign investors.

As of 2011 Croatia had not ratified the OECD Convention on Combating Bribery of Foreign Public Officials in International Business transactions, but it is a member of the Group of States Against Corruption (GRECO), a peer monitoring organization that allows members to assess anticorruption efforts on a continuing basis. Croatia has been a member of INTERPOL since 1992. Croatia cooperates regionally through the southeast European Co-operative Initiative (SECI), the Southeast Europe Police Chiefs Association (SEPCA), and the Regional Anti-Corruption Initiative (RAI). Croatia is one of five non-EU members of Eurojust, the EU's Judicial Cooperation Unit. Croatia is also a signatory to the UN Convention Against Corruption.

Giving or accepting a bribe is a criminal act in Croatia. The minimum prison sentence for an act of bribery (per articles 348(1) and 294b (1) of the criminal code) is six months and the maximum sentence is three years. For two forms of passive bribery (discussed at articles 347 and 294 (a) of the criminal code), sentences range from one to eight years imprisonment. Bribes by a local company to a foreign official are punishable under Croatian law. If it is established that a local company is the legal entity committing crimes, the company may be banned from conducting operations, depending on the gravity of the crime.

Transparency International Croatia is the main non-governmental watchdog organization in Croatia. In addition, GONG, a non-partisan citizens' organization founded in 1997, monitors election processes, educates citizens about their rights and duties, encourages mutual communication between citizens and their elected representatives, promotes transparency of work within public services, and manages public advocacy campaigns and encourages and helps citizens in self-organizing initiatives. The Partnership for Social Development is another nongovernmental organization active in Croatia, dealing with the suppression of corruption.

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Page last modified: 29-03-2016 20:06:41 ZULU