ILLEGAL PRIVATIZATION OF KRIVAJA: The Federation is paying millions in damages to private companies, while the prosecutor's offices remain silent

Entering the premises of Krivaja in Zavidovići, a once world-famous factory now ravaged by the scourge of privatization in the Bosnian and Herzegovinian style, today feels like a tour of the ruins. A few halls remain, filled with rusty machines that evoke memories of better times.

In one of these halls, tables, chests of drawers, and cots of well-known design stand like museum exhibits. A lone worker mentions that everything left from a decade ago has yet to be sold, and even now, people from BiH, Serbia, and Croatia are calling to inquire about availability of Krivaja’s furniture.

ANNULMENT OF PRIVATIZATION OR TERMINATION OF CONTRACT?

One by one, the Krivaja plant “disappeared”—first through so-called small privatization, and later following two agreements for the takeover of the factory. The first agreement, at the end of 2008, involved a partnership between Ferimpex and the Government of the Federation, with a ratio of 70:30 percent. In 2014, the production plant was taken over by a partnership group of four companies (“Marić”, “Makro drvo”, “Prograd” and “Fedis”)  which established the new company “Krivaja Mobel” with the obligation to employ 800 former Krivaja workers.

Both ended in collapse and resulted in significant financial losses for the budgets of the Federation and Zenica-Doboj Canton. The outcomes were particularly disastrous for the workers, who were not only left without jobs but also without paid pension benefit and the ability to exercise their right to a pension.

“Since 2003, the employees of Krivaja have not accumulated any pension entitlements. There are currently around one hundred workers who meet the requirements for retirement. With the latest call announced by the Government of the Federation, where each company receives 400.000 BAM, we can retire 22 to 24 workers. This is devastating for us, as we currently have between 80 and 190 workers remaining, and more are becoming eligible for retirement every day”, said for Žurnal Ramiz Mujić, representative of the workers.

At the end of the pre-election campaign for the local elections in BiH, held on October 6, the then mayor of Zavidovići, Hašim Mujanović, announced that the privatization of IP “Krivaja” has been annulled .

If the information proves to be correct, immediately after the termination of the sales contract and the return of the property of IP “Krivaja” to its previous owner, the City of Zavidovići will begin the necessary actions and negotiations related to the purchase of the property. This property would then be made available to businessmen and investors interested in starting production facilities for various activities, – said Mujanović.

Whether Mujanović was misinformed or manipulated remains unclear, but there is still no indication that the Government of the Federation will terminate the contract with the Partnership Group. It has recently come to light that the Government of the Federation accepted the “Report on the Revision of the Conversion and Privatization of IP Krivaja Zavidovići - in Bankruptcy” three years after its preparation.

Žurnal obtained access to this report submitted by the Federation Privatization Revision Agency. The conclusion can be summarized in one sentence: the privatization of Krivaja was illegal!

What can this report mean for the future of Krivaja and its workers? Certainly, not much in the near future. As Žurnal learns, a recent meeting was held in the Federation Government involving representatives from the relevant ministry, the Development Bank, the FBiH Employment Institute, the bankruptcy administration, and workers’ representatives. The conclusion was to form an inter-departmental working group to determine the next steps in the process...

In other words, the situation continues to drag on because no one dares to openly tell the public the truth. Not the one well-known that Krivaja, as a factory, is a thing of the past, and that workers can only wait to see if some of them will eventually receive the pension benefits required for retirement, but also the one that the unaddressed crime in and around Krivaja is one of the main causes of the factory's collapse. The prosecutor’s offices have neglected the investigation of crime at Krivaja for years, primarily due to the involvement of individuals from the political elite who managed the personnel and business policies of the factory.

PARTNERSHIP WITH FERIMPEX

The first major privatization debacle of Krivaja occurred with the contract under which the Government of the Federation of Bosnia and Herzegovina and the company “Ferimpex” Zavidovići, owned by the Mujanović family, formed the joint venture “Krivaja 1884” in 2008. This contract was terminated in 2011. Years of litigation ensued, during which Ferimpex demanded the return of the invested 5 million marks with interest, accusing the Government of the Federation, Zenica-Doboj Canton, the Privatization Agency, the Municipality of Zavidovići, and the bankrupt Krivaja of failing to fulfill their contractual obligations.

The epilogue after 12 years of dispute is that the Government of the Federation is expected to pay approximately 12 million marks to Ferimpex. According to information obtained by Žurnal, which was confirmed to us by Krivaja’s bankruptcy trustee, Hamdija Muratović, this has happened a few months ago, following the final ruling of the Supreme Court of FBiH. In the lawsuit, Ferimpex claimed that the Federation Government had terminated the contract.

“The Government did not initiate the termination of the contract. The existing documents clearly show that it was the representative of Ferimpex who canceled the contract with the Government. We took office in March 2011, and by April, we received a letter terminating the contract. The government formed a commission to investigate the matter and accepted the termination. Meanwhile, we explicitly instructed the relevant general attorneys’ offices and the then management of IP Krivaja to file a counterclaim against Ferimpex for all the obligations they failed to fulfill under the sales contract,” claimed the then and current Federation Prime Minister Nermin Nikšić to Žurnal.

"There was no counterclaim, which would have amounted to the same total as the unpaid taxes and contributions from Krivaja 1884 during its two years of operation, equal to what has now been paid to Ferimpex. The Privatization Revision Report states that the company operated without government supervision and, above all, that it was not legally registered.

 “At the time the contract establishing PD Krivaja 1884 was concluded, there were rulings regarding the recovery of workers’ claims that the signatories of the contract knew or should have known about. Employee appeals challenged the registration of the newly founded company. Krivaja 1884 should never have been allowed to operate. The initial registration should have been conducted with registered and unpaid capital until the registration decision became legally binding, reads the Report.

“The tax administration established a debt of 12 million, but the Government of Novalić did not want to play that card”, claims the current bankruptcy trustee of Krivaja, Hamdija Muratović, to Žurnal.

There’s work for prosecutors. The budget of the Federation has been damaged by tens of millions due to someone’s negligent or deliberate failure to file a counterclaim. The aforementioned report from the Federal Privatization Revision Agency contains much information. There are still documents and witnesses; the only thing left is to start working.

If the SDP-led Federation government had “drawn the line” on the robbery of Krivaja in 2011, it would have had an alibi for everything they did in the company in the subsequent years. They ignored the Federation Financial Police’s “Report on the Existence of Grounds for Suspicion of a Criminal Offense” regarding the illegal contract for the formation of “Krivaja 1884”, which implicated 19 individuals. The report also highlighted the illegal channeling of funds used to settle the workers’ pension benefits.

The Federation auditors, in their report on the spending of the FBiH budget for 2011, warned that there was no justification for the millions invested in Krivaja over the previous two years.

“A total of 8.065.563 BAM was earmarked in the period 2009 and 2010 from the FBiH budget through the implementation of the joint investment contract. The reports on audits conducted in the aforementioned period conclude that the earmarked funds were spent for intended purposes,” concluded the Federation auditors.

Instead of seeking accountability and prosecuting those responsible, the then-Nikšić government opted for bankruptcy proceedings, which were initiated in July 2011. Krivaja entered bankruptcy with 1.220 employees and 122 million in short-term and long-term liabilities to creditors, while the estimated value of the company was only half that amount! With Krivaja owing 44 million just in salary payments, it is possible that, due to a lack of bankruptcy assets, efforts were secretly made to prevent workers from collecting their claims and to allow a new buyer to take over the company without these obligations.

The new solution was the engagement with the Partnership group, which, as will soon be revealed, ultimately “buried” both Krivaja and the hopes of the workers.

DEBTS TO THE NEW COMPANY, PROPERTY TO THE OWNERS

After a public call for the sale of Krivaja’s production facilities, the offer from the Partnership Group of four companies was accepted. However, their business balance did not inspire optimism:

“Marić”: 19 employees, with a loss of 40 thousand BAM in the previous year

“Makro drvo”: 6 employees, profit of 52 thousand BAM, one account blocked

“Prograd”: 123 employees, profit of 28 thousand BAM, one account blocked

“Fedis”: no employees or business activities

The contract was signed in the presence of Federation Prime Minister Nermin Nikšić on September 25, 2014, resulting in the formation of the new company Krivaja-Mobel. The partnership group purchased property of Krivaja in bankruptcy for 8.7 million BAM. This amount includes the takeover of a 6 million BAM loan from the Development bank, which had previously been granted to Krivaja

“The government had the opportunity to collect 6 million from the first line of creditors, which was the amount of the loan from the Development Bank that went to IP Krivaja. However, we agreed and insisted on signing an annex stating that the Partnership group would assume the obligation and retain all employed workers at Krivaja. The agreement specified that these obligations would not be transferred to the new company but to the companies within the partnership group “, claims the Federation Prime Minister Nermin Nikšić.

But that was not the case. The loan from the Development Bank and other debts were transferred to the new company, Krivaja-Mobel. The members of the partnership group were only interested in the transfer of Krivaja’s property onto their title deeds. The Privatization Revision Report clearly states:

“Krivaja-Mobel, as a newly founded company, had no credit history or financial indicators to assure the creditors, the Government and IP Krivaja of its capability to assume such an obligation. It is important to emphasize that the responsibility for payment lay with the legal entities that purchased the property in bankruptcy through the public call. It remains completely unclear how this obligation could be transferred to Krivaja-Mobel, given the knowledge that the newly founded company had no financial indicators, plans, or projects that would assure the signatory parties of its capability to fulfill such an obligation.”

Seven years later, Krivaja-Mobel is in bankruptcy, and the loan to the Development Bank has not been repaid, as confirmed by this letter from the Development Bank.

The Federation auditors could only conclude that this was “all according to the law” embezzlement:

“We note that the Development Bank of FBiH and the Federation Institute, at the time of concluding the Agreement on the assumption and reprogramming of credit obligations with the company “Krivaja Mobel” d.o.o. Zavidovići in the amount of 6.577.072 BAM from 2015, did not secure the loan through mortgage underwriting. This issue becomes more complicated because, according to the documentation presented, the members of the Partnership Group registered ownership rights in the land register over the real estate of the former company “IP Krivaja” d.o.o. Zavidovići individually, rather than as the company “Krivaja Mobel” d.o.o., which assumed the loan. The Institute requested the Development Bank to contest this; however, the competent Federation Administration for Geodetic and Property Legal Affairs rejected the appeal in the second-instance procedure with a decision dated March 2, 2016.”

Their title deed of this year, which Žurnal obtained through its sources, shows that they own tens of millions worth of real estate and land, which, according to calculations, they acquired for only a million or two marks.

It could be said that the partners from the Partnership group deceived the government; however, the courts sided with the Partnership group, arguing that the Development Bank had agreed to the transfer of the loan debt to Krivaja Mobel with the consent of the Government of the Federation and the Federation Employment Institute. In other words, there are few innocents in this story. All the debt will apparently have to be settled at the expense of the Federation budget, while the workers have literally been thrown out onto the street and left to seek justice on their own.

“I would like to point out that upon signing the contract in 2014, the Government of the Federation committed to settling the pension benefits and fulfilling all necessary requirements for workers to retire within six months. However, the government has not adhered to this contract. Recently, we had a case in court where a worker sued the Federation government and won based on the contract we workers have. It is likely that in the coming days, we will pursue legal action against the government regarding the contracts and obligations it has not fulfilled toward the workers of Krivaja Mobel in bankruptcy”, reminded the representation of the workers Ramiz Mujić.

The bankruptcy trustee of Krivaja has little room left to address the issues, particularly the claims of the workers. According to him, the decision rests with the Government of the Federation.

“Krivaja owes 110 million, but it does not have those funds. However, do you know what it does have? Forests, land, and many other things. Everything is still registered to Krivaja and hasn't been removed. We are not looking to sell the land. Let the Federation register it to itself, but it should provide us with funds for these workers”, proposes Muratović.

An industry that once employed 10.000 workers and had branches across the former country, Europe, and the world has collapsed. There was ample work for the prosecutor’s office, yet a comprehensive investigation into the embezzlement of hundreds of millions in Krivaja, which has been ongoing for 25 years, has never been conducted. This has come at the expense of the budget and, especially, the former workers.

(zurnal.info)