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SERBIA & MONTENEGRO: Serbian Government Moves Against Karic Empire

The Serbian government is preparing to call an international tender to sell Mobtel and its license, following years of disputes with the tycoon who cofounded Serbia's oldest mobile operator.
After a month of negotiations, the Serbian government and an Austrian consortium agreed to set up a joint company that will replace cell phone provider Mobtel. The state will control 70 per cent and the consortium, led by Martin Schlaff, 30 per cent.
The deal followed years of controversy surrounding Serbia's oldest mobile operator, which was cofounded by the state and tycoon Bogoljub Karic in the 1990s with the blessing of former Yugoslav President Slobodan Milosevic.
Following the democratic changes in 2000, the new government passed a law on extra-profit tax that targeted businesses close to the Milosevic regime. However, no further steps were taken to hold tycoons accountable until Karic founded the Strength of Serbia Movement, a political party whose populist rhetoric soon translated into high poll numbers.
In late 2005, the Serbian judiciary finally launched a probe into wrongdoings that allegedly helped create the Karic empire. The investigation resulted in charges brought against the tycoon for alleged evasion of some 7.7m deutschmarks in taxes between 1999 and 2001, financial misreporting in connection with the procurement of Ericsson equipment in 1994, and attempted bribery of rival party members.
Prior to the investigation, Karic and the state had turned to a Zurich court of arbitration to settle their dispute over Mobtel's ownership structure. Further complicating matters, Karic sold his stake in Mobtel to the Austrian consortium. As a result, when the government scrapped Mobtel's operating license, the move threatened to jeopardise Belgrade's relations with Vienna.
After a month of negotiations that Schlaff described as "tough but fair," a joint Serbian-Austrian commission said it had reached a deal and agreed to drop all lawsuits.
"The main guideline was to avoid causing damage to Austrian investors and at the same time protect Serbia's interests as much as possible," said Serbian Economy Minister Predrag Bubalo.
The Serbian government says any tender for the sale of Mobtel should cover an estimated 700m euros in damage that the Karic family caused to the state while running the mobile operator. Karic's staunch foe, Finance Minister Mladjan Dinkic, has proposed using the sell-off receipts for much-needed investments in Serbia's economy.
Mobtel and its operating license will be put up for sale in April. Britain's Vodafone, Spain's Telefonica, Germany's Deutsche Telekom, and Greece's OTE are seen as the main potential bidders.
An Interpol arrest warrant has been issued against Karic, who fled the country. Every once in a while, the tycoon speaks through his lawyers, claiming that he is a victim of political persecution launched against him because he has become "the most dangerous opponent of the ruling coalition". He is thought to be in Moscow, a favourite spot for Serbia's fugitives from justice.
Karic claims he will return to the country once he gathers proof of his innocence. Meanwhile, the Tax Administration has moved to seize the Karic family's property, which includes 13 villas and 33 apartments in Belgrade alone.

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