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Photo credit: arne.list (Creative Commons)

Dear Madame Chancellor:


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We strongly recommend that Germany reject the entrance of Croatia to the EU. However, if Germany determines it is willing to take on the financial and political risks of admitting Croatia into the EU, then we urge you to require conditions. Absent these conditions, it would be a mistake to admit Croatia into the EU and provide over €11 billion (2014-2020) in EU and German taxpayer funds to the country.  The recommended conditions are as follows:
1. Croatia agrees to accept foreign visiting judges and prosecutors from strong rule of law nations to be empowered with official duties. There are precedents for this in the Balkan region and in Commonwealth nations.
2. With the above assistance, the government of Croatia recovers illicit financial outflows of over €11.4 billion in crime, corruption and tax evasion (during 2001-2010) and confiscates the wealth illicitly amassed by Croatia’s politicians, government officials, and their private partners in crime and pays it back into Croatia’s treasury.
With a politically influenced judiciary, Croatia cannot effectively deal with rampant corruption. Foreign judges and prosecutors will be able to address the illicit outflows and illicit enrichment, and assist in establishing an independent judiciary with a proper foundation of the rule of law. Croatia’s corrupt politicians and their private partners in crime should be prosecuted; their assets in Europe and beyond should be frozen; and they should be barred from all EU offices and European parliamentary seats.
BackgroundThe EU is closing its eyes to organized crime and massive corruption in Croatia. By prematurely accepting Croatia as its 28th member, the EU would not only fail Croatia’s citizens, but also expose EU taxpayers to costly bailouts. In the meantime, an unreformed Croatian government is unlikely to use EU structural funds as intended.

Dr. Daniel Kaufmann’s study, completed at the Washington, DC-based Brookings Institution, with excerpts published in The Wall Street Journal, found that Greece’s crisis was due to rampant corruption and opaque public finances. Croatia is on the path to becoming the next Greece.

For the past two decades, Croatia’s two major political groupings have rotated power while politicians enriched themselves. While engaging in rampant corruption, politicians have blocked judicial reforms, interfered with the judiciary, failed to strengthen the rule of law, encouraged a dysfunctional economy, held fraudulent elections, and brought the government debt down to junk status. Under these circumstances, investors with honest intentions avoid the country.
Investors have no legal certainty and lack the fundamental protection of property rights. According to the 2013 Index of Economic Freedom for Croatia, published by the Heritage Foundation and The Wall Street Journal, “Judicial corruption continues to undermine the rule of law. The court system is cumbersome and inefficient, and backlogs cause business disputes to drag on for years.”
  
Twelve Reasons for Concern

1.  $15.2 Billion in Illicit Financial Outflows (2001-2010) Via Crime, Corruption, Tax Evasion and Illicit  Enrichment Since 1991

Based on the research by Washington, DC-based Global Financial Integrity, Croatia experienced an illicit outflow of $15.2 billion (€11.4b) during 2001-2010 via crime, corruption and tax evasion. Croatia’s government has not yet answered the questions of theOpen Letter of February 21, 2013 co-signed by members of the European Parliament Monica Macovei—Romania’s former justice minister—and Roger Helmer (UK) and Adriatic Institute’s leadership.
Moises Naim, a scholar at the Washington, DC-based Carnegie Endowment for International peace and the author of “Mafia States,” explains: “In mafia states, government officials enrich themselves and their families and friends while exploiting the money, muscle, political influence, and global connections of criminal syndicates to cement and expand their own power.” Croatia fits the description.

2.  Corruption and Money Laundering Related to Hypo Alpe Adria Group (HAAG)

While German taxpayers were bailing out Bayerische LB with €3.75 billion connected to the “losses” of the Hypo Bank in the Balkans, the accounts of corrupt Croatian politicians and criminals remained safe, protected by Liechtenstein’s banking secrecy and its new owner Prince Michael von Liechtenstein. Prior to Bayerische Landesbank’s purchase of the HAAG shell in 2007, Hypo Consultants Group, a lucrative real estate arm of the HAAG owning a portfolio of real estate in Croatia and Serbia, allegedlyestimated at €1.6 billion, was divested. The HAAG branch in Liechtenstein was excluded from the purchase. Germany’s Honorary Consul to Croatia, RobertJezic, who allegedly received HAAG’s loans, was also a lobbyist for HAAG in Croatia.

Over the last 22 years, illicit gains from bribes, phony privatization schemes, illegal trade, and arms and oil smuggling left Croatia and allegedly landed in secret HAAG bank accounts in Austria and Liechtenstein. Part of that money was laundered back to Croatia, and invested in the real estate. The only individual held responsible was Mr. Sanader, Croatia’s former prime minister, who was sentenced to 10 years in prison for the multiple bribery cases. One of the cases involved Austria’s HAAG. Mr. Sanader is currently appealing the court’s decision.
 
3.  Extradition of Ex-General Vladimir Zagorec, and Public Assassinations in Zagreb
Vladimir Zagorec, Croatia’s former defense assistant minister and ex-general indicted for embezzling diamonds worth $5 million during the Balkan wars of the 1990s, was extradited from Austria to Croatia on October 2, 2008. According to published media reports, during the war in Croatia, Mr. Zagorec transferred about $450 million to secret accounts in HAAG, which he used as a deposit for his construction projects. Jorg Haider, an Austrian politician who spearheaded Hypo’s foray in the Balkans, and whose wealth of EUR45 million was found in Liechtenstein foundations, was killed in a car accident on October 11, 2008.Prior to his extradition from Austria, Mr. Zagorec allegedly announced that he would reveal 77 secret accounts belonging to politicians in Austria and Liechtenstein. On October 6, 2008, Ivana Hodak, the 26-year-old daughter of a lawyer defending Mr. Zagorec, was executed in front of her apartment, shot twice in the head. On October 23, 2008, a bomb explosion in Croatia’s capital killed Ivo Pukanic, a publisher of an independent weekly Nacional, and another company executive, Niko Franjic. Mr. Pukanic was one of the key witnesses against Zagorec.
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