SANADER AND ZUBOVIC The former Prime Minister and his trusted friend in the party, the person through whom most of the shady dealings related to state-owned companies wentWhile the great majority of the Croatian public believe that chucking former Prime Minister Ivo Sanader out of the Croatian Democratic Union broke his power and ended his political career, the opinion in the ranks of Government is quite different - Nacional has learned from sources close to top HDZ officials. Among top Government officials they consider this not the end, but rather just the beginning of a process that should see his power broken. In Government they are aware that during the six years of his rule of the country he created mechanisms, a secret organisation in fact, that - de facto - ruled the country. A parallel system of power that allowed him to be so all-powerful and strong. Now the deconstruction of this parallel system begins, and work is ongoing every day to do so. Nacional has learned that an informal coordination body has been set up in the top echelons of Government, one that meets practically daily, and which has started working on deconstructing this system. Party bodies of the Croatian Democratic Union, ministers and state officials working in the justice department and on maintaining national security will be involved, as will leading people in the state working in the area of finances. The first task is to identify the chief players in this system: who pulled the strings in this system and who coordinated what. Who was at the head of this system is known, it was Prime Minister Ivo Sanader, but who was at the helm besides him, that is still being investigated, and there are surprising discoveries - above all how broad and powerful this system was. One of the ministers involved in the job of tearing down this system said, "It really was an octopus!"

There are serious suspicions that this octopus was the chief central mechanism of the general corruption that was integrated into the state structure, and the aim of which was the massive accumulation of wealth by some individuals, to finance the political activity of some parties, and to finance some concrete political campaigns. At issue is theft that in some cases can be measured in tens of millions of euro, for example in the sale of some major national companies to foreigners. The octopus branched for the most part in state-owned companies controlled by important and powerful people in this octopus, but it was also active in other areas, especially in some state services where large amounts of money were in circulation. All of the investigations launched after Sanader stepped down from the post of Prime Minister, all of the arrests undertaken since then, show how far this octopus reached. It was organised as a hierarchy, and now there is much evidence that the main strings were pulled by former Prime Minister Ivo Sanader.

It all points to the fact that all of the scandals, regardless of whether they concern the national electric power company HEP, Croatian Motorways Ltd., the HPB bank, the Hypo Alpe Adria bank or Podravka, had one man in the background who made the key moves in every situation. And that was Ivo Sanader.
High-ranking sources in the national leadership have confirmed for Nacional that it is now suspected that Ivo Sanader controlled all of the important business processes in the country the way the leader of a mafia cartel would - with a firm internal structure, which could be described like the already mentioned octopus, whose arms were the people personally close to Sanader. There are doubts that, as the extended hands of Sanader's will, the arms of this octopus had a critical influence on the adoption of controversial decisions concerning the operations of various state-owned companies which, on the one hand, resulted in massive damages to the national budget, and on the other, the equally enormous accumulation of wealth by a small group of people led by Sanader. It all had as its result a complete lack of faith among foreign investors and business people in any possibility of doing fair and effective business in Croatia.

The competent state institutions recently started a detailed reconstruction of the many ways in which the Sanader cartel was involved in the implementation of various business projects. There are suspicions that all serious decision we in fact adopted at informal lunches that the Sanader cartel usually held at the Baltazar restaurant on Zagreb's Kaptol. Joining Sanader at these lunches, as a rule, were Mladen Barisic and Mario Zubovic, and if necessary, depending on the situation and topic of discussion, some other people.

One of Sanader's people, alleged to have wielded great influence during Sanader's term in office, was Mladen Barisic. Of late he too has been brought into connection with various state-owned companies that mismanagement has led into dire straits, where he is alleged to have intervened to have lucrative contracts awarded to the "right" people. Barisic's role in the cartel was allegedly above all to see to filling the party coffers. Another very influential Sanader man is dentist Mario Zubovic, a HDZ Member of Parliament and a personal friend to Ivo Sanader's. He was perceived as such in the public, as a personal friend of the Prime Minister's, whom the Prime Minister for friendly reasons drew into politics, got into Parliament, but who was an entirely benign political figure. It turns out now that the situation with him was completely different. He is engaged at various posts, both in the party and in Parliament. Among other things he is a member of the HDZ club of deputies in Parliament, the foreign policy and the inter-parliamentary cooperation committees in Parliament, he is a member of the Croatia-EU joint parliamentary committee and a member of the national committee that monitors the negotiations on Croatian accession to the EU.

But, above all, because of his close friendship with Sanader, there is suspicion of late that during Sanader's term in office as Prime Minister Zubovic was the key man that, bypassing the supervisory boards, controlled the adoption of the key business decisions of most state-owned companies. That would mean concretely that Zubovic has massive informal power, and that he implemented Sanader's will in various business situations. So far it has quite precisely been reconstructed that Zubovic was especially influential in Croatian Motorways Ltd., gas company Plinacro and insurer Croatia Osiguranje, where he - allegedly - intervened personally in various major decisions. And while Croatia Osiguranje has not been formally linked to serious scandals, the competent national institutions have started showing a growing interest in the adoption of various business decisions within this firm. The investigation is focusing on whether and how Zubovic influenced Ljerka Separovic and Damir Mihanovic, two members of the Croatia Osiguranje board. Zubovic was on behalf of the HDZ allegedly not the only one to do so bypassing the competent management bodies in the company.

JOSIP PROTEGA, the former CEO of the HPB bank, has already said that Sanader called him for various loansZubovic was one of the few people of which it is said that he had, on behalf of Sanader's parallel system of power, a powerful influence on the construction cartel that won unbelievably lucrative projects during Sanader's term in office, which Croatian citizens in general overpaid several time over. Mentioned among the companies that are the focal point of the great interest of state institutions in this context are above all Konstruktor, IGH and Dalekovod. If the suspicions of Zubovic's contentious activities prove founded, it could explain in part why he continued to support Sanader after his withdrawal from active politics and placed himself at Sanader's disposal when Sanader recently attempted a putsch to regain real power in the party. Sanader's parallel system of power will not be easy to tear down because it is very widespread, but now - after his ejection from the HDZ - it can be done, which was impossible six months ago.

The job will be done at several levels. First of all a reconstruction of the cabinet is planned, something Prime Minister Jadranka Kosor can now do, after chucking Sanader out of the HDZ. Some ministers may be replaced, and there is speculation that one minister may be offered an ambassadorial post, but the lion's share of the work will be a purge of state secretaries loyal to Sanader, through which he carried out a big part of the work of his parallel system. Estimates say that there are at least twenty of his people among the state secretaries that may be sacked. Perhaps for the same reason of deconstructing this parallel system there will be sackings at the heads of state-owned companies. An analysis will be made of Sanader's interventions in personnel issues in various parts of the national administration, especially the sensitive one such as the customs service and the police, at both the national and local level.

There are also significant activities being carried out within the Croatian Democratic Union, where the situation is somewhat better than Sanader's opponents expected. Prime Minister Kosor is exceedingly popular within the party, which was demonstrated by the triumphant reception she was given at a meeting of the Split branch of the HDZ, an organisation that was until recently Ivo Sanader's chief bastion within the party. The situation in other county organisations is similar, and it will therefore be easier to carry out a purge of Sanader's people in the party.

In this task of taking to pieces this parallel power structure - quite independent of this political aspect - what the State Attorney's Office and police will do shall be followed with interest. Government has given these institutions completely free rein to investigate all those who may have been involved in corruption, and Prime Minister Jadranka Kosor's statement that "no one will be untouchable" is significant. It is quite clear that this statement pertains above all to Sanader. Besides the State Attorney's Office and the police, Sanader could be in for trouble from Zeljko Rohatinski, the Governor of the Croatian National Bank. There are claims, for example, that Rohatinski is very focused on entirely clearing up the dubious dealings at the HPB bank. The leadership of this bank has as of late also found itself in police detention under suspicion that it is responsible for the massive losses on the bank's operations. Josip Protega, the bank's former CEO, said in an interview for Nacional given just a few days before his arrest that Sanader had phoned him and inquired about some loans the bank had given to some companies. Protega does not see anything contentious in these contacts, but after his arrest the question arises as to whether Sanader may have also intervened when some enormous loans were approved to people without any valid guarantees that the loans would be repaid. At the helm of the bank now is Cedo Maletic, who has previously worked under Rohatinski at the CNB.

Suspicions about Sanader grew some more after it was learned that a "Sonderkommando", or "special unit" of investigators was being put together in Austria under the name of Soko Hypo that would investigate all of the transactions of the Hypo Group Alpe Adria bank, and in particular the connections Ivo Sanader had with the bank, and some other once powerful officials from Croatia. Informed Austrian sources have revealed for Nacional that the unit will, for a start, make a detailed investigation of 13 cases in which Sanader intervened at the bank in Austria for various loans. That Sanader intervened at the bank at least 13 times was revealed by top officials at the Hypo Alpe Adria bank in a report on the situation in the bank they had to send to the Austrian National Bank. When the Calvary the Hypo Alpe Adria bank is going through reached its climax a few weeks ago as a result of the enormous losses that will in the end be covered in part by Austrian taxpayers, Sanader found himself in the focus of many critical articles in Austria and in Germany.

There the question asked is how in fact the Bayerische Landesbank decided to invest into the purchase of a majority stake in the Hypo Alpe Adria bank, especially after the part of the deal that concerned Croatia was sharply opposed by Zeljko Rohatinski. Former Bavarian Prime Minister Edmund Stoiber found himself under fire from German newspapers because he lobbied in favour of the Bayern LB bank ahead of the purchase of the Hypo Alpe Adria bank. When the German newspapers broached the issue Rohatinski gave an extensive interview in Croatia in which he stated that Sanader had been informally involved in the situation. Rohatinski said that Sanader, and Finance Minister Ivan Suker, pressured him to allow the Bayerische Landesbank to once again enter the Croatian market, after the German bank had behaved in very poor style in a scandal that had previously hit the Rijecka bank. According to Rohatinski both Sanader and Suker insisted that it was very important for Croatia. In light of the new situation investigations have already started into whether it was also important for some of Sanader's private interests. Additionally embarrassing for Sanader is the fact that the questions have also been broached abroad.

As Sanader is mentioned in all of these intrigues as the protagonist, this made him increasingly nervous from week to week. A few months ago he was especially perturbed by the lorry scandal, which was an introduction of sorts to further investigations, in which other state officials found themselves under fire after former Defence Minister Berislav Roncevic. That is why Sanader wanted at all costs to rid myself of the services of former Police General Director Vladimir Faber, in which he succeeded. Faber showed himself to very agile in the war on corruption and that, just like Faber's public statements, did not suit Sanader. The marginalisation of Faber was a clear message from Sanader of what he thought of the war on corruption in high state office.

With time, after stepping down from the post of Prime Minister, Sanader began with growing agility to work on regaining his influence in the party, even sending messages to Prime Minister Jadranka Kosor to abandon investigations that had been launched or to step down, and in the end decided to attempt a putsch - an attempt that buried his political career. This outcome has only further deepened already existing suspicions in Sanader and people loyal too him, and only a few days after his expulsion from the HDZ people have begun mentioning Sanader as the possible boss of the mafia octopus.

Bringing down this octopus is at the moment the most important mission for several reasons. First of all, the job has to be done to stabilise the political situation in the country, and to thwart possible coups or sabotage by Sanader's people. Next, the war on corruption is an important task in this final stage of the negotiations on Croatian accession to the European Union. The final chapter of the negotiations will only be opened to Croatia when there is concrete proof that a serious campaign has been launched against corruption at the highest levels. Furthermore, because this octopus of Sanader's has corrupted the entire economic system in the country, after it is deconstructed one can expect a significant increase in foreign investment into Croatia and economic activity, since a great deal of money will not be sucked out of the economy into private accounts.

THE LORRY SCANDAL Sanader's opposition to investigations was clearly evident in the case of former Defence Minister Berislav RoncevicThat will significantly help the recovery of the Croatian economy. And finally, the war on this octopus is important to once again rebuild the confidence of the citizens in the state, state institutions and the possibility of society as a whole to built a better future. The broader public expects not only that this parallel system of government will be torn down, but also that all those that took part in it will be identified and brought to trial. At the competent state institutions fighting corruption, including this kind of institutionalised corruption with the attributes of organised crime, there are therefore now two basic priorities - to find any kind of evidence that could bring the people at the head of this octopus into direct connection with the scandals that have been opened, or to find someone willing to turn state's evidence who will directly accuse Sanader for illegal meddling in the operations in one of the scandals that have been opened. Both scenarios - if it is established that he broke the law - could see Sanader on his way to jail, which would surprise very few in Croatia in the current circumstances.