Greek Cypriot leader’s law firm linked to Milosevic
But accession is a business opportunity too. Greek Cypriot bankers, accountants and lawyers are eager to expand their business in EU markets when Cyprus becomes a member in May 2004.
Yet doubts persist about the Cyprus authorities’ commitment to regulating international companies according to EU best practice. The obstacles faced by two Serbian bankers who are trying to trace records of Cyprus-based offshore companies involved in UN sanctions-busting during the Yugoslav succession wars have highlighted these problems. And the law firm founded and still controlled by Mr Papadopoulos is at the centre of the dispute.
The island’s financial services sector, worth about $300m yearly, covers some 1,100 international companies based in Cyprus as well as several thousand brass-plate operations, which do not operate offices in Cyprus. More companies are expected to set up on the island after Cyprus’s accession to exploit the advantages of operating from an EU member state.
The government sees financial services as a promising growth sector that will help reduce the Greek Cypriot economy’s dependence on tourism. The tourist industry, which accounts for about 20 per cent of gross domestic product, has faced problems since the September 11 attacks. This season’s bookings have crumbled because of the war in Iraq.
Ljiljana Radenkovic and Radmila Budisin are former senior executives at Beogradska Banka, a state-controlled bank with links to Slobodan Milosevic, the former Yugoslav president now on trial in The Hague for war crimes. They want to press charges against the Greek Cypriot president’s firm. They say it has failed to provide documents about the activities of two front companies Antexol Trade and Browncourt Enterprises that were registered in their names by Mr Papadopoulos’ firm.
In separate interviews with the FT, the two women said they knew nothing about the establishment and operation of the two front companies. They added that they were not involved in signing the company documents and they believe that other people’s signatures were used instead.
Partners in Mr Papadopoulos’s firm could face charges of fraud and conspiracy if they cannot produce company documents signed by Mrs Radenkovic and Mrs Budisin. The accountants who audited the companies’ books and officials at the Cyprus central bank, responsible for supervising the activities of offshore companies, could face charges of complicity.
According to investigators at the UN war crimes tribunal, Antexol and Browncourt were among a group of eight Cyprus-based front companies – all registered by Mr Papadopoulos’s firm – that were used to buy weapons, fuel and raw materials for the Milosevic regime in defiance of UN sanctions against the former Yugoslavia. Cyprus endorsed the sanctions, although – unlike other western countries – the government did not introduce legislation making them part of Greek Cypriot law.
Carla del Ponte, the UN war crimes prosecutor, in a confidential letter in August 2001 to the Cyprus authorities, obtained by the FT, said she believed an examination of records maintained by the law office of Tassos Papadopoulos "will provide further evidence of the Milosevic regime’s wartime funding arrangements" – including purchases for the Bosnian Serb army and paramilitary organisations.
But the Cyprus government, headed at that time by President Glafcos Clerides, ignored her request for copies of all documents, including documents in electronic format, relating to the front companies that were kept at Mr Papadopoulos’s offices. The Serbian bankers last October made a similar request. Through a Nicosia-based lawyer, they asked Mr Papadopoulos’s firm to hand over all documents relating to the establishment and activities of Antexol and Browncourt, as part of a joint effort to clear themselves of involvement in sanctions-busting. The firm has failed to provide any of the documents.
Pavlos Angelides, the women’s lawyer, says: "These documents are the property of Mrs Radenkovic and Mrs Budisin as the beneficial owners of the two companies. It is a criminal offence under Cyprus law for Mr Papadopoulos’s firm to withhold them."
The two women have taken a bold step. Few Greek Cypriots would dare to challenge Mr Papadopoulos, the island’s most prominent lawyer and an influential member of its close-knit business and political elite. He was backed for the presidency by his own centre-right Democratic party and the Cyprus communist party, the island’s biggest political group.
While Yugoslavia was shunned as a pariah state in the 1990s, Cyprus-based banks and front companies became the Milosevic regime’s main financial link with the outside world. These companies were financed with cash flown from Belgrade to Cyprus and deposited in special accounts, mainly at Popular Bank, the island’s second biggest bank in which the UK-based HSBC group is the largest shareholder.
According to Serbian officials at least $4bn and perhaps as much as $12bn moved through Cyprus in the 1990s.
According to Morten Torkildsen, an investigator with the UN war crimes tribunal at the Hague, Antexol and Browncourt were both managed by Beogradska’s offshore branch in Cyprus.
Mr Papadopoulos’s firm set up Antexol and Browncourt in 1992 and 1995 at the request of Borka Vucic, head of Beogradska Banka’s offshore branch in Nicosia and a confidante of Mr Milosevic. Mr Papadopoulos was Beogradska’s legal adviser and, until he became president, was also an adviser to Popular Bank.
While Mr Papadopoulos handles affairs of state, his law firm is being run by Pambos Ioannides, the managing partner.
Mr Ioannides, who served as a director of Antexol, brushed aside the Serbian bankers’ request. In a letter to Mr Angelides, he said they were involved "in a malicious attempt to defame our law office". Mr Ioannides refused to answer questions from the FT about the case.
Mrs Radenkovic and Mrs Budisin told the FT they were determined to prove they had nothing to do with the front companies. Mrs Radenkovic works for Anglo-Yugoslav Bank, a London-based subsidiary of Beogradska which, like its parent, is being liquidated. She said: "I’ll do anything within reason to help the relevant authorities get to the bottom of this story."
Mrs Radenkovic says she first heard of Antexol in 1995, when she agreed to sign a power of attorney after Mrs Vucic threatened to ruin her career by sending her back to Belgrade and dismissing her from the company. The power of attorney was used to transfer ownership of Antexol to Mrs Budisin, a cousin of Mrs Vucic’s late husband. As a result, Mrs Budisin became the owner of Antexol as well as Browncourt.
Together with Mr Papadopoulos, the women were put on a US government blacklist in the 1990s because of Antexol and Browncourt’s role in sanctions-busting. They were banned from visiting the US or working with US companies. Mr Papadopoulos came off the blacklist after the sanctions were lifted in 1995, while Mrs Radenkovic’s name was removed last year after she hired a Washington lawyer to press her case. Mrs Budisin’s name is still on the list.
Mrs Budisin, the former head of Beogradska’s legal department, now has her own law practice in Belgrade. In an interview in her comfortably furnished apartment, she said: "I had nothing whatsoever to do with these companies. I am determined to take whatever steps are required under Cyprus law to rebut these charges and clear my name."
The Serbian bankers have also requested copies of documents concerning the two companies from Popular Bank and from the central bank, which approved the companies’ registration. The central bank did not require the women’s signatures but only a bank reference, which was provided by Beogradska. Under Cyprus company law, however, written authorisation from the owner is required to appoint directors.
Both owners and directors are permitted to handle the company’s bank transactions but, following corporate best practice, a director would be expected to inform the owner when a sizeable transfer takes place. The owner would leave the director to handle small-scale transactions.
Mrs Radenkovic said: "As a banker, I know that all those payment orders must have a signature. Someone signed them but I definitely didn’t."
According to Mr Torkildsen’s report on transactions that bypassed UN sanctions on weapons purchases in 1998-99, ahead of the Kosovo conflict, as much as DM560m was deposited in Browncourt’s accounts at Popular Bank. During the same period, the company made 290 payments, most of which would be expected to have written authorisation from the company’s owner as these were large-scale transactions.
Mrs Budisin said: "I never signed anything related to these companies." Popular Bank has not replied to the Serbian bankers’ request, Mr Angelides said. A bank spokesman told the FT: "It’s up to these women to prove they are the beneficial owners of these companies before we can release any documents."
The central bank has also refused to hand over documents concerning Antexol and Browncourt. Christodoulos Christodoulou, a former interior minister who took over last year as central bank governor, said they could not be made available because the Cyprus attorney-general’s office was already investigating the companies in co-operation with the Yugoslav authorities.
He said providing documents "to a third party could affect the course of the inquiry". Alecos Markides, the former attorney general, told the FT he launched an investigation in 2001, at the request of the Belgrade government, into Cyprus’s financial links with the Milosevic regime.
In August 2002 he said he had asked the fraud squad to speed up their inquiries. The investigation has not yet been completed. In February, Cypriot investigators failed to keep an appointment to interview Mrs Budisin in Belgrade that had been arranged in co-operation with Serbian authorities.
The case of the Yugoslav bankers was placed on hold during the presidential election campaign. Earlier this month, Mr Papadopoulos appointed Solon Nikitas, a supreme court judge, to replace Mr Markides.
The new attorney-general must decide whether to complete the inquiry launched by Mr Markides. He must also consider Mrs Radenkovic’s and Mrs Budisin’s request for an investigation to determine whether charges should be brought against Mr Ioannides and other partners in the president’s firm. However, with Cyprus on the brink of EU accession, there appears to be little appetite among Greek Cypriot officials to expose the government to renewed international criticism over its support for the Milosevic regime.
Kypros Chrysostomides, the government spokesman, summed up the situation from the Greek Cypriots’ point of view: "That’s all in the past."
