BILLION DOLLAR CORRUPTION

By Natasha Srdoc
December 11, 2018

According to published reports, the United States is blocking Israel’s sale of 12 U.S.-made F-16 fighter jets to Croatia. These planes were made by Lockheed Martin in the U.S., provided to Israel free of charge as part of the Peace Marble program, fitted with Israeli electronics, and cannot be sold to the third party without U.S. consent.

The crucial questions surrounding Croatia’s purchase of 12 fighter jets from Israel are as follows:

1. For what purpose will Croatia, a NATO member country of 4 million people use fighter jets? U.S. fighter jets at NATO’s Aviano base in northeastern Italy (used during the 1990s Balkan strikes in Serbia and Bosnia) are just across the Adriatic Sea, minutes away from Croatia’s airspace.

2. If Croatia truly needed fighter jets, how could 30-year old, extensively used F-16s, at the end of their lifespan, win the tender — next to brand new fighter jets offered by the manufacturers from the U.S. and Sweden, respectively?

According to F-16 fleet reports, the service life for the global F-16 fleet ranges from one to 30 years. Actually, the oldest F-16s, which are still in service, are 30 years old. By the time of the scheduled delivery to Croatia in 2020-2022, some would be even 35 years old. If they are fully depreciated, how could they cost $500 million?

Croatia’s Ministry of Defense submitted the request for proposal for the purchase of fighter jets to Sweden (Gripen JAS 39), USA (F-16), South Korea (FA-50), Israel (F-16) and Greece (F-16) in July 2017. As criteria for selecting the bid, Damir Krsticevic, Croatia’s defense minister mentioned three factors: 1) the purchase contract had to be made between governments; 2) purchase price; 3) economic cooperation, as the Minister explained, through new job creation in this investment.

It appears that Croatia’s defense minister had it all planned out, much in advance. The government-owned Israel Aerospace Industries, which had been under investigation in Israel for corruption and money laundering, would fulfill each of these criteria, including offering the lowest purchase price of $500 million. Damir Krsticevic, Croatian defense minister’s former company would be responsible for servicing, repairing and maintaining the planes, which can run in the hundreds of millions of dollars, to double the purchase price of the planes for the next decade at a whopping $1 billion. In the meantime, Minister Krsticevic can return to his former company in order to personally benefit from this transaction which is hugely detrimental to American taxpayers who carry the largest burden of NATO spending.

The Croatian government’s corrupt practices increase instability, reduce defense capabilities for all involved and, if left unaddressed, justify further waste, fraud and abuse of power.

When Croatia’s investigative journalist Gordan Malic published a Facebook post with the materials demonstrating that former company of Croatia’s Defense Minister Krsticevic bid for another government project in partnership with Israel Aerospace Industries in February 2018, his post was abruptly removed as inappropriate content, and his emails were hacked.

From Croatia’s company register documents, it can be seen that Defense Minister Krsticevic was in senior management positions for 16 years, in the companies M San Grupa and King ICT, from 2001 until the end of 2015. In October 2016 he became Minister of Defense of HDZ-led government. The major source of income for the mentioned companies are government contracts in the IT arena, and many of them were procured without bidding. King ICT founded a new company, Planet IX, in September 2017, registering it, among others, for manufacturing, repair and maintenance of planes and spacecrafts.

Croatia’s citizens have yet to see their courts deliver a final conviction in a high-level corruption case. Judge Ivana Calic issued a guilty verdict in March 2015 against the HDZ political party, calling it a “criminal enterprise.” The guilty verdict included former Prime Minister Sanader and four of his close allies on charges of siphoning some $14 million during the period 2003-2009 from state companies and institutions via privately-owned Fimi Media marketing company for their private benefit and HDZ’s slush fund. The Supreme Court ordered a retrial, which is ongoing, while corruption-ridden HDZ is back, running the government.

During this same period, over $500 million in U.S. taxpayer funds were sent to Croatia’s treasury through USAID grants in government to government transfers.

The fundamental problem is that Croatia became a NATO member in 2009, despite rampant high-level corruption and failing to fulfill the rule-of-law criterion of NATO’s charter. The lack of rule of law and unfettered corruption permeates government decisions, public tenders, erodes freedom of speech and comes to weaken the NATO alliance in the Balkans.

While Croatia’s defense spending as percentage of GDP was at 1.4 percent in 2015, less than NATO’s required 2 percent, its corrupt politicians and their private partners in crime managed to take $35 billions out of the country in illicit financial outflows via crime, corruption and tax evasion, in the period 2005-2014, which amounts to 73 percent of the 2015 GDP.

The absence of an independent judiciary and the lack of rule of law invites foreign money laundering and allows transnational organized crime to flourish in Croatia. The Balkan Route’s heroin, arms and human trafficking merges with cocaine trafficking coming from Latin America. Reports indicate that Balkan heroin trafficking brings in more than $28 billion in proceeds annually, financing al-Qaida, Hezbollah and ISIS. The Balkan Route originates in Afghanistan, where 90 percent of the world opium is produced, and trafficked via Iran, Turkey, Croatia and other Balkan NATO countries into Western Europe and beyond. The co-existence of organized crime and political corruption in Croatia are detrimental for Israel, US, Croatia and Western Europe’s NATO members.

According to NATO’s charter, members are responsible for the defense of every NATO alliance member. They are also accountable for its defense spending to their countries’ respective taxpayers. Israel is a US ally and relies on American taxpayer aid. Croatia’s government officials have been getting away with crime since the early 1990s and will not be voluntarily transparent and accountable to NATO nor Croatia’s taxpayers.

In 2018, Croatia’s judicial system was ranked 120th out of 140 rated countries by the World Economic Forum. Unlike Israel, Croatia’s politically influenced judicial system has been delaying high-level corruption cases of bribery, fraud, embezzlement and money laundering for decades. Former Prime Minister Ivo Sanader and other culprits are still at large while the statue of limitations is near.

In March 2017, The Jerusalem Post reported about 13 individuals being arrested in Israel Aerospace Industries corruption scandal in Israel: According to police, the investigation raised the suspicion of “systematic criminal behavior and deep corruption seemingly commonplace in Israel Aerospace Industries.”

If America and NATO allow failed nations, such as Croatia, to join the alliance, there should be a mechanism through a U.S. congressional committee to monitor transparency and ensure a level playing field for the military bidding process. Croatia’s symbiotic relationship between transnational organized crime and government corruption has to be eradicated with the help of visiting judges and prosecutors from strong rule of law nations who can assist in establishing the rule of law and independent judiciary.

Natasha Srdoc, MBA, is the co-founder of International Leaders Summit.