31 January 2011 – MANS submitted today criminal charges against the vice-president of the Budva Municipality, Lazar Rađenović and the head of Budva’s Democratic Party of Socialists (DPS) branch Boro Lazović. The charges relate to allegations that they abused their positions in falsifying the final accounts of “Budva Holding,” a municipally owned company, in 2008 and 2009.
Besides the allegations of falsifying final accounts, MANS also requested that allegations be investigated relating to a potentially damaging deal that Lazar Rađenović concluded between “Budva Holding” and the off-shore company “DC Invest Limited” (from Jersey) for an investment project in Golija, near Sveti Stefan.
In June 2009, “Budva Holding” and “DC Invest Ltd.” signed the “Joint Investment Agreement – Golije.” The agreement, signed by Rađenović and Ahmed Salam, envisages the establishment of a company that would manage the planned project. Three months later “DC Invest DOO” was established in Podgorica. In the statute of the newly established company it was specified that Podgorica-based “DC Invest” was registered as a real-estate development company.
In the section describing the initial capital investments of the partners it was noted that both partners would invest €1 euro each in cash, while the property of “Budva Holding” and the Municipality of Budva was listed as the company’s non-financial capital. Therefore, several parcels of municipal land were acquired by this new company, totaling some 67,000 m2 (all of it in Sveti Stefan). According to the company’s statute, the value of these parcels was estimated at €8.8-million.
Furthermore, the joint investment agreement also foresaw that the strategic partner would not invest his own money, but would give a €6.5-million loan to be used in purchasing a 4,160 m2 parcel of land and fund future projects. According to the Real Estate Authority, this parcel of land was the only real estate actually registered with Podgorica-based “DC Invest.”
To summarize, it would seem that the Municipality of Budva, through the company “Budva Holding,” invested 67,000 m2 of property worth some €8.8-million in a joint company, while its strategic foreign partner approved a €6.5-million loan which was used to purchase some 4,160 m2 of land for an unknown sum.
Furthermore, the statute of the new company and contract signed by Rađenović stipulates that the municipality’s €8.8-million is worth 33.3% of the stakes in the company, while the strategic partner’s loan of €6.5-million secures them a 66.7% share in the company.
Similarly the statute also specifies that “Budva Holding” is entitled to 20% of revenues realized by the joint company, while the off-shore company “DC Invest Ltd.” is entitled to 80%.
Following the initial agreement, “DC Invest Ltd.” proceeded to split its share in the project. Since last year a new off-shore company “DC Invest Holding BV” (registered in Holland) has also entered the project with a 33.3% share.
Nowhere in the contract is the value of the planned construction project for a future tourist/residential complex in Sveti Stefan stipulated. However, the contract mentions that in order to obtain loans for the project a mortgage will be taken out on the land as start-up capital.
The contract also addressed the liquidation procedures for the newly formed company, specifying that obligations towards all creditors would first be settled. The parcel in question would then be transfered to DC Invest Ltd., while the municipality of Budva would receive the remainder of the real-estate it put up as start-up capital. Of course, this would all be possible under the condition that the parcels are not under mortgage.
Finally, the contracting parties also committed themselves to confidentiality, stating that: “the contents of this agreement, in whole or in part, will be kept secret from third parties outside their respective organizations.”
In the contract, Rađenović also committed to: “taking appropriate measures to properly instruct employees and company partners in order to ensure that confidential information is not revealed.”
Give the above facts, it is alleged that Rađenović had to be aware of the potential risk that this agreement held for “Budva Holding” with €8.8-million invested in the joint venture “DC Invest DOO” based out of Podgorica. In this way the interests of the Municipality of Budva were jeopardized.
The fact that the Municipality of Budva concluded this agreement is no guarantee of this deal’s legality, given the municipal parliament of Budva’s track record.
Besides the criminal charges filed in relation to this case, MANS also submitted the statute of the company in question and the joint investment agreement for consideration by the Chief State Prosecutor. This will allow authorities to determined if by signing this contract damage was caused to the Municipality of Budva’s budget and what the role of the executive was in all this.
Dejan Milovac
Deputy Executive Director
