European Western Balkans

The corruption case in Serbian state company EPS – What we know so far?

TENT B; Photo: EPS

During February of this year, the state company Elektroprivreda Srbije (EPS) was in the public’s focus for the umpteenth time due to corruption. Only fourteen days after the members of the National Assembly passed judicial laws that should eliminate political influence on the judiciary, the Higher Public Prosecutor’s Office in Belgrade replaced two prosecutors who worked on the case of abuses in the state-owned company. The deputy prosecutors, Bojana Savović and Jasmina Paunović were replaced by the anti-corruption department of the Higher Public Prosecutor’s Office, where the EPS case was taken from them “without explanation”.

The suspicion that this is an open abuse of the hierarchical structure of the judiciary is indicated by the fact that the prosecutors were transferred only a day after the police arrested six suspects for embezzling 7.5 million dollars.

In a major operation by the police and the High Prosecutor’s Office in Belgrade, six people were arrested for damaging the EPS. The issue is misconduct related to the construction of the industrial railway from the Stig station to the Kostolac B thermal power plant. During a tour of the works, it was noticed that part of the railway was missing, after which criminal charges were immediately filed.

According to Nova.rs, the Italian company ‘Italiana Costrucioni s.p.a’ was in a consortium with Bauwesen, and they were supposed to build about 20 km of railway. The CIP carried out supervision.

EPS paid for temporary situations certified by CIP. At some point, the people from EPS, who were going on a tour, realized that several kilometers of railway were missing and that it was all regularly in a construction situation that the CIP properly verified”. 

In this way, the suspects damaged EPS for as much as 7.5 million dollars, and it was fraud related to the construction of the industrial railway from the station Stig to the thermal power plant “Kostolac B”. EPS managed to collect most of the money through the activation of the guarantee for a job well done.

The railway, whose planned length is 21 kilometers, has been under construction for over five years. The value of the project is 14 million dollars, which the daily newspaper Danas wrote about back in 2018.

The project was developed by the Traffic Institute “CIP” from Belgrade, and a contractor is a group of bidders led by the Italian company “Italiana Costruzioni” with a group of domestic bidders led by the company “Bauwesen” from Lazarevac. Our portal has written about the company Bauwesen on several occasions, and the last time we got information was when they applied for the project with false documentation. 

The Executive Director of Transparency Serbia, Nemanja Nenadić, told Insajder frauds that the public found out about were only a segment of what was happening in EPS. 

“We don’t know the fate of those criminal charges filed by the relevant ministry almost two years ago when the accident occurred. We have a state body with strong arguments, and we don’t have a publicly available answer from the prosecution,” he said.

According to him, this is not just a situation where some money was misused, but it is about the fact that the most prominent company was managed for more than four years without any legal basis. Nenadić also says that in the case of EPS, it is a good reason to examine many contracts.

“If this goes in the right direction in the prosecution, then it will lead us to the fact that the prosecutors will be more active, that they will demonstrate in practice what the new law and the Constitution have brought them, a greater level of independence and that they will demonstrate in practice their willingness to investigate and other cases”, he stated. 

Transfer of prosecutors amid judicial reform

On February 23, Bojana Savović stated that she and her colleague Jasmina Paunović were deprived of the EPS case “without explanation” and were removed from the anti-corruption department.

On the same day, the prosecution rejected those claims. They pointed out that it was about the “transfer” of deputy prosecutors according to the regular annual plan to other departments.

On the other hand, some opposition and non-governmental organizations accuse the government and judicial authorities of exerting political pressure on female prosecutors and trying to cover up cases of high corruption.

Advisor for EU integration issues in YUCOM and coordinator of the Working Group of the National Convention on the EU for Chapter 23, Jovana Spremo, said for EWB  that this is a good moment for such an event to attract the attention of the public and that the prosecutors did well by addressing the public to protect their independence, taking into account that the mechanisms from the new Law on Public Prosecutions have not yet been implemented.

“I believe that these events are coincidental in that the reform and changes in the law have neither prevented nor helped this situation with the prosecutors. We have previously pointed out that although these judicial laws have been improved to a small extent, it will only be possible to speak of greater independence after some time. In order to see the effects of the new solutions, it is necessary to start implementing the law and for the judges and prosecutors to become familiar with those solutions, which potentially enable more mechanisms to protect their independence, that is autonomy,” says Jovana Spremo.

She pointed out that this is a good signal for other prosecutors to use protection mechanisms as much as possible in the upcoming period of application of the new laws if they feel that there is pressure on them from other branches of government, as well as management, i.e. superiors who potentially threaten their independence.

She assessed that a more positive shift is expected only if the prosecutors and judges accept their role in the system and publicly use the newly created mechanisms.

Commenting on the recent removal of prosecutors Bojana Savović and Jasmine Paunović and the confiscation of the embezzlement case in Elektroprivreda Srbije a day after the arrest of six suspects, European Commission spokeswoman Ana Pisonero told European Western Balkans that the EC is monitoring developments in the High Public Prosecutor’s Office.

“Independent functioning and integrity of prosecution service is key for Serbia’s progress in the area of rule of law and these issues are followed closely in the context of EU accession negotiations under chapter 23, and those are judiciary and fundamental rights”, Pisonero said. She added that Serbia is expected to proceed swiftly with the effective implementation of this legislation and therefore establish the High Judicial and High Prosecutorial Councils as soon as possible.

According to Pisonero, the legislation introduces, among other things, the obligation to justify decisions, including those on the transfer of prosecutors, and a guarantee of the improvement of legal remedies, after the new High Council of Prosecutors has been formed.

“These changes aim at strengthening the internal autonomy of individual prosecutors. We expect Serbia to proceed swiftly with effective implementation of this legislation and therefore to establish the High Judicial and High Prosecutorial Councils as soon as possible, through a swift election of the lay members”, Pisonero said.

Vladimir Međak, Vice President of the European Movement in Serbia (EPUS), told EWB that Serbia should prove that it credibly fights for the independence of the judiciary. He adds that the fight against corruption is one of Serbia’s demands in Chapter 23, which concerns the rule of law.

“Serbia’s negotiating framework for EU accession is quite clear. We have to fulfill the transitional criteria in Chapters 23 and 24. Now that the judicial laws have been adopted, we need to prove that we credibly fight for an independent judiciary and an independent prosecution. The application of judicial laws and the fight against corruption will be one of the requirements according to which it will be measured if we close chapter 23”, Međak said

EPS – a company with constant losses

Elektroprivreda Srbije is the largest company in the country, with around 25,000 employees. Since the fall of 2022, the government in Serbia has been negotiating with Norwegian experts on the reform of EPS and other energy companies.

According to official data, EPS is the first on the list of companies with a cash loss. From March 2022, the acting EPS is Miroslav Tomašević. At the head of the company, he replaced Milorad Grcic, a member of the Serbian Progressive Party, who resigned in January 2022 due to public pressure due to the company’s collapse.

“Major errors in the management of Srbijagas and Elektroprivreda Srbije (EPS) came to fruition during the world energy crisis,” announced in July 2022 by the Fiscal Council, an independent institution that controls state expenditures.

The Council stated that the crisis, caused by the coronavirus pandemic and Russia’s invasion of Ukraine in February 2022, “was the trigger that exposed the domestic crisis of state-owned energy companies, which had been simmering for a long time.”

Total losses of EPS and Srbijagas, the state gas supply company, during the last heating season 2021/22. they amounted to about one billion euros. The Fiscal Council predicts that in 2023, more than one billion euros from the Serbian budget will cover the losses of Srbijagas and EPS. The exact figure has yet to be discovered, nor how the losses occurred and for what purposes the budget money will be used, the Fiscal Council warned.

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