VZCZCXRO7166
PP RUEHPOD
DE RUEHPOD #0130/01 1051555
ZNR UUUUU ZZH
P 141555Z APR 08
FM AMEMBASSY PODGORICA
TO RUEHC/SECSTATE WASHDC PRIORITY 0757
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUEHRO/AMEMBASSY ROME PRIORITY 0005
RUEHPOD/AMEMBASSY PODGORICA 0838

UNCLAS SECTION 01 OF 03 PODGORICA 000130 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV PREL KCOR KCRM MW
SUBJECT: ITALIAN PROSECUTORS QUESTION PM DJUKANOVIC ABOUT '90S 
CIGARETTE SMUGGLING ALLEGATIONS 
 
 
¶1. (SBU) SUMMARY: Montenegrin PM Milo Djukanovic voluntarily 
traveled to Bari, Italy on March 31 for questioning by Italian 
prosecutors. Djukanovic and another 14 Montenegrins have been 
under investigation by the Italian authorities since 1999 for 
"associating with the mafia to profit from cigarette smuggling 
from 1994 to 2002." Djukanovic's lawyer said Djukanovic had 
denied that he (the PM) or Montenegro had done anything wrong 
-- Djukanovic claimed Montenegro had legally licensed the 
transit of cigarettes in order to survive at a time when 
Montenegro was under pressure both from Milosevic and 
international sanctions against the former Yugoslavia.  The 
Montenegrin opposition used Djukanovic's appearance in Bari to 
launch another wave of criticism against the PM just before the 
country's April 6 presidential elections. End Summary. 
 
 
 
Background On The Case 
 
---------------------- 
 
¶2. (U) Media reports differ on the content of the allegations 
against Djukanovic, but most agree that Djukanovic is accused of 
playing a key role in a massive smuggling scheme which began in 
1994 when Djukanovic (who was also PM at that time) granted a 
license to Swiss national Franco de la Torre to import about 
1,000 tons of cigarettes per month from the U.S. to Montenegro. 
(Note:  De la Torre is currently on trial in Italy on other 
charges).  The cigarettes were transferred to a state-owned 
freight company called "Zetatrans," which transported them to 
the Montenegrin ports of Zelenika and Bar.  From there, and with 
the authorization of the Montenegrin police, Italian speed boats 
carried the cigarettes to Italy, where Italian criminal 
structures allegedly sold or re-exported them without paying 
import duties.  Djukanovic also is accused of providing shelter 
in Montenegro to mafia figures wanted by Italian police. 
 
 
 
¶3. (U) The investigation into Djukanovic's activities was 
completed in June 2007, but Italian judiciary bodies apparently 
have still not decided whether or not to formally indict.  At 
the time, they gave the suspects a 20-day deadline to present 
their defense before the Italian judiciary. 
 
 
 
¶4. (U) In addition to Djukanovic, the Italian judiciary opened 
investigations against 14 other Montenegrins, including Miroslav 
Ivanisevic, former Minister of Finance and current Chairman of 
the Senate of the State Auditing Office, Dusanka Jeknic, former 
Head of the Montenegrin Trade Mission to Italy, and businessmen 
Stanko Subotic, Veselin Barovic, Branko Vujosevic, Brano 
Micunovic, and Andrija Draskovic.  Eight persons (Ivan Krcmaric, 
Nikola Milosevic, Jovica Randjelovic, Dusan and Milan Rankovic, 
Slavko Zecevic, Zoran Dzajic and Miloje Sarac) were charged with 
transferring 500 million euros, allegedly earned from cigarette 
smuggling and laundered through banks in Switzerland and 
Lichtenstein, from Montenegro to a Cypriot bank (account number 
03854109703949). 
 
 
 
¶5. (U) The Italian press says Montenegro earned about 25% of its 
gross national income during the 1994-1999 period from cigarette 
smuggling (which continued until about 2002, but with less 
intensity), while Italy lost about four billion lira annually 
due to non-payment of taxes on cigarettes. Italian investigators 
believe profits from cigarette smuggling reached seven million 
dollars per month. 
 
 
 
¶6. (U) According to the media, two separate investigations by 
police and prosecutors in Bari and Naples were unified in 1999, 
and the Directorate of the Special Prosecutor in Bari was given 
responsibility for the final phases of investigation. The 
evidence presented by Italian prosecutors reportedly was based 
on statements collected by mafia informants ("pentiti"). 
 
 
 
Related Trials 
 
-------------- 
 
¶7. (SBU) In Serbia, the state prosecutor's office opened an 
investigation several years ago of Marko Milosevic (son of 
Slobodan Milosevic), Stanko Subotic (the controversial 
businessman also being investigated by the Italians), and Sinisa 
 
PODGORICA 00000130  002 OF 003 
 
 
Stojicic (brother of Radovan Stojicic Badza, deputy Minister of 
Interior of Serbia murdered in 1997) for their alleged 
involvement in cigarette smuggling .  The Belgrade press claims 
Djukanovic was mentioned in the investigation of Subotic and 
Milosevic. 
 
 
 
¶8. (SBU) In 2000 and 2002, the EU Commission filed a lawsuit in 
the U.S. against RJ Reynolds Tobacco, Japan Tobacco, and Philip 
Morris on charges that they had caused several billion dollars 
in lost tax revenues in EU countries. According to the lawsuit, 
during the 1990s, RJ Reynolds sold cigarettes to Montenegro and 
earned an unspecified but enormous profit. Large sums of money 
were allegedly paid to Djukanovic and other Montenegrin state 
officials for transport of the cigarettes through "Zetatrans." 
A Federal Court in Brooklyn rejected the lawsuit, but the EC 
Commission has appealed that ruling. 
 
 
 
Djukanovic Denies Allegations 
 
------------------------------ 
 
¶9. (U) Bari prosecutors questioned Djukanovic for six hours on 
March 31.  Djukanovic's defense attorney Tucilo told journalists 
on April 1 that Djukanovic asked to talk with the prosecutor's 
office in Bari over a year ago "in order to clarify the 
situation."  According to Tucilo, Djukanovic had responded to 
all the Prosecutor's questions and had denied all accusations. 
Italian and Montenegrin media reported that Djukanovic appeared 
before Bari Deputy Prosecutors Eugenia Pontasula and Giuseppe 
Selzi at his own initiative. 
 
 
 
 
 
¶10. (U) Tucilo told the media that Djukanovic had explained to 
the prosecutors that he did not know anything about the presence 
of Italian mafia figures in Montenegro, that the Montenegrin 
government had never been involved in criminal activities, and 
that Montenegro had in fact fought against mafia clans.  Tucilo 
said Djukanovic had asserted that the cigarette business in 
Montenegro in the 1990s was legal, and that the licensing of the 
transit of cigarettes had been essential for Montenegro's 
financial survival at a time when the country was under pressure 
from both Milosevic and international sanctions against the 
former Yugoslavia.  According to Tucilo, Djukanovic also said 
that if there were questions about what happened to the 
cigarettes once they left Montenegro, those questions should be 
dealt with by the Italian judiciary.  (Note:  In response to 
questions about the Swiss and Cypriot bank accounts, Tucilo 
noted that at the time Montenegrin ministers were permitted to 
open foreign bank accounts.) 
 
 
 
¶11. (U) Djukanovic told the press on April 2 that he appeared in 
Bari on his own initiative to put an end to the allegations. 
According to a GoM press release issued after Djukanovic's 
return from Bari, "despite his immunity and the obligations that 
he has as the leader of the strongest party in the upcoming 
elections, Djukanovic insisted on giving his testimony.  He 
believes that Montenegro, and he, will be absolved of the 
unfounded accusations which damaged his reputation for years, 
and which were also abused for political purposes." 
 
 
 
Fate of Case Unclear 
 
-------------------- 
 
¶12. (U) Vesna Cejovic, a Montenegrin expert on Italian law, told 
the media that once the Italian prosecutors completed the 
investigation, they were obliged to forward the case to a judge, 
who would then decide whether to issue a formal indictment. 
Citing unnamed sources in the Italian judiciary, ANSA reported 
that the Italians would shelve the investigation of Djukanovic 
because of the PM's diplomatic immunity.  (Note:  Djukanovic 
denied that he knew that he would be cleared of the charges 
because of his immunity.)  Cejovic noted that the case could be 
formally closed only if the state prosecutor requested it. 
 
 
 
¶13. (U) The Montenegrin weekly "Monitor" claimed Djukanovic had 
reached a deal with the Italian prosecutor, according to which 
 
PODGORICA 00000130  003 OF 003 
 
 
Djukanovic would not be indicted while the other suspects in the 
case could be held accountable. (Note:  Monitor did not identify 
its source.) 
 
 
 
Comment 
 
------- 
 
¶14. (SBU) The Montenegrin opposition quickly jumped on 
Djukanovic's appearance in Bari, which occurred just a few days 
before Montenegro's April 6 presidential election, as evidence 
of the PM's past wrongdoing.  The opposition daily "Dan" alleged 
that the Italians had been prepared to issue an arrest warrant 
for Djukanovic unless he testified. It is unclear what will 
happen next, but most Montenegrins believe the Italians will 
quietly shelve the case, or go after lower-level suspects, 
rather than take on a sitting PM with diplomatic immunity. In 
the event, the scandal did not hurt Djukanovic's DPS, whose 
candidate Filip Vujanovic won the presidential race with a 
landslide 52%.  Even so, the case continues to dog Djukanovic, 
and raises questions about rule of law in Montenegro at a time 
when the country is seeking to speed its integration with 
Euro-Atlantic institutions. 
MOORE