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RR RUEHAG RUEHAST RUEHDA RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN
RUEHLZ RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHBW #1040/01 2771548
ZNR UUUUU ZZH
R 031548Z OCT 08
FM AMEMBASSY BELGRADE
TO RUEHC/SECSTATE WASHDC 0499
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHEHNS/NSC WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/HQ USEUCOM VAIHINGEN GE

UNCLAS SECTION 01 OF 02 BELGRADE 001040 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: PGOV KCOR SR
SUBJECT: SERBIAN AUTHORITIES ARREST RULING PARTY MAYOR FOR 
CORRUPTION 
 
REF: BELGRADE 617 
 
Summary 
------- 
 
¶1. (SBU) Popular ruling party mayor Goran Knezevic was arrested 
October 1 and charged with participating in a criminal conspiracy. 
The arrest comes less than a month after statements by top officials 
of the ruling Democratic Party (DS) announcing a crackdown on 
corruption.  The media and observers were rife with speculation 
about possible political motivations since Knezevic was reportedly a 
rival to DS Vice President Bojan Pajtic.  Despite charges of 
political motivation, the new government may be making good on 
campaign promises to fight corruption.  End Summary. 
 
Mayor Charged with Defrauding Municipality 
------------------------------------------ 
 
¶2.  (U) Goran Knezevic, mayor of Zrenjanin in Vojvodina and a member 
of the main board of the ruling Democratic Party (DS), was arrested 
along with ten others on October 1 on charges of criminal 
conspiracy, abuse of office, forging public documents, and bribery. 
Among the ten are other Vojvodina public officials and businessmen, 
including Branko Savkovic, who is known as "Legija's banker" for his 
close association with the career criminal Milorad "Legija" Ulemek 
(reftel).  In a press release, the Office of the Special Prosecutor 
for Organized Crime alleged that Knezevic participated in a scheme 
to sell choice plots of public land in Zrenjanin at cut-rate prices 
to select businessmen who would then sell them to corporations for 
an enormous profit.  The "Construction Mafia" is also suspected of 
hiring a public security company, Gvozden, for public events and to 
protect municipal buildings without going through a public tender. 
The group allegedly made a 3.5 million Euro profit through these 
schemes.  Knezevic specifically is accused of falsifying tender 
documents and paying and taking bribes.  News outlets reported on 
October 3 that Knezevic and most of the other suspects had denied 
all allegations during questioning.  One of the suspects, chief of 
Zrenanjin urban planning Nikola Halas, admitted to taking a bribe 
and said he told Knezevic about it, according to press reports. 
 
¶3.  (U) According to the Special Prosecutor's announcement, police 
in Zrenjanin, Vojvodina's capital Novi Sad, and Belgrade were 
involved in the investigation.  Interior Minister Ivica Dacic said 
the investigation was already well underway when he took over as 
minister in July.  An investigative judge will determine whether to 
initiate a court investigation and order investigative detention. 
Local daily Blic reported on October 3 that the investigation of the 
"Construction Mafia" was ongoing and involved criminal groups in 
Belgrade. 
 
Government Announces Anti-Corruption Campaign 
--------------------------------------------- 
 
¶4.  (U) Speeches by top government leaders foreshadowed the arrests. 
 President Tadic (DS) announced at the party's main board meeting in 
September that his government would decisively address corruption 
and crime and he would begin by uncovering corruption within the 
party.  Soon after the board meeting, Oliver Dulic, Environmental 
Protection and Urban Planning Minister and one of Tadic's close 
advisors, gave an interview in the weekly magazine Vreme announcing 
the government's fight against corruption.  In the interview, he 
said the government needed to recognize the great harm corruption 
inflicted on citizens. 
 
¶5.  (U) In an October 2 press release, DS said the fight against 
corruption was one of the government's highest priorities and that 
the state would carry out its duties without regard to a suspect's 
status or party membership.  Interior Minister Dacic said that 
further actions to combat organized crime would occur, regardless of 
political affiliation, whenever the police discovered evidence.  On 
October 2, Tadic told press that he was personally affected by the 
arrest of so prominent a DS member but that no one would be 
protected from the government's efforts to rout corruption.  Tadic 
said Serbia had to address corruption and other issues before it 
could join the EU.  Belgrade Mayor Dragan Djilas (DS) told the press 
he was certain similar abuse of office occurred in Belgrade and 
would not be surprised if a similar operation resulted in the arrest 
of officials in the capital.  Dulic said the arrests should serve as 
a signal to other officials that the time had come to launch a 
serious crackdown on abuse of office. 
 
Speculations on Government Motive 
--------------------------------- 
 
¶6.  (U) Belgrade was awash with speculation on October 2 about the 
motivations for the arrest.  Knezevic, a highly popular mayor, has a 
reputation as a high flyer, and there is speculation that his 
success may have sparked jealousy among his political rivals.  Goran 
 
BELGRADE 00001040  002 OF 002 
 
 
Jesic, DS Mayor of another Vojvodina municipality, Indjia, claimed 
that the fight was political and if the government had been serious 
about fighting the "Construction Mafia," it would have started the 
investigation in Belgrade and Novi Sad, where the root of the 
problem lay.  Conspiracy theory-loving tabloid Kurir posited two 
theories on the reason for the arrest: a) Pajtic had ordered 
Knezevic's arrest because Knezevic had been a serious alternative to 
Pajtic for the position of president of the Vojvodina Executive 
Council, or b) Knezevic was only the first of many Vojvodina 
officials -- including Pajtic -- who would be targeted by DS in 
Belgrade for their efforts to decentralize power in Serbia. 
 
Popular Mayor Led Municipality's Growth 
--------------------------------------- 
 
¶7. (U) Knezevic is popular in Zrenjanin.  He served a successful 
term as mayor from 2004-2008, and he won reelection in May by a wide 
margin.  From 2000-2003, he was President of Zrenjanin's Executive 
Council.  He also served as a member of the Serbian Parliament from 
2003 to 2007.  Until last year, he was the head of DS's Vojvodina 
branch.  He resigned from this position in mid-2007 amid rumors of a 
political fight with Bojan Pajtic, a DS vice president and president 
of Vojvodina's Executive Council.  Dusan Elezovic, a close friend of 
Pajtic, replaced Knezevic as the head of DS in Vojvodina. 
 
¶8.  (U) Zrenjanin is the largest municipality by area in the 
province of Vojvodina.  A participant in USAID's Municipal Economic 
Growth Activity (MEGA) program, Zrenjanin has been successful in 
attracting investment.  It received the Serbian Chamber of 
Commerce's Municipalities of the Future award for economic 
development in 2007.  In a 2007 report of the World Bank on "Doing 
Business" in South East European cities in 2008, the World Bank 
ranked Zrenjanin the second highest among 22 cities in terms of ease 
of doing business.  Knezevic is given much of the credit for 
Zrenjanin's successful development.  In the summer of 2008 he 
received the Executive with Vision award from the Serbian Economic 
Journalists' Club and Agrobank. 
 
Comment 
------- 
 
¶9.  (SBU) Corruption, which opinion polls consistently show is 
widely believed to be rampant in Serbia, was a top campaign theme in 
the presidential and parliamentary elections earlier this year. 
Anti-corruption efforts also fit in with Tadic's EU integration 
agenda.  Knezevic's political spat with other top DS officials and 
his fellow mayor's surprising outspokenness about the political 
element invite the conclusion that the government is starting with 
convenient targets, but the arrest is not likely purely political. 
Some of Knezevic's co-defendants are unsavory, suggesting that 
Knezevic cannot be an innocent victim.  Tadic may be making good on 
his campaign promises and starting by cleaning house.  It is still 
too early to tell, however, if this arrest heralds a comprehensive 
campaign.  End Comment. 
 
MUNTER