Former minister, current Varaždin County Prefect, and candidate for future Prime Minister of Croatia, Radimir Čačić claims he is a successful businessman. An apartment building deal in Israel, which he made 15 years ago as head of the company „Coning“, collapsed and despite valid court verdicts „Coning“ never paid the 172 million kunas and $8.5 million in debts.

Although a lot was written in the last 15 years about DP Coning’s business in Israel, up until now there was no serious analysis of the case, and it has not been fully concluded to this day. Namely, the company Zagorje is still legally fighting to collect 172 million kunas, the amount determined by a final court decision to be owed by Coning Holding/Ingprojekt. Another $8.5 million that Coning Holding/Ingprojekt owes to dozens of Israeli companies, also proven by a final decision of an Israeli court, has not been paid back either. Using reports by experts who analyzed the situation on instructions of Israeli and Croatian courts, as well as interviews with several dozen people involved in these events, we managed for the first time to examine the “Deal of the Century” from all sides, including the Israeli side, completely unknown to the Croatian public up until now.

Radimir Čačić began the already long forgotten construction venture in Israel as Director of DP Coning in mid-1991. The works went on for a little more than a year, actually until 15 October 1992, when they were suddenly discontinued.

“At the beginning of the war, in light of strongly reduced investment activities on one hand and a desire to help the fallen GK Zagorje in these circumstances on the other, DP Coning turned to additional business abroad,” says Dragutin Lovrenčić, one of Coning’s head managers. Israel at that time, due to the specific political situation, was seeking the help of foreign builders, as local companies could not do everything planned at the time.

Contract for Building 1,294 Apartments

Coning appeared in the Israeli market as a contractor at a time when the Israeli government with Minister Ariel Sharon had major programs which promised the building of as many as 50,000 apartments in five years. Coning concluded a contract for building 1,294 housing units in the city of Ashkelon, some 60 kilometers from Tel Aviv. The contract was concluded with the company Ben Yakar Gat, one of Israel’s four largest building companies at the time. The deal was won in competition against two other relevant European building companies,” says Lovrenčić.

Although the project was pompously announced in the media, even declared “Deal of the Century,” it was clear already in early 1992 that it was a huge business failure, whose loose ends would drag on for decades. Employees staged strikes and damage to DP Coning was estimated at tens of millions of dollars.

According to the opinions of practically all interviewees in Croatia and Israel we had a chance to talk to, as well as judgments in rationales of some of the final verdicts passed by Croatian courts, DP Coning’s Israel failure was primarily caused by a very unfavorable contract that Radimir Čačić as Director of DP Coning had signed with Ben Yakar Gat. As Čačić had agreed on the final price in advance and the projects came subsequently, what happened was that the orders were much more costly and demanding than Coning had expected, the materials had to be procured according to special rules and often at prices that were several times higher, and the building deadlines were on the verge of impossible. The contract completely favored the Israeli investor and gave practically no rights to the contractor. Coning’s debts were soon estimated at tens of millions of dollars.

“When Coning started building, there was a disagreement with Ben Yakar Gat over prices. Coning claimed it couldn’t handle such a low price and needed more money in advance from Ben Yakar Gat. Coning made an ultimatum: if Ben Yakar Gat wouldn’t give them the money, they wouldn’t continue to build. That’s how problems started. They were building and Ben Yakar Gat was giving them money in advance, including money that they weren’t due to give according to the contract. One day Ben Yakar Gat became tired of giving money which in their view didn’t belong to Coning according to the contract, so they stopped paying,” Avraham Yaron, DP Coning’s liquidator in Israel, told us.

Warning of Danger Ignored

A technical analysis ordered by DP Coning in the spring of 1992, when the construction work had already been going for almost a year, suggested that Čačić should withdraw from Israel because guarantees given by DP Coning in case of termination of works were lower than debts rising with every work day in Israel. However, Čačić did not heed the suggestion and works headed for the final phase.

The reason for entering the very unfavorable “Deal of the Century” and especially the possible reason why DP Coning had not walked out of the deal in the spring of 1992 despite the recommendation from the technical analysis, probably hide in DP Coning Director Radimir Čačić’s political engagement, i.e. his candidacy for member of Croatian Parliament in 2 August 1992 elections. Namely, to a great extent Čačić based his image on the reputation of a competent manager; the engagement of Croatian builders abroad contributed a lot to this. True, the work in Israel did not stop immediately after the elections, but in the summer of 1992 payments to suppliers had become irregular and completely stopped in late September and early October. Money was no longer paid out, not just to those who supplied the construction materials, but also to those who delivered food for employees, and employees no longer received salaries after the August elections.

Whatever the mysterious motivation for DP Coning’s business decisions, the situation at the construction site was gradually turning into anarchy, with more than 600 Croatian and Bosnian-Herzegovinian workers at the construction site being left without work, food or money, accommodated next to the war-torn border between Israel and the volatile Gaza Strip. Hundreds of workers hired for the job testify to this.

“We worked normally, until one afternoon trucks came loaded with rocks. They unloaded the rocks at each entrance through which we came to work so that no truck could enter or leave the construction site. When the work day was over, I went to hand in my equipment at the warehouse. The worker there took my tools, threw them into a corner and said we wouldn’t need them again. I thought he was joking, but he remained serous. And really – tomorrow we no longer went to work. We stayed at our camp. We didn’t receive food any more, we just got bread,” says a bar-bender who wanted to remain anonymous. After several days during which the situation was on the verge of unrest, the workers returned to Croatia on planes paid by Coning Holding. However, many of them never received their salaries for August, September and half of October.

Primary Subcontractor Destroyed

According to a final court verdict passed by Beersheba County Court, DP Coning still owes Israeli companies $8.5 million. The biggest debts are to the concrete supplier Lime & Stone Industries and supplier of paint and other chemicals Tambour.

However, with its “Deal of the Century” DP Coning inflicted the most damage to the Croatian building company Zagorje. Namely, DP Coning had hired Zagorje for the Israel deal as an “operational company” to built apartments using its own workers and machines. The “operational company’s” whole machinery was seized in Israel as part of the guarantee that DP Coning had given in the contract to Ben Yakar Gat. But Zagorje was also damaged by the reduction in the scope of the whole deal and sudden interruption of works where most of its workers had been employed. Due to the damage, Zagorje operated for years with serious financial problems and on the verge of bankruptcy and only succeeded in recovering economically several years ago.

A question that can only be answered by examining DP Coning’s documentation is whether the business failure, along with the bad contract, was also helped by possible use of money that DP Coning received from Ben Yakar Gat for other purposes. Our Israeli sources tend to believe this, although there is no proof.

“We compared the prices in Coning’s contract with Ben Yakar Gat and concluded that other companies in Israel were working for similar prices. Perhaps this is a bit cheap, but similar prices were also given to other companies working in Israel which ultimately finished their projects. As such high debts remain behind Coning Holding, perhaps the money was used for other purposes,” maintains Yaron.

DP Coning’s liquidation in Israel was initiated on 22 October 1992, just seven days after the termination of works. As the Israeli court verdict has not been confirmed in Croatia, we found out from Yaron and Tishman that Ben Yakar Gat later compensated some of DP Coning’s debts to Israeli companies. This was a condition that the Israeli government made to the company in exchange for a new apartment construction deal.

At the beginning of the new millennium, Israel was struck by a strong economic crisis which swept away many construction companies, including the big Ben Yakar Gat. However, Ben Yakar Gat’s owners are successful in the construction business again with new companies today. Other companies, including L&S Industries, to which DP Coning has the biggest debts, changed their field of operation and many companies shut down.

As we could see for ourselves interviewing residents of apartment buildings in Ashkelon, which DP Coning, or actually Zagorje, had been building, they generally do not know that the judicial “loose ends” related to the building of their apartments in Croatia were dragging to this day. Most of them are immigrants of Russian origin deliberately settled in this Israeli city, which has a pleasant climate on the Mediterranean coast, but is located right next to the still volatile Gaza Strip.

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Krešimir Kovač is a freelance journalist from Varaždin. He investigated the story for six months in Croatia and Israel.

The story was edited by Saša Leković.

The investigation was financially supported by the Denmark-based network for investigative journalists in East and Southeastern Europe – SCOOP.