Former minister, current Varaždin County Prefect, and candidate for future Prime Minister of Croatia, Radimir Čačić, claims he is a successful businessman. But the truth is that the former Coning holding under Čačić's leadership left debts of hundreds of millions of kunas and that bankruptcy proceedings have been initiated for the successor company over unpaid tax.

In complete media silence, two years ago bankruptcy proceedings were initiated at Varaždin Court of Commerce for Coning Holding/Ingprojekt. Bankruptcy proceedings were requested by the Varaždin Tax Administration because Coning Holding/Ingprojekt owed the Ministry of Finance 50.3 million kunas and its account had been blocked uninterruptedly for more than nine years.

This company, together with the smaller Congama, was created in 1992 with the transformation of the former DP Coning, while today’s companies whose names include the word Coning, with the exception of Congama, are actually newer companies formed in the 1990’s and later, independently of the “original” Coning. The bankruptcy of Coning Holding/Ingprojekt marks the collapse of the largest part of RO Coning, which had separated from GK Zagorje under the management of Radimir Čačić in the 1980’s.

Radimir Čačić headed the fallen Coning Holding as its Director until the mid-1990’s when the company account was blocked and it lost its employees. However, despite its account being blocked since 1995, bankruptcy proceedings for Coning Holding/Ingprojekt were only initiated in 2005. In documents related to bankruptcy proceedings, which are still pending, we found that Coning Holding/Ingprojekt had left huge unsettled debts.

Creditors Claim Half a Billion Kunas

Namely, after bankruptcy proceedings started in mid-2005, creditors were asked to report their claims and the figure on the long list rose to almost half a billion kunas, or more precisely 452 million kunas, the amount creditors claim Coning Holding/Ingprojekt still owes them. Along with the Tax Administration, claims were also reported by Zadar Technical School, which lays claim to 56.7 million kunas, and Ministry of Education and Sport, which claims 30.7 million kunas.

However, the biggest “sin” burdening the former Coning Holding is debts that were never settled in the “Deal of the Century” in Israel. Based on lawsuits that it won, the company Zagorje Ltd d.o.o. claims as much as 176.5 million kunas from Coning because DP Coning had hired the Varaždin-based building company as a sub-contractor and never fully paid what it owed.

Furthermore, the amount of 452 million kunas claimed from Coning Holding by various companies and institutions does not include an $8.5 million claim (this amount is much higher with interest) that DP Coning owes Israeli construction material suppliers and small sub-contractors according to a verdict passed by District Court of Beersheba, Israel.

Coning Leaves $8.5 Million in Debts in Israel

“DP Coning left Israel without settling its debts. There were a total of some hundred suppliers and sub-contractors who did carpentry and similar works for example and they all had contracts with DP Coning,” says Israeli lawyer Avraham Yaron, appointed by the Israeli court as liquidator of DP Coning to protect creditors’ interests, whom we met in his office in Tel Aviv.

Most of Coning Holding/Ingprojekt’s debts were “swallowed” by the statute of limitations, including debts to the Tax Administration. However, as Zagorje had paid a 200,000 kuna advance for the costs of the proceedings, it seems that this company, a decade and a half after the deal in Israel, has continued the legal battle to “wangle” the money Coning Holding/Ingprojekt owes them. We found out unofficially that lawsuits were filed against Coning Holding for deliberate damage done to creditors.

After we combed through several thousand pages of documents, most of them obtained from court files in different lawsuits filed by creditors against Coning Holding/Ingprojekt in Croatia and Israel, we concluded that the company evaded paying debts by transferring Coning Holding’s business and assets to the newly-created Coning Inženjering and to other, more recent companies, which is why creditors were unable to collect payment as Coning Holding/Ingprojekt no longer had valuable assets.

In late 1992, right after the collapse of the construction deal in Israel, Coning Holding founded four daughter companies: Coning Inženjering, Coning Turizam, Coning Ekologija and Coning Informatika. Coning Holding was their 100% owner and almost the entire business and assets were soon transferred to the daughter companies. However, as of 1993 different resale and exchange of shares started and the debt-ridden Coning Holding lost the daughter company shares. As a result, the company, without employees or any valuable assets, was left only with debts.

Meanwhile, Coning Holding continued with normal business through the daughter companies, now free of debt. Employees, owners, assets, business, even the name Coning in different forms, and the logotype – everything generally remained the same. Still, for the Croatian judiciary and administration these companies had no direct connection to Coning Holding. Our Israeli interviewees were particularly surprised by this.

They Recognize Profits, But Not Liabilities

“We can’t understand how someone can transfer profits to a new company without liabilities. Any company could do it then. If someone, for instance, has 20 million dollar profits and owes 25 million, they can simply move the 20 million to a new company and leave all 25 million to the old company. The lawyer we hired in Croatia tried to explain this to us. We couldn’t understand this as lawyers from the viewpoint of our judicial system because this is impossible in Israel. After all, it’s not logical either,” says Avraham Yaron. However, in Croatia the Israeli lawyers had to take these explanations seriously.

For example, the largest Israeli creditor, Lime & Stone Industries, alleges in its lawsuit against Coning Holding and its daughter companies that their assets have become mixed. However, Varaždin Court of Commerce in its judgment maintained that this was not supported by anything concrete and, since L&S Industries did not prove the responsibility of the daughter companies for the disputed debt of 1.7 million Swiss Franks, the lawsuit against them was thrown out.

After the exchange of shares between Coning Holding and its owners, some of the daughter companies exchanged a small number of their shares left in Coning Holding for shares in Croatia Airlines, as a result of which the daughter companies acquired part of their own shares, while Coning Holding acquired shares in the Croatian airline. However, the Croatia Airlines shares later disappeared from Coning Holding, but due to lack of documentation it is unclear if Coning Holding received a counter-value. According to the list of assets drawn up during bankruptcy proceedings, by 2005 Coning Holding/Ingprojekt owned a minor number of daughter company shares, less than 0.2% of their initial capital, which means that Coning Holding was left just with high debts.

However, collection of debts due to Coning Holding by the former Slovenian company Elan arrived in 1994. As the Međimurska Bank had issued a guarantee for these debts, the court decided that the bank must pay nine million German marks to Coning Holding. Judging by information from the Report on Revision of Transformation and Privatization, the problem was “solved” by selling the debt for 18 times less, for 500,000 marks, to the other companies controlled by Čačić and his associates, and after moving through different accounts the money arrived at Coning Inženjering. This company, namely, had taken over most of the former Coning Holding’s business and Čačić ran the company as its Director until 1998.

After all of Coning Holding’s assets, employees and business were moved to other companies, in March 1995 Radimir Čačić withdrew from the position of Director and left the company, without employees and without business, to his associate Frano Mesić. In order for Coning Holding to symbolically become history, it was renamed Ingprojekt, while another newly-founded company, Condelta, was renamed Coning. Dragutin Lovrenčić, one of Coning’s head managers, justified the change by protection of the company, because annulment of privatization, which returned Coning Holding to the ownership of the Croatian Privatization Fund for several years, arrived in 1996.

Payment of Debts Evaded by Privatization

“Precisely due to announced and later implemented activities related to seizing the company from its real owners, the reputed name Coning was kept and given to a private company founded with the private payments of some 100 small shareholders, who had created the name Coning in the first place. As such it is legitimately used with pride today,” explains Lovrenčić.

Coning Holding/Ingprojekt’s legal battle included hiring tough lawyers who were given high bonuses and who repaid this by expertly and ingeniously placing countless obstacles for the plaintiffs – counter lawsuits, appeals, complaints – dragging out the lawsuits for years. Some of the proceedings even ended unfavorably for the plaintiffs.

For example, DP Coning’s liquidators in Israel, the lawyers Avraham Yaron and Doron Tishman, requested in Croatia the recognition and execution of a verdict pronounced by an Israeli court, according to which the company owes 70 Israeli companies the amount of 13.7 million new Israeli shekels. Although the Israeli court’s final decision was summarized on just two pages with a list of creditors, Croatian courts wrote hundreds and hundreds of new pages about it. After long and complex proceedings, they rejected the Israeli verdict. The reason was procedural, i.e. everything was stuck on the issue of which court was responsible and if the proceedings in Israel were bankruptcy proceedings or litigation.

Parallel to this lawsuit, the biggest creditor, Lime & Stone Industries, decided to seek justice in Croatia, but was turned down because a Croatian court decided that proceedings were being undertaken at the same time for recognition of the Israeli court’s verdict and that its claim from this company was part of it.

Croatian Courts do not Recognize Evidence

“When the first court case started in Varaždin, our lawyer in Croatia said there were a lot of problems at the local court. He thought it might be simpler in Zagreb, but that didn’t work either. Lime and Stone Industries, to which Coning owes the most, separately conducted different proceedings. They sued Coning directly in Croatia. They had all documents – invoices, transport bills, all signed and stamped, but that was also unsuccessful,” says Doron Tishman, the Israeli lawyer we interviewed in Tel Aviv who was appointed together with Avraham Yaron as liquidator of DP Coning. Although surprised and embittered by the decision, there was not much the Israeli lawyers could do.

“When we realized the procedure wasn’t going the way we thought it should, in the late 1990’s we arranged a meeting with Radimir Čačić in Zagreb to try to make a deal. However, Čačić completely turned us down at the time. He kept blaming Ben Yakar Gat, the investor company Coning had concluded contracts with to build apartments in Israel in 1991. We told him to sue Ben Yakar Gat, but we represent the creditors and there is no doubt that DP Coning has debts to them, and also the whole case has a negative effect on Croatia’s reputation in the business world. We also met with Croatian Government officials. We brought letters from the Israeli Ministry of Justice and Ministry of Foreign Affairs. But that didn’t help either,” says Tishman, who returned with Yaron from Croatia empty-handed.

After five years of litigation, the most successful in the legal battle was the company Zagorje, which won a final court decision in 1999 according to which Coning owes it a total of $9.6 million. But in distraint proceedings that followed, Zagorje could not collect the money because all of Coning Holding/Ingprojekt’s assets had been moved to the daughter companies years ago. In proceedings that lasted more than four years, Zagorje tried to carry out distraint over the founding shares in Coning Inženjering, Coning Turizam and Coning Ekologija, but in the end all proceedings were discontinued because the company had been declared bankrupt in the meantime. Consequently, Coning Holding/Ingprojekt’s debt to the company Zagorje has not been settled to this day, although 15 years has passed since the “Deal of the Century” in Israel.

A N N E X E S

Radimir Čačić as a Politician

Radimir Čačić was the Minister of Public Works, Reconstruction and Building from 2000 to 2004 and today he is the Varaždin County Prefect and a member of the Croatian Parliament. He is one of the founders of the Croatian People’s Party (HNS) and today serves as President of its Central Board. He started his pre-election campaign for elections that are due at the end of this year almost two years earlier, not hiding his ambition to become Prime Minister of the Republic of Croatia.

Čačić Refuses to Make a Statement

We tried to contact Radimir Čačić through the Chief of the Office of the Varaždin County Prefect, as Čačić holds the position of the County Prefect. After Čačić failed to call back, we sent a letter to Varaždin County explaining what we are writing about and for whom. But instead of responding to our letter, using the media Čačić attacked the article in advance and tried to deny the still unwritten article. After claiming that new scandals were being staged against him, he made the following allegations in Večernji List in early January:

“A journalist working for a regional newspaper which doesn’t have much of a circulation and has even lower sales figures and is sponsored by various people working with the state, i.e. authorities, has started to pursue investigative journalism. Allegedly not for his own paper, but out of his own impulse. And he came upon the so-called scandal in Israel, which is based on the fabrication that there is a final court decision against me for economic crime; Miroslav Rožić from the HSP once alleged that I was banned from entering Israel for that reason. Although this was all resolved long ago – it was written about, the Israeli embassy denied all of it – I guess some still find it interesting, and a consequence of this big scandal is that an Israeli business group is building a free zone in Breznički Hum and my county will open new jobs. If this is a consequence of the attack, let them attack me,” explained Čačić.

Čačić also stated that he had found out “from friends” about the alleged media campaign being staged against him. After these statements, we sent another request to the County for an interview with him on the subject of the article, but Čačić failed to respond again.

Countless Conings

The socially-owned company Coning was created out of the former RO Coning and its sectors and was registered on 27 March 1989. By decision of the Court of Commerce dated 12 October 1992, DP Coning was registered as Coning Holding d.d. The four daughter companies, Coning Inženjering, Coning Turizam, Coning Ekologija and Coning Informatika, were created on 29 December 1992 and the only founder and stock owner was Coning Holding. Coning Holding was renamed Ingprojekt in 1995.

There are many other companies from the 1980s, most of them founded independently of DP Coning, whose names contain the words Coning or Con: Coning Alfa, previously Coning d.o.o.; Congama and Condelta (we were unable to check the existence of Coning Beta, which is missing in this sequence); Polifin; Coning Projekt; and many other Conings. Some changed their names and Condelta later became Coning d.d., Polifin later became Coning Projekt, etc.

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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.