A series of high profile arrests rattled Slovenia yesterday. In what appears to be the an almost year-long investigation, the anti-crime unit and a specialized team of prosecutors gathered enough evidence to detain Ivan Zidar, Dušan Črnigoj and Hilda Tovšak, CEOs of construction companies SCT, Primorje and Vegrad respectively.
Ivan Zidar (SCT), Dušan Črnigoj (Primorje) and Hilda Tovšak (Vegrad)
To cover the intricacies of the Slovenian construction sector would require a whole series of posts, but suffice it to say that the past 15 years have been good for business in the sector. As the good doctor would have us know, real-estate prices in Slovenia have reached utterly pocket-crippling prices, but the demand outpaces supply by far, enabling contruction companies to practically sell whole blocks of appartments before even construction begins.
But this is just end-user market. The real money is in the infrastructure, namely in the Slovenian highway system, which was at the time it was commenced a) 30 years behind schedule and b) naivelly under-priced. This had two immediate effects: Slovenian construction companies, suffering the loss of the Yugoslav market and finding it increasingly hard to do business internationally (it is said that SCT built bunkers for Saddam Hussein in Iraq), were suddenly looking at a very bright future at home but at the same time the project kept getting more and more expensive until it became clear that someone wasn’t looking at the right column when adding up the total costs of Slovene highways.
There was more than enough work for entire Slovenian construction sector (and an occasional foreign contractor as well), but the most contracts by far went to Ivan Zidar’s SCT – some commentators estimate that his company earned €3,5 billion just by building highways.
Now, anyone who ever build a house (or even just redid the bathroom) knows that in the end it is always more expensive than initially thought, because “we had to change them pipes that were leaking all over the place” and that once you go with the project you don’t really change the contractor, because finding a new one again costs time and money while you can’t use the loo. And so Slovene construction companies followed the culture of underpricing and then, when a particular section of the highway was half-built, went “Errr… you know, about the price….”. And the government coughed up another tonne of money, because a) it didn’t want to come off as naive, b) this way it kept employment and GDP up and c) the deal was probably political anyway.
And this is the gist of it: it is more or less a matter of public record that companies, supposedly competing for winning contracts, formed a sort of a trust, fixing their bids and pre-aranging who would win which contract, hiring the remaining companied as subcontractors afterwards. Just that noone was able to prove it, because…. well… the government didn’t really feel like it, mostly due to the a,b,c cited above, plus the fact that some wealth was probably spread the government way as well (I won’t use the word bribe, but feel free to think it). But even if there was no direct bribery involved, the fact remains that people from construction companies would often find themselves in government or para-government posts (such as board of the Slovene Highway Company – DARS) or vice-versa. Nearly everybody is connected to nearly everybody else and in this game nobody tops Ivan Zidar, who is probably the single most-connected person in this coutnry. His connections span from old communist aparatchiks to the highest levels of the Catholic Church (SCT being its main contractor as well).
Yesterday’s arrests strike at the very heart of Slovene economy, especially since last year’s high GDP growth was riding solely on a government-funded construction boom. But rattling the economy cage, arrests are also political. If one had to name a party which had overwhelming influnece (especially in the highway business), it would be Slovene People’s Party (SLS), whose economic influence far exceeds its political might. Indeed, Finance minister Andrej Bajuk (NSi) allegedly ran a pet project of breaking this party’s grip on the construction sector, although both parties belong to the political right. Or maybe that was precisely the reason.
The stakes are high for PM Janez Janša. Although he (as he should) claims that he had no prior knowledge of the operation, noone really believes him. This is just to big for him not to be in the know. Moreover, he publicly declared a war against “tycoons” (i.e.: so called winners of transition) who ammased relatively huge ammounts of wealth in the past 15-20 years. So the police and the prosecutors better have an air-tight and waterproof case which they will close fast. Because if they don’t – and if the whole thing turns out to be just a political and PR stunt – the wrath the detained trio will bring down on the PM will be tantamount to Samuel L. Jackson’s “great vengence and furious anger“.
And remember – the burden of proof lies with the government. This is not a traffic violation we are talking about here. Being convinced that the three are guilty of corruption and bribery and proving it beyond a shadow of the doubt are two very different things. If the government wants to avoid allegations of setting up a pre-election show-trial aimed at boosting its dwindling popularity, the prosecution needs to produce a smoking gun. And it doesn’t really matter they do it on a deal of building a new control tower at Ljubljana International, worth just € 30 million. Elliot Ness got Al Capone for tax evasion.
P.S.: If your comment doesn’t show up immediately, please be patient. Akismet is acting up…