A YUGOSLAV offshore company used for sanctions-busting by the Milosevic regime could not even be liquidated because all its directors and staff had abandoned the island, an auditor told a Nicosia civil court yesterday.
Kypros Charalambides, a liquidator for auditors KPMG, was testifying in the case of Predrag Djordjevic, a Cyprus-based Serbian businessman who is suing the Popular Bank for transferring his money into a secret account without advising him.
In 1994, at the height of the Bosnian war, Djordjevic attempted to ship cotton into Yugoslavia with a United Nations permit.
Djordjevic claims his Bulgarian trade partner deposited about £180,000 in Deutschmarks into his company account in Belgrade, and that the money was supposed to be transferred to Beogradska Banka in Cyprus.
However, the transfer was mysteriously blocked.
After a long legal wrangle with Beogradska, Djordjevic found his money had been moved into an account with the Popular Bank. A company he had never heard of, Antexol Trade Ltd, controlled the account.
When the accounts were examined in court, Djordjevic discovered about $300,000 had been transferred to Antexol’s Popular Bank account, which bore the same number as his account with Beogradska.
Djordjevic, who finally received his money too late to save his cotton deal, then decided to take legal action against the Popular Bank and Antexol.
Antexol was named by the International War Crimes Tribunal as one of eight offshore ventures forming part of a money-laundering network. All of them had opened accounts with Laiki. They were registered by the Tassos Papadopoulos law firm.
And when liquidators were despatched to Beogradska, they found nothing but empty drawers and file cabinets.
Djordjevic is building his case on the premise that his company, Genemp Trading, was mistaken for one of the alleged front companies on the island engaged in money-laundering for the Milosevic government. Yugoslavia was subject to a strict UN embargo at the time.
Yesterday’s first witness, Kypros Charalambides, said it had not been possible to secure Beogradska’s statement of affairs because “all of the people in charge were not in Cyprus… there was no one we could talk to”.
The bone of contention during yesterday’s hearing was a fax sent by Beogradska to the Popular Bank. The fax, dated April 18, 1994, informed the Popular Bank that a letter of credit was to be transferred into the account of one of the latter’s customers.
The reference code for the account was 78-10-198.
The letter of credit had been issued by a bank in Vienna, and the money was to be paid into Beogradska and subsequently transferred to Djordjevic’s account with the Popular Bank. Instead, Djordjevic claims, the funds ended up elsewhere.
Next to take the stand was Yiola Kilaniotou, who was employed at the Popular Bank credits department at the time.
For half an hour she was grilled by Djordjevic’s chief lawyer Christos Clerides as to why the bank did not check with the beneficiary of the letter of credit – Djordjevic –before moving the money into an account.
Kilaniotou said the fax they received bore the insignia and signature of Beogradska, who were the representatives of the beneficiary, so this was enough to approve the transfer.
“We had nothing to do with the beneficiary,” she said, adding: “All our contact was with Beogradska.”
“So you relied on a fax from an unknown person without checking back with Beogradska? You assumed the letter of credit was from them, but never bothered to check,” insisted Clerides.
“I submit to you, madam, that when it came to dealing with Yugoslavian companies, you did everything through Beogradska, with whom you had a special relationship, no questions asked.
“That would explain why your bank did not go to the trouble of informing my client’s company of the transaction.”
The witness denied this, repeating that she had merely followed standard procedure.
She said that she personally made a handwritten note at the bottom of the letter of credit, which read “care of Beogradska.”
The fax was then forwarded from the bank’s headquarters to the branch on Nikis Avenue, Nicosia, since the account code corresponded to that branch.
However, two days later, Nikis Avenue branch sent the fax back to headquarters, not having transferred the money into Djordjevic’s account.
“And why not?” quizzed Clerides.
“I suppose it is because they were unable to locate the customer in the meantime,” the witness replied.
Clerides next asked Kilaniotou if she had ever heard of Antexol and its involvement in money laundering.
Popular Bank attorney Kikis Tallarides strenuously objected, saying it was irrelevant to the case.
The hearings resume tomorrow, with the testimony of Costas Hadjiefthymiou, former manager of the Popular Bank branch in Pallouriotissa, where Djordjevic held his account.
The case, which began last summer, is expected to wrap up this week with closing arguments.
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