Montenegro Telecom Privatisation
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In Montenegro, approximately €7.3 million was paid in bribes to Montenegrin Telecom officials in exchange for favourable terms for the purchase of a majority of shares in Montenegrin Telecom by three former senior executives of the Hungarian telecommunications provider in 2005. The Hungarian executives applied the same bribery scheme during the privatisation of Macedonian Telecom in 2005.
- Country
- Montenegro
- Sector
- Communications and media
- Offence
- Abuse of authority in business operations
- Phase
- 1st instance procedure
Description of the case
In Montenegro, approximately €7.3 million was paid in bribes to Montenegrin Telecom officials in exchange for favourable terms for the purchase of a majority of shares in Montenegrin Telecom by three former senior executives of the Hungarian telecommunications provider in 2005. The Hungarian executives applied the same bribery scheme during the privatisation of Macedonian Telecom in 2005.
In 2011, the United States Securities and Exchange Commission (US SEC) filed charges against Hungary’s Magyar Telecom and three of its former senior executives for bribing government and political party officials in Montenegro and Macedonia.
However, in 2014, US SEC suspended the investigation into bribes paid in Montenegro to simplify the overall case while the commission’s investigation on bribery in the privatisation of Macedonian Telecom continued. In 2017, the charged Hungarian executives agreed to pay financial penalties and accept professional bans to settle the charges against them.
The judiciary in Montenegro took over 13 years to proceed with the investigation owing to the alleged involvement in the bribery scheme of relatives of high-ranking politicians in the country (see here, here and here).
The investigation was opened in 2015. In 2018, the special state prosecutor’s office in Montenegro filed an indictment for abuse of authority in a business operation against former directors of Montenegro Telecom Oleg Obradović and Miodrag Ivanović. In February 2019, the high court in Podgorica confirmed the charge brought by the prosecutor’s office only against the former officials of Montenegrin Telecom.
Media reports suggested that Ana Kolarević, Milo Đukanović’s sister and prime minister of Montenegro at the time, was involved in attempting to take bribes for Đukanović and gain control over minority shareholders’ stocks (see here, here, here and here).
However, the special prosecutor stated that the investigation against Kolarević had been dropped. It was determined that her law office had provided consultation services amounting to €580,000 and there were no links to Đukanović.
Legal description of the case (this is optional)
Bribery for senior executives of Hungarian telecommunications
Abuse of authority in business operations, Article 272 of the Criminal Code for former directors of Montenegro Telecom
Applicable corruption offence
Bribery, abuse of official powers, illegal mediation
Other laws breached
Criminal Code, Law on Prevention of Corruption, United States Foreign Corrupt Practices Act (FCPA)
Suspects' institutional affiliation
State-owned Montenegro Telecom officials are at the heart of this corruption case. The privatisation process was overlooked by the Montenegrin Council for Privatisation, appointed by the Government of Montenegro.
Date of offending
The privatisation took place in 2005, while the bribery was discovered by US SEC in late 2011. At the beginning of 2018, the Montenegrin special state prosecutor’s office filed an indictment against two former directors of Montenegro Telecom. The case before the Montenegrin Prosecution is ongoing.
Sector affected
Communications and media
Related developments
It took the domestic judiciary over 13 years to advance with the investigation. This was primarily because the US SEC investigation pointed to individuals close to high-ranking politicians in the country.
Court
High court
Related domestic or foreign cases
Magyar Telecom executives applied the same bribery scheme in the privatisation of Macedonian Telecom in 2005 and 2006. This case was also discovered by US SEC.
Current phase of the case in criminal procedure
The high court accepted the case, confirming the indictment against former Montenegrin executive directors for abuse of authority in a business operation, Article 276 of the Criminal Code.
Procedural history
On 29 December 2011, US SEC filed charges against Magyar Telecom and three former high executives of the company. They were charged with bribery of government and political party officials in Montenegro and Macedonia.
On 1 March 2014, SEC suspended the investigation into bribes paid in Montenegro to simplify the overall case. The investigation into bribes paid in Macedonia continued (see here).
In February 2019, the high court in Podgorica confirmed the charge of the special prosecutor’s office in Montenegro filed against former directors of Montenegro Telecom Oleg Obradović and Miodrag Ivanović (see here).
Obstacles
The involvement of high government officials and the lack of political will to prosecute corrupt practices in the privatisation process have slowed down the investigation. US SEC pointed out that one of the actors in the bribery scheme was a lawyer, Kolarević, sister of former prime minister Đukanović. Public concerns are that the case will not proceed because she has close ties to Đukanović (see here, here, here and here).
Resolution of the case
Ongoing, postponed in May 2021
Applicable minimum and maximum penalty
Two to ten years in prison for abuse of authority in business operations (Article 272 of the Criminal Code of Montenegro)
Charges pressed by the prosecutor in the actual case
Montenegrin courts: abuse of authority in business operations
Sanctions imposed
US SEC imposed penalties of US$95 million (€66 million) to Magyar Telecom and US$4.36 million (€3 million) to Deutsche Telecom in 2011. In 2017, the three former executives of Magyar Telecom were fined US$460,000 (€319,000) and barred from serving as officer or director in US SEC-registered public companies.
Sanctions enforced
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