Corrupt Bank Practices Sap Yugoslav Economy

Serbs lose savings from underworld schemes to subvert sanctions

TENS of thousands of panicked Belgraders besieged a soccer stadium yesterday where numbered tickets were being given to withdraw money from a private bank. The rush followed the collapse last week of another private bank whose owner fled to Israel, leaving a tangle that threatens to bring down the whole economy of the remaining Yugoslavia.

Jezdimir Vasiljevic, once regarded here as a financial magician, fled the country after a series of events that include the arrest of two ministers and several mysterious deaths. He has announced that at least some small investors will recover their savings once his assets in Yugoslavia are liquidated. But diplomats say his flight has started the collapse of a private banking system whose influence is pervasive and interest rates exorbitant.

Depositors besieging the soccer stadium agree.

"Putting my money in this [Dafiment] bank was the only way to survive," said Vesna Djordjevic, a factory worker who has lost her job when the factory closed because of United Nations sanctions. "I put all my savings in - I'm afraid I am going to lose it all. I don't know what I am going to do."

The flight of Mr. Vasiljevic, popularly known as Gazda (Big Chief) Jezda, has led to the exposure of a network of semi-legal institutions which came into being following the outbreak of Yugoslavia's civil war in 1991 and the imposition of UN sanctions, which have virtually shut down the country's legitimate economy.

Private banks, such as Vasiljevic's Jugoskandic and its rival Dafiment Bank, have been the heart of this network. Offering fabulous interest rates - 200 percent a month on dinar accounts, 15 percent a month on hard currency accounts - they have apparently been used to soak up money people have kept in their mattresses, diplomats say. They have also allowed people to survive in a time of more than 50 percent unemployment and 25,000 percent annual inflation. The private banks are said to be involved in smu ggling goods banned by the sanctions, and laundering drug money.

Depositors have besieged the banks and the parliament, demanding that Vasiljevic address them on television from Israel. Many hope something may be salvaged even though the acting director has admitted the bank could not meet its obligations.

Informed sources said Bobby Fischer, the American former world chess champion who has been living here since last September, is one of the largest depositors in the collapsed Jugoskandic.

Vasiljevic lured the reclusive Mr. Fischer out of retirement last summer by offering him $1 million to play his old Russian archrival Boris Spassky. Vasiljevic also put up a $5 million purse for the tournament billed as the "world chess championship."

The government has made no official statements on the scandal. But the government-controlled media have been attempting to control damage and discourage a run on other private banks.

Shortly before Vasiljevic's unexpected flight, police arrested several people believed to be linked to him. Among them were Serbian ministers for trade, Velimir Mihajicvic and Sava Vlajkovic, who are said by police to have received 1.5 million deutsche marks "in connection with oil imports." Police claimed that when they arrested Mr. Mihajicvic, they found 700,000 deutsche marks in cash in his apartment.

From Israel, Vasiljevic accused other close associates of Serbian President Slobodan Milosevic of extorting such large bribes from his bank that it could no longer operate.

Among the accused are two former prime ministers of Serbia, Dragutan Zelenovic and Radoman Bozovic (now president of the federal parliament), as well as top Belgrade official Nobojsa Covic, whom Vasiljevic said extorted 200,000 deutsche marks last December. Mr. Covic conceded receiving the 200,000 marks, but insisted it was a "voluntary contribution" to his election campaign.

A range of theories as to why Vasiljevic took flight is circulating in Belgrade. One claims that he lost out in a financial power struggle to his main rival, Dafina Milenovic, known simply as Dafina, the owner of Dafiment Bank, who is said to be directly protected by Mr. Milosevic. Her banks give similarly fantastic rates of interest. Depositors in her banks were besieging the soccer stadium yesterday.

Another theory advanced by diplomats holds that Vasiljevic may be working for Milosevic, preparing the ground for the Serbian president to remove certain officials, including Montenegrin leaders, who have been increasingly dissatisfied with their union with Serbia in the new Yugoslavia declared by Milosevic in January last year.

Since he arrived in Israel, he has attempted to play the crusading knight exposing the corruption of top politicians for the good of the people.

In particular, he has accused top Montenegrin leaders, including the president and prime minister, of extorting huge bribes.

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