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How Croatian agriculture bought the farm

Agriculture was once a core industry in the former Yugoslavia. But corruption and mismanagement turned the region's one-time breadbasket into a 'small war zone.'

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The employees demanded an investigation into the previous management. They also criticized Babic, accusing him of delaying the insolvency process by missing key sessions. But their complaints were ignored by the judges at the commercial court.

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Selling off the kit

The rancorous bankruptcy sessions reflected tensions outside the courtroom. The workers claimed a man named Vlado Loncaric, appointed by Babic to guard the farm, had mishandled the auction of equipment.

“Some of the machines – combine harvesters, tractors, trailers and parts of the gear – have been stolen and undersold by Vlado Loncaric,” the workers told the court in May 1998. “There are no auctions and no one is keeping a record.”

Babic responded by accusing farm employees of trying to sabotage the auction by stealing machine parts. “Everything the workers are telling you is a lie,” he said in court.

The insolvency process would deal a series of blows to the employees’ hopes of recompense.

An audit by a local firm ascribed a far lower value to the farm equipment than previous estimates. For instance, a machine for spreading fertilizer, originally valued at €4,000, was sold for €5. A company bus was sold for €330, while a combine harvester, only a couple of years old, was sold €750.

Babic said the employees’ theft of machine parts had reduced the value of some equipment. Nevertheless, he told the bankruptcy court, the sale of machinery had been the “most successful part of the auction.” Overall, he said, equipment with a total value of €156,000 had fetched only slightly less: €136,000.

During a phone interview with BIRN this summer, Babic defended the auction and said he was not responsible for the values determined by the local auditor. “I did not want to have anything to do with it,” he said, referring to the pricing.

With the workers clamoring for his dismissal, Babic told BIRN he too was just as keen to hand over management of the insolvency. The whole process had “irritated” him, he said.

Viktor Palic, a presiding judge at the bankruptcy court, also told BIRN that Babic had been under pressure from the workers. “The employees kept attacking him,’’ he said.

The audit, ordered by Babic and completed in 1998, showed that the farm had lost half its value since 1991. The equipment and the buildings were now only worth around €700,000 ($900,000).

Neither estimate – from 1991 and 1998 – takes into account the value of the surrounding fields, whose ownership is harder to establish since the Croatian government took control of the collectives.

Throughout the 1990s, agricultural land originally managed by the Yugoslav-era collectives was broken into plots and redistributed to smallholders, including war veterans, peasants and loyalists of the HDZ party, which governed Croatia after independence.

Stipan Bilic, an agricultural expert in Croatia, argues that this was more harmful for the old farms, such as PP Retkovci, than the mismanaged privatizations.

“The company was stripped of its capital assets,” he said. “They could not obtain loans any more.”

‘Missing documents’

The workers were bitterly frustrated with the insolvency process – but worse was yet to come.

In August 1998, Babic told the court that some €150,000 of the farm’s funds – including money from the sale of the equipment – were no longer accessible. The money had been placed with Glumina Bank, a creditor of PP Retkovci, which had gone bust the previous month. The workers were furious and again claimed that Babic had mismanaged the insolvency. However, Babic pointed out that he had made the deposit with the approval of the court.

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