November 25, 2022 - The former minister of regional development and funds of the European Union, Gabrijela Žalac (HDZ), celebrated her 40th birthday at the beginning of 2019 at the Šarm restaurant in Zagreb.

The bill was huge, a total of HRK 23,750. The Ministry of Regional Development and EU Funds approved that account for payment on March 4, 2019, at the expense of the Operational Program Competitiveness and Cohesion, i.e. from EU funds. Telegram.hr reports today that the disputed account is in the case file of the European Public Prosecutor's Office, on the basis of whose order minister Žalac was arrested at the end of last year on suspicion of illegalities in the process of public procurement of an IT system, known as the "software affair" discovered by Telegram.

The European investigator's office is in possession of invoices proving that the Ministry headed by Gabrijela Žalac spent more than two million kuna in just one year for catering, various meetings, conferences and working groups, or hotel and restaurant services. There is a well-founded suspicion that these expenses were often a cover for issuing fictitious invoices. Telegram's source reveals that, for example, on January 31, 2019, food was ordered for 50 people of the Interdepartmental Working Group for the preparation of the National Development Strategy until 2030, but the food was allegedly not delivered at that meeting, for which the ministry was later billed in the amount from HRK 14,000. The participants of the meeting said that on that occasion they were not served oxtail soup, duck pâté, or beef loin bruschetta. On February 13, 2019, the ministry headed by minister Žalac paid that bill to the company Gero. d.o.o. which owns the restaurant Atlanta Bocca Marai, and it was at the expense of the Sector for expert management and coordination of investments from EU instruments.

The invoices combed by the Office of the European Investigator were often issued after midnight, and there was no cost specification on them, but only the total amount, which most often ranged from HRK 10 to 20 thousand. None of the invoices included the names of the persons who attended the lunches or dinners, although this is an obligation imposed by fiscal responsibility. Telegram unofficially learned that at the celebration of the minister's 40th birthday in the Šarm restaurant in February 2019, among others, there was Mladen Šimunac, owner of the company Micro Projekt, whom the Office of the European Investigator suspects because of the contract concluded with the Ministry of Regional Development and EU Funds regarding with the installation of the SPUR software, as well as Tomislav Petric, at that time the director of SAFU, arrested on November 10 last year, when Gabrijela Žalac was also arrested. According to Telegram's source, the guests at that party were Ivana Jakir Bajo, then the chief state treasurer, now the vice-governor of the Croatian National Bank, and the then Minister of Agriculture and Deputy Prime Minister, Tomislav Tolušić. 

Interestingly, the costs of the consumption of spirits and wine, drunk during dinners and lunches were paid by the state budget, since the rules of EU funds do not recognize the costs of alcohol consumed at conferences. Those bills, Telegram's source claims, were mostly signed by the then minister Žalac, state secretaries or others from the minister's cabinet.

ZAGREB, 3 Jan 2022 - Former Minister for Regional Development and EU Funds Gabrijela Žalac has been released from investigative custody after all witnesses in the so-called Software case have been interviewed and there is no risk of her interfering with witnesses, a Zagreb County Court investigating judge ruled on Monday.

The other suspects, former Central Finance and Contracting Agency (SAFU) director Tomislav Petric and IT company owners Mladen Šimunac and Marko Jukić, are expected to be released later this week, after all, witnesses have been questioned, Hina learned from sources close to the investigation.

On 10 December, the investigating judge extended the detention of Žalac and the other suspects for a month citing a risk of witness tampering. They were arrested on 10 November on the orders of the European Public Prosecutor's Office (EPPO) in Zagreb, which demanded that they be remanded in custody for two months so that they could question 17-18 witnesses.

The investigation was launched by the EPPO following a criminal report filed by the National Police Office for the Suppression of Corruption and Organised Crime. Žalac, Petric, Šimunac, and Jukić are suspected of defrauding the European Union and Croatia of €1.8 million.

Žalac is suspected of fixing the public procurement of an information system for strategic planning and development management for the companies owned by Šimunić and Jukić. The suspects concluded a harmful deal under which the price of the IT system was increased several times over to HRK 13.4 million (€1.8m) to the detriment of the financial interests of the EU and Croatia.

Žalac is suspected of abuse of office and official authority and of influence peddling, Petric is suspected of abuse of office and official authority, Šimunac is suspected of inciting the abuse of office and official authority, and Jukić is suspected of aiding and abetting the abuse of office and official authority.

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ZAGREB, 8 Dec, 2021 - The Zagreb County Court on Tuesday rejected appeals by the suspects in the Software case against the investigative detention order, Hina learned from sources close to the investigation.

The court ruled that former Minister for Regional Development and EU Funds Gabrijela Žalac, former Central Finance and Contracting Agency (SAFU) director Tomislav Petric and IT company owners Mladen Šimunac and Marko Jukić would remain in custody.

They are under investigation by the European Public Prosecutor's Office on suspicion of defrauding the European Union and Croatia of €1.8 million.

Žalac is suspected of fixing the public procurement of an information system for strategic planning and development management for the companies owned by Šimunić and Jukić. The suspects concluded a harmful deal under which the price of the IT system was increased several times over to HRK 13.4 million (€1.8m) to the detriment of the financial interests of the EU and Croatia.

The court meets on Friday to discuss the prosecution motion to extend investigative detention for two months.

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ZAGREB, 13 Nov, 2021 - President Zoran Milanović on Saturday criticised Prime Minister Andrej Plenković's statement that he expected Milanović to release a letter from the military chief-of-staff, saying "such cynicism and contempt for the truth and rules is ruining Croatia spiritually and materially."

That letter is to his defence minister and is classified, Milanović told press. In the letter, he said, the military chief-of-staff "warns, asks, even tells (the minister) that he is harassing the entire system, that he is strategically mobbing him and jeopardising the system."

"That document is not secret, I can declassify and make it public tomorrow, but I wanted Plenković to read it first. I wrote in the letter that I ask him to pay special attention to it... One corrupt loony can cause enormous damage, which is currently happening," the president said, alluding to Defence Minister Mario Banožić.

Speaking of a scandal involving the transport of bishops by a Navy vessel, he said the military must not be used for that and would not be any more as long as he was president. Banožić brought the bishops into an awkward position, he added.

As for the prime minister's statement that the Navy would not be ruined because of that transport, Milanović asked him if the EU would be ruined because of the recently arrested former EU funds minister Gabrijela Žalac.

Such a cynical approach by the prime minister when someone commits an evident offence with criminal intent, that's favouring, that's protection, he said.

Banožić is a case for OLAF and should be removed at once

Milanović said that due to Banožić's arbitrariness, the soldiers escorting him were not receiving per diems. That's a crime, that's his revenge. We'll see how to legally stop such barbarous behaviour, he added. "Banožić is a case for OLAF (European Anti-Fraud Office) and should be removed at once."

The president reiterated that he would "sit at the table only with Plenković," not with Banožić.

Fitch rating upgrade expected

Commenting on the Fitch Ratings agency's upgrade of Croatia's credit rating, Milanović said it had been announced and expected due to Croatia's upcoming euro area entry.

Asked to comment on Žalac's arrest earlier this week, he wondered how Plenković would explain in Brussels "this fiasco with EU funds and the people he trusted. Because this is a fiasco. Such outrageous things rarely happen. This is indeed an outrage."

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ZAGREB, 11 Nov, 2021 - The European Public Prosecutor’s Office (EPPO) has launched a probe and proposed pre-trial detention against four suspects in Croatia: a former minister Gabriela Žalac, the SAFU Agency's director and two businessmen on suspicion that they embezzled €1.8 million from the EU and Croatian budgets.

The EPPO issued a statement on the matter on Thursday without revealing the identity of the four suspects.

The statement reads that the EPPO "has initiated an investigation against four Croatian citizens, as well as two companies, for the criminal offences of trading in influence and the abuse of office and official authority."

Among the suspects are the former minister of the Ministry of Regional Development and EU Funds (MRRFEU) and the Director of Croatia’s Central Finance and Contracting Agency (SAFU), Tomislav Petric and the businessmen Marko Jukić and Mladen Šimunac.

All four suspects were arrested on Wednesday at the request of the EPPO.

Based on the results of the preliminary investigative activities, carried out in cooperation with the European Anti-Fraud Office (OLAF), the Croatian National Police Office for the Suppression of Corruption and Organised Crime and the Independent Financial Investigation Sector of the Tax Administration of the Croatian Ministry of Finance, the EPPO has now officially initiated an investigation.

The Croatian police specify that the former minister is suspected of abuse of office and influence peddling, SAFU director Petric of abuse of office while the businessmen Šimunac and Jukić are suspected of having encouraged the office-holders to commit wrongdoings.

EPPO says in its press release that "it is alleged that the first suspect, in her joint capacity as Minister of the MRRFEU and President of the Governing Board of the SAFU, took actions aimed at ensuring a privileged position for the second and the third suspects, as well as the companies linked to them."

"These activities occurred in 2017 and 2018, in the process of the public procurement of an information system for strategic planning and development management. During this time, the former minister was responsible for both the lawful conduct of public procurement procedures at the MRRFEU, and for proposing the appointment and relieving of duties of the Director of the SAFU. "

Adjusting ministry's procurement plan to benefit suspects

"The privileged position of the second and the third suspects was ensured by: adjusting the MRRFEU Procurement Plans for 2017 and 2018 to benefit the second and third suspects and the companies linked to them; inflating the estimated value of the procurement of that information system; changing the type and manner of procurement; and adjusting the technical specifications of the software required for the MRRFEU’s purposes to the software that the suspects and their companies had at their disposal.

The former minister decided that the MRRFEU would make this purchase at a price much higher than the market price for the development of software with such technical specifications and functionalities.

It is alleged that, in order to carry out what was agreed, the former minister first decided, in 2017, to conduct a negotiated procurement procedure without prior publication of a public invitation to tender, with an overestimated procurement value of HRK 9,860,000.00 (EUR +/- 1.31 million); and in that process, the companies linked to the second suspect were invited to submit their bids.

"In order to ensure the continuation of the negotiated procurement procedure without prior publication of a public invitation to tender, and by using her joint authority as Minister of the MRRFEU and President of the Governing Board of the SAFU, the former minister requested that the fourth suspect, the Director of the SAFU (the agency responsible for the ex-ante control of EU-funded MRRFEU public procurement procedures) made sure that the SAFU, in the ex-ante control of the documentation of the procurement of software licences unduly estimated at HRK 9,860,000.00, did not dispute the negotiated procurement procedure."

As this request came from the President of the SAFU and the minister who was in a position to propose, to the Croatian government, the appointment and relieving of his duties, the director agreed, and instructed the SAFU administrative and professional services to be as lenient as possible in their comments referring to the procurement documentation.

"When, in October 2017, the Croatian State Commission for the Supervision of Public Procurement Procedures annulled the public procurement procedure due to the breach of the law on public procurement, the former minister and the second suspect continued, in 2018, to take action to award the contract to the companies of the second suspect.

"Finally, after having conducted an open public procurement procedure, the MRRFEU concluded a purchase contract for this information system with the companies linked to the third suspect, a business partner of the second suspect, with the price unrealistically set at HRK 12,991,000.00 (EUR 1.73 million) – although the realistic price of that system would have been approximately HRK 2,000,000.00 (EUR 265,000). "

As much as 85% of the procurement of that software was financed by the EU’s Operational Programme Competitiveness and Cohesion grant.

"The above amount, inclusive of VAT (HRK 16,238,750.00 in total, or EUR 2.16 million), was paid to the account of the company of the third suspect, after which a part of the money was transferred to the accounts of the companies of the second and third suspect, and a part was withdrawn in cash."

The EPPO concluded that "In the end, the financial interests of the European Union and the Republic of Croatia were damaged by the total amount of EUR 1.8 million."

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ZAGREB, 27 April, 2021 - Prime Minister Andrej Plenković said on Tuesday that at the moment he did not see that former minister Gabrijela Žalac, an official of the Croatian Democratic Union (HDZ), is guilty of anything after the USKOK anti-corruption office expanded its investigation in the windpark scandal.

"I read the press release for my information. Our judicial bodies are independent. You are aware of our position - we have zero tolerance to corruption. I don't what is behind that and I cannot deduct from the press release what exactly it has to do with," Plenković told reporters during a visit to Split-Dalmatia County.

I don't have any information about what USKOK and the State Prosecutor (DORH) are doing.

What he does know is that the loan in question was approved, as far as he is aware, in accordance with the Croatian Bank for Reconstruction and Development (HBOR) rules.

"We have to see here what this is about exactly. At the moment I don't know nor do I have any detailed information of what USKOK or DORH are working on. She is a member of the HDZ. At the moment I don't see that she is guilty of anything," said Plenković.

He claimed that he saw Žalac about a month ago but they did not discuss the windpark case.

"She will deal with this situation on her own and as far as our relationship is concerned, it is as it was in any case," underscored Plenković.

For more about politics in Croatia, follow TCN's dedicated page.

Despite the odd investment here and there, continental Croatia rarely gets a look in when compared to the coast, particularly when compared to Dalmatia. In Eastern Croatia, more specifically Slavonia, the situation is even more depressing, but it seems that not everything is as bleak as we sometimes like to imagine and even portray.

As Suzana Varosanec/Poslovni Dnevnik writes on the 16th of April, 2019, the economic expectations from the Luka Brod (Brod Port) project worth more than 100 million kuna are high. Through the construction of new port infrastructure, the project has become the driving force for the development of Brod-Posavina County, as was highlighted by the Croatian Government.

As stated, the much anticipated construction of new port infrastructure is the driving force for the development of this Slavonian county, this was highlighted at the eighth session of the Council for Slavonia, Baranja and Srijem, and according to the prime minister, it's essential for the Croatian Government and local self-government units to do everything to create the proper conditions for economic development that will end the mass exodus of citizens from Croatia.

Until now, contracted projects with EU funding amount to 9.7 billion kuna, stated the Minister of Regional Development and EU Funds, Gabrijela Žalac. Another 1.85 billion kuna are contracted investments from the state budget.

For the strengthening of the Croatian economy, the development and enhancement of competitiveness, projects such as Brod Port are of great importance, stated the Croatian Chamber of Commerce's Mirjana Cagalj. This is also an incentive for the development of a local environment that is particularly burdened with the exodus of the resident population who are leaving in their droves owing to the unfavourable economic situation, contributing to Croatia's worrying demographic crisis.

Its exceptional traffic position provides great potential for the development of the new port in Slavonski Brod in an intermodal logistics centre, which, according to Cagalj, would work to influence its future strategic role in international container traffic because Brod Port is located on the border of Croatia and Bosnia and Herzegovina, near the crossing of the railway corridor X and the road corridor Vc, which is an international entry port for the EU.

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Click here for the original article by Suzana Varosanec for Poslovni Dnevnik

ZAGREB, March 25, 2019 - The parliamentary Conflict of Interest Commission has decided to launch proceedings against Regional Development and EU Funds Minister Gabrijela Žalac and Finance Minister Zdravko Marić in cases involving a luxury Mercedes, a Croatian Reconstruction and Development Bank (HBOR) loan, and tickets for a Croatia-England World Cup match in Russia, Commission chair Nataša Novaković said after a meeting of the Commission on Monday.

"In the case involving Žalac, the Commission will see if there is a connection between the official's personal relationship with Šibenik businessman Josip Stojanović Jolly and the awarding of an HBOR loan to the businessman's company, the purchase of buses for the public transportation company in Split from the businessman's company, and the lease of a Mercedes car to members of the official's immediate family," Novaković said, adding that the Commission would determine if there had been any mutual favouring.

As for Minister Marić, she said, the Commission will determine the connection between the minister's personal relationship with businessman Stojanović and the awarding of an HBOR loan to Stojanović's company and the minister's travel to Russia.

"We will determine who paid for the tickets for the said game," she said.

As for Velika Gorica Mayor Dražen Barišić of the HDZ party, the Commission will inspect his declaration of assets in the part that refers to his salary and car.

Asked by reporters about officials' obligations with regard to car lease, Novaković said that officials were obliged to state car lease in their declaration of assets but that they did not have that obligation in the case of a short-term, month-long lease.

More news about conflict of interest issues can be found in the Politics section.

ZAGREB, March 22, 2019 - Minister of the Interior Davor Božinović said on Thursday that "police acted in line with the law" in the case of a recent traffic accident involving Regional Development and EU Funds Minister Gabrijela Žalac and a traffic accident involving her close friend Marijana Obradović.

"With regard to the traffic accident of several weeks ago, police did all they should have done, following professional rules. After a police investigation, the case is now in the hands of prosecutorial authorities. My answer is similar as regards the other case, too," Božinović told reporters.

Speaking of the accident involving Žalac's friend, Božinović said: "As for the difference between a crime and a misdemeanour, it lies in the gravity of injuries. A lighter injury means a misdemeanour charge and a more serious injury means a criminal charge. The police are not the ones to determine the severity of injuries," said the minister.

On March 9, Žalac hit with her car a 10-year-old girl who was crossing the street in the eastern town of Vinkovci. She was driving with an expired driver's licence. After the accident, misdemeanour charges were pressed against the minister. The girl suffered a fracture to the lower leg and is recovering well.

Žalac's friend Marijana Obradović in late December 2018, while driving under the influence of alcohol, swerved off the road in the eastern municipality of Jakšić, hitting a 35-year-old woman who was walking on the pavement, after which she drove off.

Požega-Slavonia County police said in a statement that they did not press criminal charges against Obradović but rather misdemeanour charges because medical staff had described the injuries sustained by the 35-year-old as light.

More news about regional development and EU funds minister Žalac and her ever-growing list of scandals can be found in the Politics section.

ZAGREB, March 21, 2019 - Regional Development and European Funds Minister Gabrijela Žalac said on Wednesday that a media lynching campaign was launched against her, and that she had insinuations that someone was setting her up, refusing to reveal any details at this moment, saying only that this could also be part of intra party conflicts.

"After the experience over the past ten days, I would absolutely say that someone is setting me up. I have some sort of insinuations," Žalac told Nova TV commercial television, adding that she suspected this was an intra-party conflict.

She declined to speak about possible reasons behind this, stressing she would refrain from it because of the latest developments which included smearing her as the minister, member of the government, her family and even involving her children.

Žalac said she did not know what the true problem was. "I have some insinuations, evidence, so when the time comes, we will talk about it. I do not know whose way I am standing in, but things are a bit clearer now. I will not say anything yet," Žalac said.

She said she was prepared to submit to the Conflict of Interest Commission receipts for leasing the luxury Mercedes parked in the front yard of hr family home in Vinkovci, worth at least 50,000 euro and owned by a company leasing luxury vehicles. The minister did not include the car in her declaration of assets. Žalac claims her mother was covering the costs of the monthly lease, under a contract that was signed to a period of one year.

Commenting on a statement by Social Democratic Party (SDP) member of the Croatian parliament Gordan Maras who said earlier on Wednesday the problem is that Josip Stojanović Jolly, the owner of the company who leased the car to the minister's parents, has been awarded a loan by the Croatian Bank for Reconstruction and Development (HBOR) on whose supervisory board the minister sits.

Žalac said she knew Stojnovic, declining however that she had done any favours for him. She said that when HBOR granted a loan to Stojanović, she SDP was the ruling party and that she was not a member of the HBOR Board at the time.

Stojanović said on Wednesday that Regional Development and EU Funds Minister Gabrijela Žalac had nothing to do with a Mercedes owned by his company, announcing that he would sue MP Gordan Maras of the opposition SDP party for saying that he had been awarded a loan from the Croatian Bank for Reconstruction and Development (HBOR) on whose supervisory board the minister sits.

"The car is owned by our car rental company and Minister Žalac has nothing to do with it. Had the minister bought the Mercedes in question, I would certainly have known about it. Until a while ago I didn't even know who has rented it, and that is Mrs Vinka Ivanković, probably the minister's mother," Stojanović told reporters in Dugopolje, near the southern coastal city of Split.

Responding to questions from the press, he said that the rental agreement was signed on 18 January 2019. He produced a copy of the agreement, but would not discuss its content, citing the confidentiality rules of the Mercedes company.

Asked how the minister could authorise him to show the agreement to the press if she had nothing to do with it, Stojanović said: "You should ask her and her mum."

SDP MP Maras said earlier in the day that the problem was that Stojanovic had been granted a loan by the HBOR on whose supervisory board the minister sits.

Commenting on his statement, Stojanović said that he would sue Maras because what he said was not true. He said that Minister Žalac was not the chair of the HBOR supervisory board at the time. "Mr Maras is uninformed. We did take a loan from the HBOR, but we repaid it before using it because it was unfavourable to us, and commercial banks gave us more favourable terms," Stojanović said.

Asked if he saw anything disputable about the fact that his company had won a tender for the purchase of 20 buses for Split's Promet municipal transport company, which will be financed with EU funding, meaning through the ministry headed by Žalac, Stojanović replied in the negative. "We responded to the tender because we cover the area stretching from Dubrovnik to Gospić, and we offered the most favourable terms," Stojanović said.

The net.hr news website said on Wednesday that last October Žalac signed an agreement for the purchase of new buses for the Promet company with EU funding; the project is worth 44 million kuna (6 million euro). It was formally announced on March 8 that the Jolly Autoline company, owned by Josip Stojanović, had won the tender, the website said.

More news about minister Žalac can be found in the Politics section.