081027ED

Page 33702

1 file a supplemental with a list of documents that were presented by

2 Mr. Tomic, some 54 documents. Of those, only three will be used, and I'm

3 told that I should point that out in advance so they can be released in

4 the e-court. They're 1D 03046, 1D 03050 and 1D 03051. They're -- each

5 document is two or three pages. So, anyway, I point that out, Your

6 Honours. So with your permission, if they can be released into e-court.

7 As for the other documents, we will be filing a motion to add them on to

8 the 65 ter list. They have not been translated. Only four of the

9 fifty-four documents were translated over the weekend.

10 Now, with that -- I need a decision, Your Honour. Perhaps you

11 guys -- Your Honours can confer.

12 [Trial Chamber confers]

13 JUDGE ANTONETTI: [Interpretation] The Trial Chamber, after

14 having deliberated, authorises you to add these documents to the 65 ter

15 list.

16 MR. KARNAVAS: Thank you, Your Honours.

17 Examination by Mr. Karnavas:

18 Q. Mr. Tomic, let me begin by asking you a little bit about your

19 background. I understand you're from the Mostar area and you studied in

20 Mostar, obtaining a degree in Economics from the University of Mostar.

21 Is that correct?

22 A. Yes, that's correct.

23 Q. And in what year was that, sir?

24 A. 1980.

25 Q. All right. Picking up from there, if you could just briefly,

Page 33703

1 very briefly, tell us about your work background from 1980 all the way

2 until, say, 1990, when the first elections occurred, or 1991.

3 A. After graduating from university, I started working at a company

4 called Unis Elektronik in Mostar as an economist, in the sales department

5 and in the economic analysis department. In 1985, I became a

6 professional politician, as the president of the youth organisation of

7 Mostar. That was one of the political organisations in the former

8 system.

9 After that, in 1987, I became the director of the revenues

10 department, and basically, ex officio, a member of the city government,

11 the executive council of the city of Mostar. During a certain period of

12 time, I was acting head of finance because for a while there wasn't an

13 elected head, so it was the municipal budget that I took care of. While

14 I was head of the revenues department or taxation department, the 1990

15 elections took place, and when the following parties won, the SDA, the

16 HDZ and the SDS; and then it was the SDS that was supposed to get the

17 position as the head of the taxation department, and therefore, I left.

18 Q. Let's go back a little bit. With respect to you being the

19 president of the youth organisation for the Mostar municipality, could

20 you just very briefly tell us what did that entail, because as I

21 understand it, that was a professional position for one year.

22 A. Yes, I did that on a professional basis. The youth organisation

23 brought together all the young people up to the age of 27, up to the age

24 of 27, I say; and it represented a form of political organisation in the

25 former Yugoslavia. There was the League of Communists, the Veterans

Page 33704

1 organisation, the trade unions' organisation, the Socialist Alliance of

2 the Working People, so the youth organisation was one of these political

3 organisations.

4 Q. I'm going to ask you to speak a little slower. Otherwise --

5 THE INTERPRETER: Microphone for Mr. Karnavas, please.

6 MR. KARNAVAS:

7 Q. I'm going to ask you to speak a little slower. Otherwise, our

8 interpreters are not going to make it through the morning.

9 All right. Now, with respect to -- in 1987, it was translated

10 that you were the director of the revenue department. We're talking

11 about the tax department; is that right?

12 A. Yes, the director of the revenues department.

13 Q. All right. Could you please tell us, what did that department do

14 and what did you do concretely?

15 A. In the former system, there were two institutions that collected

16 public revenues. One was the SDK, the public accounting service that

17 collected revenues from the companies, enterprises, by way of checking

18 their accounts and carrying out appropriate legislation. And the second

19 institution that was organised at the municipal level was in charge of

20 collecting revenues for municipal budgets from the private sector at the

21 time; that is to say, from farmers, butchers, caterers, restauranteurs,

22 small-scale enterprises that did not have the status of real companies at

23 the time.

24 Q. All right. So if I understand it, even prior to the 1990

25 elections there was some form of private enterprise, albeit for small

Page 33705

1 businesses, in the former Yugoslavia; correct?

2 A. Yes, that's correct.

3 Q. And in that particular department, how many employees were there

4 besides yourself, as the director?

5 A. Around 60 people.

6 Q. All right. And as I indicated -- as you indicated, after the

7 1990 elections that position was allocated, that is, the director of the

8 revenue or tax department, was allocated to somebody from the SDA.

9 A. [In English] SDS.

10 Q. SDS party, and I take it you were out of a job because of that.

11 A. [Interpretation] Yes, that's correct.

12 Q. All right. So let's pick it up from there. What did you do?

13 You're out of a job. It's 1990. What happens?

14 A. At the time, I did not want to run in the elections, although I

15 had received an offer or, rather, offers from several parties; namely,

16 the Liberal Party that had been established by the former youth

17 organisation, then the SDP, the former Communist Party that was the

18 successor of the League of Communists, and the Green Party in Mostar that

19 I had established together with my friends. At the time, I had contacts

20 with some people from the HDZ as well, primarily those people who worked

21 in the municipal organs. I had good relations with them.

22 Q. Let me just speed it up a little bit. What kind of work did you

23 do after that?

24 A. I have to point out that when the new executive council was

25 elected, a great step backwards was made in terms of the competence of

Page 33706

1 the elected people to carry out that particular work.

2 Q. And why is that?

3 A. That was the first distribution of positions after they had won

4 power.

5 Q. Okay. Distributions by the political parties?

6 A. Yes, and the political parties gave these positions to their own

7 people. However, they had had no experience in running a municipal

8 administration.

9 Q. All right. And did that cause any problems?

10 A. Of course it did, because after the very first month, they ran

11 into great difficulties, like the problem of getting the garbage out of

12 town, then carrying out tax reforms, the problem of illegal construction.

13 Q. All right. If you could just tell us, what was the next position

14 that you held?

15 A. Six months later, I was made an offer to be the director of the

16 fund for the construction and development of the city.

17 Q. All right. And what did that entail, specifically?

18 A. That fund was the successor of the former socialist

19 self-management community of interest that had run the town and town

20 planning, as such, that was in charge of the financing of town planning,

21 that collected money from rent, that is to say, on the basis of what had

22 already been invested in infrastructure. Then we financed the building

23 of new infrastructure, that is to say, municipal roads, streets,

24 waterworks, sewage.

25 Q. All right. Now, did you have to join a political party in order

Page 33707

1 to receive that position?

2 A. There were pressures brought to bear for me to join the HDZ and

3 to sign an application form. However, I didn't do that then.

4 Q. All right. Now, how long did you hold this position?

5 A. I held that position until April 1992.

6 Q. All right. And then what did you do in April 1992?

7 A. Then we left the premises that were in the eastern part of town,

8 because it became impossible to work.

9 Q. Okay. Now, Mr. Tomic, you know, you went from speaking very fast

10 to very slow, and it's almost difficult for the interpreters to do it

11 word for word because they are highly competent. So if you to so, a

12 medium, full sentence, trust me, they are terrific people.

13 All right. Now, you said you had to leave the east side. Why

14 was that? And if you could tell us, what was located on the east side of

15 Mostar?

16 A. In the eastern part of town, there were the premises of all

17 administrative bodies; the Municipal Administration, my fund, the mayor's

18 office, the Defence Department. Only the Secretariat of the Interior was

19 in the western part of town. At the time, the reserve units of the JNA

20 were already in town. The first confrontations began. Fear was

21 spreading. People were afraid of going to work and even staying in

22 Mostar, especially in early April, when a tanker truck exploded. Many

23 inhabitants left town then, and many institutions could not work

24 properly.

25 Q. Do you recall about when that explosion took place and where,

Page 33708

1 which month? You know, we could --

2 A. It was in early April, and the explosion was immediately -- in

3 the immediate vicinity of the barracks, the so-called northern camp. I

4 don't know that -- after the explosion, I took my children and my sister

5 children -- my sister's children and my parents to Makarska. Many

6 citizens did that. It was mostly women and children who left and became

7 refugees.

8 Q. All right. Now, you told us that a lot of the administrative

9 offices were on the east side. What about the SDK and the --

10 JUDGE ANTONETTI: [Interpretation] One moment, Mr. Karnavas. I

11 would like to talk a bit more about the explosion of the truck.

12 You've just stated, Witness, that you took your family to

13 Makarska, but that you were not the only one and that many people did the

14 same. I'm rather surprised to hear this. If this was an accidental

15 explosion, indeed there was no reason to be alarmed, but if it was a

16 criminal explosion, then it was different. So according to you, what was

17 the cause of this explosion? Was it just an accident or was it a crime?

18 THE WITNESS: [Interpretation] Nobody knew at the moment of the

19 explosion, no one of my co-workers knew that. There were various

20 statements. Various statements could be heard, some saying that the

21 incident had been staged by the JNA themselves to produce chaos, or, on

22 the other hand, that it was -- it happened by chance or, alternatively,

23 that it was a criminal act, et cetera. But tension was present in the

24 city at the time, and people were starting to leave the city, mostly

25 women and children. The explosion only speeded up the process and turned

Page 33709

1 it into a chaotic evacuation.

2 MR. KARNAVAS:

3 Q. All right. Since we're on this issue, I'll ask my follow-up

4 question now. Now, you said a lot of women and children left. Were

5 these women housewives or did they also work -- have working positions?

6 And if so, do you know where they would have been working?

7 A. I'm speaking mostly about mothers with children. Some were

8 housewives, others had employment. Out of the six women that worked at

9 my fund, four left, so that the fund could no longer function. And that

10 was the situation in many other institutions too.

11 Q. All right. Now, I -- the SDK, was it located on the east side or

12 the west side?

13 A. On the east side.

14 JUDGE ANTONETTI: [Interpretation] Sorry for cutting you off,

15 Mr. Karnavas, but I'm very surprised to hear you say that out of six

16 women working in your department, four left. And you said that the same

17 happened in other business sectors and other institutions. Were these

18 people leaving spontaneously because they were afraid or did people leave

19 following instructions telling them to leave? Are we talking here about

20 individual decisions to leave or did people respond to instructions given

21 by X, Y, Z?

22 THE WITNESS: [Interpretation] The motivation was exclusively

23 fear, because in Mostar there had already been assassinations, shootings,

24 et cetera, so people were afraid for themselves and their children.

25 Those who had relatives in the Western Herzegovina or who were originally

Page 33710

1 from there went there or others went to the Adriatic coast.

2 JUDGE ANTONETTI: [Interpretation] If we look at this history of

3 your town, the history of Mostar, can we find similar situations in the

4 past where the population was afraid and left the city because of that or

5 is it something that was unprecedented, because it's a rare occurrence to

6 see the population of a city leave the city because they're afraid. When

7 such things happen, it's because serious things are going on. Had this

8 already happened in the history of Mostar or not? Is it something that

9 had occurred before or not, these people leaving because they were

10 afraid?

11 THE WITNESS: [Interpretation] Well, people were leaving for

12 reasons of fear exclusively. There was no organisation in place. I

13 don't know whether anything similar had happened in -- before in history.

14 JUDGE ANTONETTI: [Interpretation] Fine.

15 MR. KARNAVAS: Let's move rather quickly into your involvement in

16 the Crisis Staff.

17 Q. As I understand it, as some point you were involved with the

18 Crisis Staff. If you could tell us a little bit about that. What was

19 the Crisis Staff and how did you get involved in it?

20 A. At that time in April, when the institutions stopped working one

21 after the other, my fund included, I cooperated with Mr. Gagro, the

22 mayor; and on April the 20th, Mr. Kazazic, my colleague who worked at the

23 housing maintenance fund, which is a similar organisation to mine, or

24 was, we went to the Crisis Staff, and --

25 Q. [Previous translation continues] ... sir, so you need to pick it

Page 33711

1 up a little bit.

2 A. Thank you. So we went to the Crisis Staff and we said to them

3 that we were at their disposal. We wanted to assist in the organisation

4 of the financial system at those times.

5 The Crisis Staff had its premises in the basement of the

6 director's [as interpreted] office. Organisationally speaking or with

7 regard to the organisation of the city, it was not competent. People who

8 were supposed to work in the sector of finance had no experience

9 whatsoever. And then Mr. Kazazic and I were appointed to work on

10 financial issues, and we were to have relations with the SDK.

11 We immediately drafted two decrees, signed by the Crisis Staff,

12 and we also drafted instructions, but it was too late already.

13 JUDGE TRECHSEL: A point regarding the transcript. On page 15,

14 line 6, we read "director's office," but I think it was the rectorate's

15 office, the office of the president of the university, and I think that

16 is misleading if it's left like this. Thank you.

17 MR. KARNAVAS: All right.

18 Q. Now, this gentleman that you were working with, concretely, what

19 did you do with him during that period of time? And if you could tell us

20 what the period is. What period are we talking about? This would be

21 late April to what period?

22 A. I'm speaking about the period starting on April the 21st, and it

23 was our task to try and raise money for the citizens, because at the time

24 we were out of cash. There were no more Yugoslav dinars left. And

25 that's why we had prepared such a decree, which was then published by the

Page 33712

1 Crisis Staff about the -- about limitations to -- for the use of cash and

2 cheques and the like, and those are decrees that are commonly issued in

3 the early days of a crisis. But the Crisis Staff failed to publish these

4 in a timely fashion.

5 However, a few days after these decrees, it was no longer

6 possible to even go to the SDK, and the last people who had been there

7 said that the safe had been broken open by the JNA reserve units and that

8 there was money lying around.

9 Q. All right. Now, before I go into the next topic, which would be

10 the special-purpose council which we all know that you were involved in,

11 perhaps this would be a good time for you to give us a brief explanation

12 of how the SDK functioned.

13 A. The SDK was a public institution before the war. It was

14 organised by Belgrade as the federal SDK. Then every republic had its

15 own SDK. In Bosnia-Herzegovina, the SDK headquarters was in Sarajevo, or

16 the head office, and all economic analyses were made there, accounts were

17 checked, payment was -- payment was checked, et cetera, and there were

18 also regional branch offices. Mostar was the branch office for all of

19 Herzegovina, from Trebinje to Livno; and there were also lower-level

20 offices in the municipalities, or branches in the municipalities. So all

21 institutions, all companies, were required to have an account with the

22 SDK, and they had to deposit cash there. And all their payment would

23 also go exclusively through the SDK. The SDK collected taxes and

24 contributions for funding public expenditures. They also carried out

25 some -- they had some control functions. And I must say that at

Page 33713

1 municipal level, this institution was independent from the municipal

2 authorities, so that the Municipal Assembly could not give instructions

3 to the SDK to raise additional taxes and whatever.

4 Q. All right. Now, you told us that the SDK offices were on the

5 east side. You've told us that the situation is rather grave in Mostar.

6 This is around April 1992. Could you please describe to us whether at

7 this point in time, that is, late April or early May, whether the SDK,

8 the regional branch in Mostar, whether it is functioning, and to what

9 extent, if it is?

10 A. Very few people had remained at the SDK. Most of them worked as

11 security officers. The operations had ceased in late April because

12 communications had been interrupted, and the SDK cannot work without

13 telecommunications; so they couldn't communicate with the head office in

14 Sarajevo, so that their activity was reduced exclusively to payments

15 within Mostar and cash operations.

16 Q. All right. What about the administration, the tax administration

17 that you had worked for? I take it they were collecting taxes from small

18 businesses. Did they have cash on hand, and more specifically, was that

19 administration working at that point in time, if you know?

20 A. That administration dissolved because the director had left

21 Mostar for Eastern Herzegovina, and the Crisis Staff did not appoint

22 another person, and the secretary of finances, who was a member of the

23 Crisis Staff, was incompetent, a person who hadn't worked in that area,

24 so that the service didn't function at all.

25 Q. All right. Just if you could tell us, do you know what area had

Page 33714

1 he worked in before he was appointed by virtue of his membership into the

2 SDS party?

3 A. As far as I remember, he had worked for a company.

4 Q. All right. Now, we understand, because we've seen documents and

5 heard testimony, that at one point in time you became involved in what is

6 known as the special-purpose council. So before we talk about your

7 specific involvement, if you could briefly describe to us, so we have

8 some context, how the situation is in Mostar. So this would be around

9 mid-May or so. What is the situation in Mostar specifically with respect

10 to the various administrative departments in Mostar, whether they're

11 functioning, to what extent, because we do know that we have a

12 Crisis Staff, but -- you know, but we need to know to what extent the

13 city is functioning, or the municipality.

14 A. First of all, I can say that the city and its institutions did

15 not function. The Crisis Staff -- it was up to the Crisis Staff to make

16 sure that some services functioned at times of war, but those services

17 were no established, so that it was all left to the individual

18 initiative. It was all left to individual initiatives. There were

19 people who previously had been responsible, directors of companies or

20 institutions, who went to the Crisis Staff and volunteered to work. It

21 was their intention to make themselves useful, to make use of their

22 business relations, in order to help the citizens of Mostar. Those

23 activities go back to the time when Dubrovnik was shelled, when aid was

24 collected for Dubrovnik, and those people would occasionally have

25 informal meetings with Mayor Gagro.

Page 33715

1 Q. Let me stop you here for one second. What period are we talking

2 about with respect to aiding Dubrovnik?

3 A. It was in early 1992.

4 Q. All right. And to what extent were these individuals trying to

5 assist in providing aid to Dubrovnik, and to what extent was Mr. Gagro

6 involved?

7 A. He was to provide contacts where the trucks [Realtime transcript

8 read in error, "Turks"] should go, et cetera.

9 Q. And were you involved in any way during that effort?

10 A. Yes.

11 JUDGE TRECHSEL: Excuse me. This information, he was to provide

12 contacts where the "Turks" should go, is not quite understandable.

13 MR. KARNAVAS: Well, the --

14 JUDGE TRECHSEL: Maybe the witness can explain, if it is not a

15 mistake in the transcript.

16 MR. KARNAVAS: It is a mistake in the transcript. I heard

17 "trucks" --

18 JUDGE TRECHSEL: Thank you.

19 MR. KARNAVAS: -- but I was going to correct that.

20 Q. You said "trucks"?

21 A. Yes, yes.

22 Q. All right. Now, stepping back, you said the Crisis Staff wasn't

23 functioning and certain services were supposed to be established.

24 Perhaps you could clarify that. Which services were to be established by

25 the Crisis Staff that were not established?

Page 33716

1 A. The city of Mostar and all the other municipalities had the

2 municipal defence plans in place, and this plan envisaged quite clearly

3 what organs, what institutions, should continue functioning if there was

4 a war or an imminent threat of war. What the plan did not envisage was

5 that the Yugoslav People's Army would actually carry out the attack. In

6 those plans, it was always foreseen that the attacks would come either

7 from Italy or from Hungary.

8 Q. Stop. So that's why, you know, the blue helmets or the red

9 helmets?

10 A. [In English] Yes.

11 Q. Blue being the Western powers, red being the Soviets and the

12 satellites?

13 A. [Interpretation] Yes. So those plans were not usable in their

14 entirety, but it was because of the incompetence of the people in the

15 Staff. They were not adapted to the existing situation, so that the

16 former Territorial Defence Staff was not operational, the Income

17 Administration was not functioning, the Urban Planning Secretariat was

18 not operational. It was very important in terms of municipal services,

19 utilities, such as the municipal waste collection, water supply, all

20 those municipal activities.

21 Q. All right. Now, you did indicate that you had been assisting the

22 Crisis Staff with Mr. Kazazic, but I take it you were not a member of the

23 Crisis Staff but you were merely assisting. Is that correct?

24 A. Yes. We were in charge of this area because the head of finances

25 was formally a member of the Staff.

Page 33717

1 Q. All right. Now, to your knowledge, did you ever see these -- the

2 municipal defence plans? Has Mr. Gagro, as the head of the Crisis Staff,

3 ever bring out the municipal defence plans to see how, to any extent,

4 they might be adjusted to the unfolding circumstances?

5 A. I had an opportunity to see those plans while I was in the

6 executive board, before the elections, because as the director of the

7 Income Administration, I did have some obligations that had to do with

8 the drafting of those plans. However, Mr. Gagro did not ask me anything

9 about those plans, nor was this a topic of our conversation.

10 Q. All right. And just to make sure that we all understand, this is

11 during the Yugoslavian period, sort of 1987 to 1990, when you were

12 working for the Department of Taxation; correct?

13 A. Yes. At that time, I was in charge, that was the term that was

14 used, of the defence plan, the segments of that plan that had to do with

15 tax revenue.

16 Q. And your situation was not unique. I take it that in -- or was

17 it unique? Did the other heads of departments, whether it's SDK or other

18 municipal administrations, were they also responsible for knowing what's

19 in the defence plan; for their sectors, that is?

20 A. Of course, everybody had a role according to the defence plan.

21 Some sectors would cease to work under that plan. Some bigger sectors

22 would be set up. Some functions no longer existed.

23 Q. All right. Well, if that was the case, could you please explain

24 to us, perhaps if you know, why it was Mr. Gagro didn't activate the

25 defence plan? Are we to assume that he wasn't aware that such plans

Page 33718

1 existed?

2 A. I don't know what the reason was.

3 Q. All right. Let's move on to your involvement with the

4 special-purpose council. If you could please tell us, because we know --

5 we've seen documents that you were part of this special-purpose council,

6 if you could please explain to us, first of all, how was it that you

7 became a member, and then tell us, to your understanding, what was the

8 special-purpose council about, what was its functions?

9 A. Well, throughout the time, and this is why I started talking

10 about the period when Dubrovnik was shelled, throughout the time that the

11 Crisis Staff existed some of the competent people, managers of companies,

12 directors of institutions, were trying to find a way how to help; and we

13 started getting together. The manager of the Mostar Privredna Banka

14 bank, Mr. Vegar, even provided us with an office in a building that

15 belonged to this bank; and we would go there and we would talk and

16 discuss about ways in which we could help. Some of these people went to

17 the Crisis Staff and offered various things, from the food that they had

18 in their warehouses, the liabilities that they had -- or, rather, the

19 assets that they had, that they had to collect from other companies.

20 Q. Was this an executive administration? Did it have any executive

21 authority, this special-purpose council, while you were a member of it?

22 A. I would like to say this: The council was appointed by the

23 Municipal HVO Staff, and that's when it was given this form of a council.

24 And the reason why this was necessary was primarily because it made it

25 possible for the council members to travel around in the performance of

Page 33719

1 their job. We did not have any executive power. We did not decide on

2 any issues that were within the purview of the municipal administration.

3 The only thing was to create conditions for the assistance and aid to

4 reach the citizens of Mostar and to protect the property of the companies

5 that had their seats in Mostar located abroad.

6 Q. All right. But as I understand it, and we'll get to a

7 document --

8 THE INTERPRETER: Microphone, please.

9 MR. KARNAVAS:

10 Q. We'll get to a document very shortly, but as I understand it,

11 you, among two others, were designated as a coordinator, and can you

12 please explain to the Trial Chamber and to the rest of us what exactly

13 this position entailed as coordinator?

14 A. Well, like any other coordinator, since the members were on the

15 road, one of the coordinators always had to be present there because the

16 council members had to ensure they had vehicles, "lesse passe," so this

17 was purely to coordinate activities for the implementation of the tasks

18 that I mentioned.

19 Q. All right. And could you please tell us --

20 JUDGE MINDUA: [Interpretation] Mr. Karnavas, I'm sorry to

21 interrupt.

22 Witness, you said that the council did not have any executive

23 power, unlike the municipal organs. However, this council had to protect

24 the property of companies, but how, because you didn't have any powers,

25 so how was it supposed to do that?

Page 33720

1 THE WITNESS: [Interpretation] I can give you an example, using

2 the Soko company in Mostar as an example. It manufactured parts for

3 Dornier and other aircraft industries in Europe. They had money in their

4 bank accounts in Frankfurt. They received the money for the goods that

5 they had delivered to Germany. The Soko management, headed by the

6 general manager, went to Belgrade, and they issued an order from Belgrade

7 that this money should be spent, because up until that time they had the

8 authority to sign off things like that.

9 And we, as the council, contacted the people from Soko, the

10 deputy manager, because he was still there, and we sent them to Germany

11 to explain the situation to the people there, what the situation was like

12 in Soko, and to put a stop to the expenditure of this money. And the

13 German partner really did put a stop to the payments and even offered to

14 take on 18 workers from Soko. They were to be given jobs in Germany. So

15 this was -- and also they provided an ambulance car. It was their

16 donation. So you can see now that a member of the council went up there,

17 and he did all that. He protected the property of a company from Mostar,

18 prevented this money from being spent, and he also got this ambulance van

19 by way of a donation. So this had nothing to do with any kind of

20 administrative work, any kind of administration.

21 JUDGE MINDUA: [Interpretation] Thank you very much.

22 MR. KARNAVAS: If there are no other questions, I'll -- okay.

23 Q. And if you could please tell us, how long were you with the

24 special-purpose council, up until what point in time?

25 A. I was with the council up until the time when I was appointed the

Page 33721

1 head of the finance office. That's the 15th of August, 1992.

2 Q. All right. So -- well, before we move on to that segment,

3 perhaps we can look at some documents dealing with the special-purpose

4 council. So if you could look at your binder, and I'm going to be

5 referring to three documents in particular. The first one is 1D 03050.

6 1D 03050. This is dated 21 April 1992.

7 Sir, are you familiar with this document, and if so, could you

8 please tell us how?

9 A. I am familiar with this document because I drafted it together

10 with my colleague, Mr. Kazazic. It's an instruction on the

11 implementation of the order on the use of cash, because we had run out of

12 cash, and this was an attempt on our part to use accounts cheques and

13 other forms of payment as much as possible because there simply was no

14 cash.

15 Q. All right. And you can see that this document does make

16 reference to the public accounting services, the SDK, and during this

17 period of time can you confirm to us whether it was working as it had

18 been in the past, that is, connected to Sarajevo and to the rest of the

19 country, or had the SDK been impaired by this point?

20 A. In that period, the communications with Sarajevo were down.

21 I think that in early April, a truck with cash was stopped in Konjic

22 because there were roadblocks set up there, and after the

23 telecommunication lines went down it was impossible to use those, so the

24 SDK could operate only partially in the Mostar area to effect payments

25 within companies in Mostar.

Page 33722

1 MR. KARNAVAS: Your Honour, I'm told that we're supposed to break

2 at 10.15. If I could go on for a few more minutes, I can close this

3 chapter up. Two brief documents, Your Honour, if that's okay.

4 JUDGE ANTONETTI: [Interpretation] Go ahead.

5 MR. KARNAVAS: Thank you.

6 Q. The next document is 1D 02389. 1D 02389. And this is dated May

7 1992, and this is a decision to appoint you and others to the

8 special-purpose council. You see that, sir, do you not?

9 Do you have the document, sir?

10 A. Yes.

11 Q. Okay. And we can see your name here at the very top; correct?

12 A. Yes.

13 Q. If we look at the last paragraph, number 4, we see that you are

14 to be one of the coordinators, along with Mr. Prlic and Mr. Puljic;

15 correct?

16 A. Yes.

17 Q. Okay. And as I understand it, in this capacity -- well, let me

18 just ask you this: Since you were the coordinator, along with Mr. Prlic

19 and Mr. Puljic, did you have -- did you exercise any authority over the

20 other members of the special-purpose council?

21 A. No authority in terms of subordination. It was simply

22 coordination of activities, so that you don't have three people visit the

23 same institution in the same village, because there were no vehicles, no

24 fuel.

25 Q. All right. If we could look at the next document, which is 1D

Page 33723

1 03051, 1D 03051, we see this is dated 6th June 1992, and there seems to

2 be two signatures on the special-purpose council coordinators. Have you

3 seen this document before, sir?

4 A. Yes.

5 Q. All right. And we can see from the very first paragraph that it

6 says that this report covers the activities of certain members, and it

7 mentions Slezak, Salahovic, Primorac and Orucevic. Did you know these

8 gentlemen and could you confirm to us that they were also involved in the

9 special-purpose council?

10 A. Yes.

11 Q. All right. And we can see briefly some of the activities. Do

12 you know whether, in fact, this report is consistent with what you were

13 able to observe at the time, that it talks about the field of payment,

14 telecommunications or communications, there's a list of other activities,

15 humanitarian aid? We see that there are current activities.

16 A. Yes, this corresponds to the kind of activities that we had at

17 that time.

18 Q. Now, if we could look at the very last page of this document, and

19 I'm going to focus our attention to the last two paragraphs, primarily,

20 starting with the second-to-last paragraph, it says here:

21 "Besides the mention of concrete activities, some members of the

22 council were intensely engaged in the forming of HVO Mostar war

23 government, especially in the preparation of appropriate acts on the

24 establishing and defining of activities of the town civilian

25 authorities," and so on and so forth.

Page 33724

1 Do you know what this is referring to, sir?

2 A. Well, of course. We had prepared two documents as part of our

3 activities. People with experience in administration, such as Mr. Prlic,

4 Puljic, Kozul, Jahic, Kazazic; so we had drafted a document about what

5 the war government should look like, with a description of the relevant

6 purviews. That was based mostly on our knowledge of how government

7 functioned and on the previous defence plans, and we put this in the form

8 of a proposal to Mr. Topic. And we also submitted a proposal containing

9 the list of regulations that this government should enact in order for

10 life to be organised. These were mostly activities that were envisaged

11 in the defence plans that we had been familiar with.

12 Q. And finally, if we look at the very last paragraph, a meeting is

13 suggested between members of the council and the president of the

14 Croatian Defence Council in order to define the status of the

15 special-purpose council and its tasks, as well as its composition and

16 form for the upcoming period. Do you know whether, in fact, such a

17 meeting took place? And if so, what, if any, outcomes came about from

18 that meeting?

19 A. Yes. At that time, the municipal HVO had already been appointed,

20 and the first decisions had already been issued, inter alia, about the

21 establishment of the office in charge of providing supplies to the town,

22 the finance department, and we thought that some of the activities of the

23 council could now be transferred back to those institutions and that the

24 members of the council could go back to their companies and try to do

25 something.

Page 33725

1 MR. KARNAVAS: Thank you very much.

2 Your Honours, we could take that break now.

3 JUDGE ANTONETTI: [Interpretation] Very well. We'll have a

4 20-minute break.

5 --- Recess taken at 10.25 a.m.

6 --- On resuming at 10.47 a.m.

7 JUDGE ANTONETTI: [Interpretation] The Court is back in session.

8 Mr. Karnavas.

9 MR. KARNAVAS: Thank you, Your Honours.

10 Unless there are any questions regarding the special-purpose

11 council, I'm going to move on. Seeing no questions from the Bench, let

12 me fast forward a little bit, sir.

13 Q. Briefly, I want you to discuss with us your involvement with the

14 HVO HZ-HB. That's the executive authority of the Croatian Community of

15 Herceg-Bosna. And we've seen documents. We know at one point you were

16 appointed, as you had indicated earlier, as the head of the finance

17 department. Is that correct?

18 A. Yes, yes, that is correct, in August 1992.

19 Q. Okay. And if you could please tell us, describe to us, in your

20 understanding what was the HVO HZ-HB, this executive authority? What was

21 its function?

22 A. Our function was to organise life in the territory where the HVO

23 was in charge of defence, as the military structure concerned. So it was

24 the organisation of civilian life and assistance in terms of defence.

25 That was the basic task.

Page 33726

1 Q. All right. Now, we have also heard some testimony concerning the

2 various positions and how it operated, and that this was a collective

3 body. Can you confirm whether, indeed, the HVO HZ-HB acted as a

4 collective body?

5 A. Yes.

6 Q. As such, could you please tell us whether the president of the

7 HVO HZ-HB, that would be Dr. Jadranko Prlic, had the authority to

8 override decisions or appointments taken by the collective body? In

9 other words, if there was a decision that was adopted by a majority,

10 could he override it by virtue of his position?

11 MR. SCOTT: Good morning, Your Honours.

12 I'm going to object to that question as leading. Obviously,

13 we're now beginning to get into more core areas of the testimony

14 concerning Mr. Prlic's function. I think an open question is, "Can you

15 describe Mr. Prlic's function," without leading the witness.

16 Thank you.

17 MR. KARNAVAS: I didn't want to go into that specific detail, but

18 I'll go about it another way, Your Honour.

19 Q. Could you please tell us what was the function of the president

20 of the HVO HZ-HB?

21 A. According to our organisation, they were involved in different

22 fields. I was involved in the organisation of finance. I prepared

23 regulations, proposals for appointments and so on. I sent them to the

24 office of the president of the HVO. The president of the HVO would set

25 the agenda. We discussed the decisions, and after a vote was taken these

Page 33727

1 decisions would be signed by the president and they would be published in

2 the Official Gazette.

3 Q. All right. What about appointments to various positions?

4 A. As for the appointment of my assistants, I would propose

5 candidates, and just like the other decisions, the council would debate

6 that, the council would confirm the decisions, and then the decision

7 would be signed by the president and it would be published in the

8 Official Gazette. If the members of the council would not agree with my

9 proposal, then I would put forth another candidate. And I was

10 independent in that.

11 Q. All right. Well, I just want to -- concretely, though, we

12 understand -- we have seen documents that Dr. Prlic -- bearing

13 Dr. Prlic's signature with various appointments or decisions. Were those

14 his appointments or were those the appointments of the collective body,

15 the HVO HZ-HB?

16 A. Well, I've already said the proposal for my assistants would come

17 from me, and the HVO would vote and confirm the decision. Prlic would

18 sign it, and his office would send it to the Official Gazette to be

19 published.

20 Q. All right. So let me make sure that I'm crystal clear. Whose

21 appointment is it? Is it Prlic's appointment, by virtue of his signature

22 of the document, or is it the appointment of the HVO HZ-HB?

23 A. The HVO.

24 Q. All right. Now, we've heard some testimony in the past

25 concerning the Presidency of the Croatian Community of Herceg-Bosna.

Page 33728

1 Perhaps you could very briefly describe to us the relationship between

2 the Presidency, as a body, and that of the HVO HZ-HB, which is the

3 executive authority.

4 A. From the very outset, the relationship between the Presidency and

5 the HVO HZ-HB was a conflicting one, in a way, in terms of its content.

6 In the Presidency of the HVO HZ-HB, there were the presidents of the

7 municipal HVOs that were supposed to implement the decisions that were

8 made by the HVO. On the other hand, they adopted these decisions and

9 they assessed the work of the HVO. In the stage when the implementation

10 would start, the implementation of the decisions of the HVO, basically

11 most of the resistance came from the municipalities.

12 MR. SCOTT: Excuse me, Your Honour. Just for correction on the

13 record, it may be a mis-translation or it may be that Mr. Tomic misspoke,

14 but on page 32, line 5, there's a reference to the Presidency of the HVO

15 HZ-HB. I don't think there was any such body, if he's talking about the

16 Presidency of the HZ-HB. Perhaps that can be clarified.

17 MR. KARNAVAS:

18 Q. Mr. Tomic, don't worry about what's on the transcript. If you

19 could just clarify at this point, was there a Presidency of the HVO HZ-HB

20 or was there a Presidency of the HZ-HB? Which of the two?

21 A. Presidency of the HZ-HB.

22 Q. Okay, all right. Occasionally, mistakes are made, and we try to

23 clarify them, so don't be surprised if there's some interventions. And

24 we appreciate Mr. Scott's intervention in this case.

25 Now, we also heard that Mate Boban was the president of the

Page 33729

1 Presidency as well as the president of the HZ-HB. If you could kind of

2 clarify his position and his relationship between -- with the Presidency

3 as well as with the HVO HZ-HB, the executive authority.

4 A. Since the defence of the area started earlier on, that is to say,

5 before the HZ-HB was established, Mr. Boban was practically president of

6 the HZ-HB and commander of the HVO at the same time.

7 Q. Let me stop you here. It says here: "Before the HZ-HB was

8 established, Boban was practically the president of the HZ-HB." Are

9 you -- so can you please clarify that?

10 A. [No interpretation]

11 Q. Okay, thank you. That's the executive authority?

12 A. Yes.

13 Q. Continue.

14 JUDGE TRECHSEL: Sorry. The answer of the witness was not

15 recorded.

16 MR. KARNAVAS: I see that. It is kind of disruptive of the flow

17 of the testimony, but we have to do it this way, and I apologise.

18 Perhaps it's -- it's Monday morning, but ...

19 Q. There is a distinction between HVO HZ-HB and the Presidency of

20 the HZ-HB; correct?

21 A. Of course, yes. The Presidency of the HZ-HB was the legislative

22 body and the HVO HZ-HB was the executive.

23 Q. All right. Let's continue where we were talking about Mr. Boban.

24 Just a point of clarification. Again so that we all understand,

25 because it says in the transcript that the HZ-HB was the executive, and I

Page 33730

1 understand that maybe the gentleman is not recording everything in the

2 transcript, but at some point the transcript will be clarified. There is

3 the HVO HZ-HB, that's the executive, and then there is the Presidency of

4 the HZ-HB; correct?

5 A. Correct, correct. That is what I said.

6 Q. I understand that. The Presidency is the legislative --

7 A. [In English] Yes.

8 Q. The HVO HZ-HB is the executive?

9 A. [Interpretation] Yes.

10 Q. All right. Now that we've clarified that, if you could please

11 tell us Mate Boban's function prior to your involvement with the HVO

12 HZ-HB, this executive authority.

13 A. Mate Boban was president of the HZ-HB and president of the

14 Presidency of the HZ-HB. That is to say, he was the president of the

15 legislative authority, and at the same time he was the main commander of

16 the HVO as the military structure.

17 Q. All right. Now, when you were appointed, by whom were you

18 appointed? This is, I believe you said, April 15, 1992. Who appointed

19 you? Or August, I'm sorry, August. I apologise. August 1992.

20 A. The decision on my appointment was signed by Mr. Mate Boban,

21 president of the HZ-HB.

22 Q. All right. Now, how is it that you were appointed to this

23 position?

24 A. The state of war went on for a while, and in the area under HVO

25 control the municipalities took power, established various points and

Page 33731

1 institutions that functioned earlier on in the area and that were of a

2 regional or a republican character seized to function, so at that moment

3 the Presidency of the HZ-HB passed a decision on the establishment -- or,

4 rather, the appointment, I'm sorry, the appointment of Mr. Prlic as

5 president of HVO, as the executive authority, and I was appointed head of

6 the financial department. Our task was to try to organise civilian life,

7 as it were. Schools were supposed to start working shortly,

8 universities, and institutions that were financed or, rather,

9 institutions that were supposed to finance them did not exist because

10 they had been financed regionally or from the republican budget.

11 Q. All right. Now, we're going to slowly get into this in more

12 detail, but first: We have come across some documentation that prior to

13 your appointment as the head of the finance department, that position was

14 held by Dr. Jadranko Prlic. Were you aware of that?

15 A. Yes.

16 Q. Can you please explain to us whether, when you inherited this

17 position, whether you found anything in place, any legal instruments that

18 might have been drafted, actions that had been taken, prior to that;

19 prior to your appointment, that is?

20 A. As I was appointed to this position, I didn't find any papers or

21 any people or any premises that would belong to the finance department.

22 Q. All right. Could you please describe to us, then, what sort of

23 legal instruments were available at the time of your appointment? And we

24 have seen the statutory decision, for instance. Aside from that, can you

25 please explain to us what sort of legal instruments you inherited that

Page 33732

1 would give you an indication of what your functions and those of other

2 members of the HVO HZ-HB were?

3 A. At the time, we could see the statutory decision that defined the

4 duties of the department. The Presidency of the HZ-HB had passed that

5 decision. As for the legislation that was available at the time, for the

6 most part these were laws of the Republic of Bosnia and Herzegovina that

7 had been passed in March 1992 and that had mostly been taken over from

8 the former Yugoslav laws regulating the field of finance.

9 Q. All right. Now, here's how we're going to proceed, Mr. Tomic and

10 Your Honours: For the next segment, I'm going to ask you to briefly

11 describe to us, you know, how it is that you went about establishing the

12 priorities of your department. Then we're going to look at what was

13 occurring at the municipal level, the various municipalities. And then

14 we'll get into the documents that are related to the HVO HZ-HB,

15 particularly in your field. So that's to give everybody an idea of where

16 we're going.

17 So, first, if you could explain to us, now that you have been

18 appointed --

19 JUDGE ANTONETTI: [Interpretation] One moment. A small detail.

20 You said that you succeeded Mr. Prlic in the finance department,

21 but you added this. You said, "I found no document. I found no civil

22 servant and no offices, so I wondered what Mr. Prlic was doing." Could

23 you clarify this? Since you succeeded someone, did that person -- or had

24 that person not done anything at all? And if he had, you didn't come

25 across any documents, you didn't meet the people he worked with, and you

Page 33733

1 didn't come across any office he might have been in?

2 THE WITNESS: [Interpretation] Mr. Prlic was appointed on the

3 15th, on the 15th of May, as head of the finance department. However, at

4 the time he was in Mostar, and he worked in the special-purpose council

5 as coordinator.

6 As far as I know, he took part, as head of the finance

7 department, in the preparation of the session of the Presidency of the

8 HZ-HB that was held at the time when my appointment was carried through.

9 What he did and what he wrote was from home. I mean, there were no

10 offices, there were no premises for the finance department, and there was

11 no staff either.

12 JUDGE ANTONETTI: [Interpretation] Well, if I have understood

13 correctly, you headed this department, this was in August, but this

14 department was not structured or organised, had no staff, and you had to

15 do everything. Is that right?

16 THE WITNESS: [Interpretation] Yes, that's correct.

17 MR. KARNAVAS: Very well.

18 Q. All right. Well, let's talk about what -- the priorities that

19 you set and how you went about establishing the functions of the

20 Department of Finance. Could you please tell us, what were the sort of

21 things that you were looking at, as far as establishing, to start off

22 with, and how did you go about carrying out your tasks?

23 A. As I often travelled as a member of the special-purpose council,

24 I went through different areas and I saw that all municipalities had

25 turned their areas into customs areas, taxation areas. Check-points were

Page 33734

1 placed where customs duty was collected, and taxes too. After the

2 Yugoslav customs service broke up, a republican service was not

3 established. The public accounting service, the SDK, also -- was also in

4 disarray. There was no communication. The Revenues Administration,

5 which had also been organised through a republican institution, was cut

6 off from Sarajevo, and it was reduced to municipal organs. So on the

7 whole, chaos prevailed and there were individualised solutions according

8 to different municipalities. Municipalities financed defence, and those

9 that were not involved in war operations were richer municipalities and

10 they could afford better salaries. Soldiers from other municipalities

11 did not receive salaries at all because there was no economic activity.

12 And I could see what the situation was on the ground.

13 Then I prepared a set of regulations that should be passed as

14 soon as possible, a minimum of regulations for the field of finance, in

15 order to create resources for defence that could be distributed more

16 equitably and in order to enable the functioning of civilian institutions

17 that were financed before the war from regional or republican levels.

18 Q. All right. Let me stop you here for a second. Can you list,

19 first of all, as a general principle, can you list for us what sort of

20 priorities did these regulations have? How did you -- what were you

21 concerned with, first of all, and then moving down the list of

22 priorities, you being a technocrat and, in particular, being well aware

23 of revenue collection and revenue distribution?

24 A. The first priority was the establishment of the Customs

25 Administration, because that is a source of data for subsequent taxation,

Page 33735

1 as most of the merchandise was imported. Then there was the

2 establishment of the SDK service to provide a clearance system to

3 avoid -- in order to avoid tax fraud. Then the establishment of the

4 budget of the HZ-HB, to collect revenues necessary for the financing.

5 These three institutions -- or, rather their functioning required

6 the functioning of other institutions. However, to establish a tax

7 administration in Mostar, before the war in Mostar there was a branch

8 office of the Yugoslav Tax Administration. Five staff were left, three

9 Croats and two Bosniaks, and we were supposed to create a customs

10 administration with these five people. We had to pass regulations, find

11 staff, train them and get going.

12 Q. I'm going to take it step by step. We're going to take it step

13 by step here. Let's start off with -- you said the priorities were

14 customs, SDK, budget. Those were the three big-ticket items, so let's

15 start off with customs.

16 First of all, why was it necessary to establish the Customs

17 Administration, to start off with?

18 A. I've already said that the customs database was the basis for

19 subsequent taxation and monitoring the economy in the area controlled by

20 HZ-HB, as there was practically no domestic manufacturing, no production.

21 At that time, on the border between Bosnia-Herzegovina and Croatia, there

22 were no customs bodies because the Republic of Bosnia-Herzegovina had not

23 established a customs administration. There was an attempt by the

24 Yugoslav Customs Administration, when Slovenia and Croatia declared

25 independence, there was an attempt to draw a border between Siroki Brijeg

Page 33736

1 and Mostar and raise customs duties there. That was supported by the JNA

2 during their -- while they were still in Mostar. So there was no customs

3 administration, but we needed one to create the preconditions for a

4 budget and for tax control and supervision.

5 Q. All right. Well, is the collection -- the establishment of a

6 customs authority at the border, the collections of customs and maybe the

7 imposition of a tariff system, are those not the functions of a state as

8 opposed to a region or municipality?

9 A. Yes, of course that is a prerogative of a state, and the Republic

10 of Bosnia-Herzegovina had taken over the customs law, but there was no

11 administration to implement it, and there were no border crossings. So

12 at the time the municipalities started collecting taxes and customs

13 duties that, under the law, were -- belonged to the state. But there was

14 nobody else to do that.

15 Q. Okay. Now, when you say the municipality started collecting

16 taxes, are we talking about municipalities within the Croatian Community

17 of Herceg-Bosna or also other communities that were outside, such as,

18 let's say, Tuzla?

19 A. It was the case throughout Bosnia-Herzegovina. Every

20 municipality tried to raise funds, starting from customs through taxes,

21 to which under the law the state is entitled. But due to the problem

22 with the communications, that wasn't possible, so that they kept that

23 revenue to themselves and they passed municipal regulations that turned

24 that revenue into municipal revenue.

25 JUDGE ANTONETTI: [Interpretation] Witness, we are now dealing

Page 33737

1 with a very complex and very technical issue, but you seem to be a

2 specialist of this matter. That's why my question is going to be

3 extremely specific.

4 Under the former regime, under the Yugoslav regime, what about

5 the municipalities' budgets? Was it a matter that the federal state was

6 dealing with or a matter that came under the republic? In 1989, what

7 about the budget of the Mostar municipality? Did it come under the

8 federal government, the republican government, or the municipality?

9 THE WITNESS: [Interpretation] The budget was adopted by the

10 municipality, but the municipal revenue was regulated by regulations at

11 federal level, the level of the republic and the municipal level. And

12 there was a social agreement in place about taxation policy, and there

13 was federal tax. At the level of the republic, there was a law

14 regulating the subject matter of taxation and stipulating which part of

15 the tax belonged to the municipality.

16 For example, sales tax were divided between the municipality and

17 the republic, so that the revenues were regulated both by republic laws

18 and municipal regulations. The municipality wasn't in a position to

19 collect taxes, but that mostly applied to smaller-scale taxes such as

20 property taxes, real estate taxes, taxes on copyright fees and the like.

21 The greatest portion of the revenue stemmed from sales tax.

22 JUDGE ANTONETTI: [Interpretation] Fine. Once the federal state

23 stopped existing when Slovenia, Croatia and Bosnia-Herzegovina became

24 independent, these federal taxes were not collected anymore, and as a

25 result the transfer from the federal budget to the municipal budgets

Page 33738

1 stopped, was stopped.

2 You're saying, "Yes," by nodding your head, but that's not

3 enough. Please say it clearly so that it can be recorded on the

4 transcript.

5 THE WITNESS: [Interpretation] Yes.

6 JUDGE ANTONETTI: [Interpretation] Under those circumstances, the

7 municipalities found themselves in dire straits because some of the

8 revenue they had before they did not receive anymore. What about the

9 Republic of Bosnia and Herzegovina? When you took up your position, was

10 money transferred from the republican budget to the municipalities?

11 THE WITNESS: [Interpretation] The main tool in the collection of

12 taxes and the flow of money was the SDK. When the SDK fell apart and the

13 telecommunication lines broke down, it was no longer possible to

14 implement the existing laws and regulations, because it was impossible to

15 transfer money.

16 JUDGE ANTONETTI: [Interpretation] Because of this specific

17 situation, you were forced to set up a new system to enable the

18 municipality to survive, financially speaking, and that's why you

19 explained that a customs department was set up and the SDK was revamped

20 because it was not working anymore, and you also had to work on the

21 budget of a municipality. So if I understand correctly, you had to set

22 up a new system from scratch.

23 THE WITNESS: [Interpretation] A correction. At the time of the

24 collapse of the system, the municipalities that had control of their

25 territory and could work were actually more prosperous than before the

Page 33739

1 war, because there was no transfer of money to the budget of the

2 republic, as the SDK didn't work. But the institutions such as the

3 pension fund, the fund for higher education from which the universities

4 were financed, or water management which were run from the level of the

5 republic and from where money for the pensioners came and for healthcare,

6 they were left without money. And the municipalities continued to raise

7 funds that they were entitled to, but they used them exclusively for

8 defence, so that university teachers were left without salaries,

9 secondary school teachers were left without salaries because those

10 schools were financed from the regional level, doctors and hospitals,

11 which were also financed from regional funds or partly from the funds of

12 the republic, were left without salaries.

13 So a huge number of the population or a huge part of the

14 population was left without money. So it was our role, first and

15 foremost, to help the citizens and the municipalities which, due to the

16 war activities, were left without money for financing their tasks.

17 JUDGE ANTONETTI: [Interpretation] If I understand correctly, if

18 you had not set up this customs administration, chaos, anarchy, would

19 have ensued. Would we be right in thinking so?

20 THE WITNESS: [Interpretation] On the ground, there was already

21 chaos. We were trying to gain control over it.

22 JUDGE ANTONETTI: [Interpretation] Mr. Karnavas.

23 MR. KARNAVAS: Thank you, Mr. President. Just a couple of points

24 of clarification.

25 Q. Prior to the breakup of Yugoslavia, was there a border control

Page 33740

1 and a customs administration between the Republic, the Socialist Republic

2 of Bosnia-Herzegovina and, I guess, the Socialist Republic of Croatia?

3 A. There were no borders. The borders were more of an

4 administrative nature. You could see them only on maps. But in real

5 life, there was no border.

6 Q. All right. Now, you indicated to one of my earlier questions

7 that this was a state function, that is, the establishment of a customs

8 administration and the collection of customs, and I take it by that, by

9 that answer, the monies should have been transferred to Sarajevo.

10 Correct?

11 A. Correct.

12 Q. And assuming that the money was capable of arriving at Sarajevo,

13 and you've already told us that that wasn't possible, what was Sarajevo

14 obligated to do with that money or part of the money?

15 A. Sarajevo was supposed to a budget of the Republic of

16 Bosnia-Herzegovina, and part of that money would have returned to other

17 parts of Bosnia-Herzegovina to finance the institutions I mentioned.

18 Q. All right. Now, you talked about -- you used the word "fund" and

19 "funds," and since we're on the issue of budget, are we to assume that

20 the budget was sort of a line-item budget, where you could see how much,

21 where, the money is supposed to be allocated to when the budget is

22 adopted?

23 A. Correct.

24 Q. All right. And when you talk about funds, could you just please

25 give us a brief description of what is a fund and how it works?

Page 33741

1 A. In the transitional period in Yugoslavia, there were socialist

2 self-management communities of interest which, in the reform processes

3 initiated, should have become funds. These were para-budgetary

4 institutions that had their own revenue, and in the practice we called

5 that revenue "contributions."

6 So there was a pension fund contribution, and there was the

7 socialist self-management community of interest for pension insurance.

8 They had their organisation, and it was in charge of disbursing pensions.

9 They had their own budget and their assembly. That assembly was made up

10 of representatives of the pensioners, on the one hand, that is, the

11 beneficiaries, and representatives of companies, as those that were

12 obliged to pay these contributions. All those assemblies of the

13 republics SIZs, and there was several SIZs such as the pension SIZ, the

14 water management SIZ, the higher education SIZ. Some of them were at

15 regional levels, such as secondary education, others at municipal level,

16 such as the primary education SIZ and others.

17 Q. All right. Well, was it possible, during this period of time,

18 for the various municipalities to go into the various funds and actually

19 collect, directly from the fund, the monies that were owed to them,

20 monies that they had paid into the system or monies that the system was

21 supposed to distribute to them? Would that have been possible?

22 A. When the system collapsed, these services that managed those

23 funds also disappeared. The municipalities passed regulations under

24 which contributions to all these funds and taxes were turned into

25 municipal revenue. So those monies were not transferred to the accounts

Page 33742

1 of those SIZs or funds because there was no clearing system and services

2 were not paid. Secondary schools, higher education, did not function,

3 pensions were not paid out, so that the municipalities imposed a

4 synthetic rate of 80 per cent or even 100 per cent of the net salary to

5 direct those monies into their budgets.

6 Q. You might need to explain that a little bit to us. When you say

7 "a synthetic rate," I think I understand you, but what exactly are you

8 saying, aid, 100 per cent? Is that a contribution?

9 A. So if we take the net salary of an employee, taxes and

10 contributions were calculated on the basis of that net salary. That was

11 the system that was in place. The taxes were the revenue of the

12 municipality and the republic. They were divided. And the contributions

13 would go to the SIZs: 20 per cent for pension insurance, 15 per cent for

14 healthcare, primary education, 5 per cent. So the total of all those --

15 all those contributions and taxes amounted to about 80 to 100 per cent of

16 the net salary. Companies paid some additional contributions that were

17 linked to their income or profit, but speaking about salaries, the total

18 rate was about 80 per cent because there was a campaign in place to

19 reduce general expenditures. Municipalities that had all those taxes and

20 contributions put together in one rate would continue collecting all

21 those, but they would put all that money -- direct all that money into

22 their budgets.

23 Q. All right. Now, going -- let's move on to the second --

24 JUDGE ANTONETTI: [Interpretation] One moment, please.

25 Under the former socialist regime, when someone received a

Page 33743

1 salary, would that person have to pay taxes on that salary?

2 THE WITNESS: [Interpretation] A worker would get his net salary,

3 and the taxes and contributions were paid by the company where that

4 worker was employed, so that the worker, personally, never -- would never

5 know how much tax was paid on his salary or the total of the

6 contributions. Only if a worker had a large income, they, at the end of

7 the year -- he or she would have to pay additional tax.

8 JUDGE ANTONETTI: [Interpretation] So if I understand properly,

9 under the former socialist system employees would receive a net salary,

10 except for those who received a much higher salary. But when you,

11 yourself, set up a new system, things were different. People received a

12 gross salary and then had to pay various taxes, so that in the end, if I

13 understand correctly, people -- some people would have to pay about

14 80 per cent of their salary in various taxes, or am I mistaken?

15 THE WITNESS: [Interpretation] No, there is a misunderstanding.

16 Workers would always get a net salary, so -- and that salary was

17 transferred to their current account, and the taxes or contributions

18 would be calculated by the company based on the net salary. And the

19 total of those taxes and contributions would amount to a total of about

20 80 per cent in relation to the net salary.

21 JUDGE ANTONETTI: [Interpretation] Let's take the case of someone

22 working for the municipality in Mostar, a garbage collector. Under the

23 former regime, under the federal regime, or under the new regime, the new

24 system, the salary of this particular employee was not taxed. It was up

25 to the employer to pay various taxes and contributions. The employee

Page 33744

1 would receive exactly the same pay?

2 THE WITNESS: [Interpretation] Yes, that's the net salary

3 principle.

4 JUDGE ANTONETTI: [Interpretation] Fine.

5 MR. KARNAVAS: All right.

6 Q. And I take it the difference now between -- under the old --

7 prior to the war, the conflict, was the money at one point -- prior to

8 the conflict, the money would be directed to Sarajevo, and then it would

9 be distributed from Sarajevo to the various municipalities, whereas now,

10 as I understand your testimony, the municipalities are keeping the money

11 for themselves and not sending it on to Sarajevo, and then taking care of

12 their particular needs. Is that how we are to understand your direct

13 testimony?

14 A. Yes.

15 Q. All right. Now, if we go on to the next priority, you indicated

16 the SDK -- the SDK, that's a system that you spoke about earlier. Can

17 you please explain to us what exactly you did or your department did to

18 make this function?

19 A. First, we passed regulations governing the work of our

20 organisation, and then started to renew the network and establish

21 communication between the offices of the SDK.

22 Q. All right. And how far were you able to establish the offices?

23 And in relation to that question, were you able to link up, as it were,

24 with Sarajevo? And if not, why not?

25 A. In most of the municipalities, the offices were physically

Page 33745

1 intact.

2 Mostar was a problem because the building and all the equipment

3 were left on the -- in the eastern part of town and was destroyed. Then

4 we found other premises for what was to become the central branch for

5 calculations and analyses of financial flows. We were able to procure

6 the same kind of equipment as the one that was used before the war by the

7 SDK of the republic and software from the head office in Sarajevo.

8 Thus, we were able to get Mostar running. The greatest problem

9 was that of the phone lines, but by the end of the year we were able to

10 solve that. We did not have communication with Central Bosnia, though.

11 Q. And two questions. One: Were you ever able to solve the issue

12 of communications with Sarajevo so that you could link up with the

13 Sarajevo SDK, the central government?

14 A. Technically, no.

15 Q. And, secondly, you said that you were able to get the software

16 from Sarajevo. Two questions. One: Why was the software necessary?

17 Presumably, the SDK was functioning prior to the conflict and where the

18 entire country was linked into the system, so why was it necessary to get

19 software? And, number 2, and perhaps even more importantly, how is it

20 that the software came to Mostar from Sarajevo?

21 A. First of all, we needed the software that would do the operations

22 of the central unit which was in Sarajevo and now it had to perform the

23 same kind of work in Mostar. We decided to get the software from

24 Sarajevo because we thought it was just a provisional solution and that

25 soon enough we would be able to communicate with Sarajevo and that it

Page 33746

1 would be easy to take it from there. The government commissioner who

2 left Sarajevo, he was the director of the central unit in Sarajevo, was

3 our contact person, and he made it possible for us to get the disc with

4 the software that ran those operations.

5 Q. All right, thank you. Now, you did indicate that the equipment,

6 that would be the hardware, I take it, was located on the east side and

7 had been destroyed, I would take it, on or about April-May 1992, so how

8 did you deal with the issue of the hardware, if that was destroyed?

9 A. Well, the hardware was specific, because Bosnia and Herzegovina

10 used NCR equipment. It was actually on its way out, becoming obsolete.

11 Croatia and Slovenia no longer used this equipment in their systems, so

12 that we were able to find this software [as interpreted] in Slovenia --

13 THE INTERPRETER: Interpreter's correction, "hardware."

14 THE WITNESS: [Interpretation] -- and we were able to use the

15 same equipment throughout Bosnia and Herzegovina.

16 MR. KARNAVAS: All right, thank you. And, finally, we have ten

17 minutes left before our lunch break, I'm told.

18 JUDGE ANTONETTI: [Interpretation] Wait, wait, I'd like to go

19 back to a minor issue maybe, but which is essential to me.

20 That software you mentioned, you said that you asked the Sarajevo

21 representative, who was the director of the unit in charge of that

22 software, to give it to you. Does it mean that the Sarajevo authority

23 had given the go-ahead or was it given to you in an official manner? Did

24 you receive it via personal contact with that individual or did you

25 obtain the software in a very official manner?

Page 33747

1 THE WITNESS: [Interpretation] The commissioner was an official,

2 and we requested that assistance be given to us to be able to perform

3 this kind of operation, because we didn't have communications with

4 Sarajevo, and he arranged for us to get this disc when an employee of the

5 SDK in Sarajevo managed to leave Sarajevo.

6 JUDGE ANTONETTI: [Interpretation] Which means that the

7 authorities of the Republic of Bosnia and Herzegovina knew about this.

8 They were aware that that disc had been given to you?

9 THE WITNESS: [Interpretation] Yes.

10 JUDGE ANTONETTI: [Interpretation] Good.

11 MR. KARNAVAS: Judge Trechsel, did you have a question?

12 JUDGE TRECHSEL: I was just wondering, "was given to you," was

13 given to the municipality of Mostar, is that correct, or was given to

14 HZ-HB?

15 THE WITNESS: [Interpretation] This was passed for the SDK HZ-HB

16 because this is the kind of software that can be only used in the central

17 offices of the SDK, not in the municipal branches, because this is the

18 software that brings together the work of various branch offices, it

19 analyses the data, things like that.

20 JUDGE TRECHSEL: Thank you.

21 MR. KARNAVAS: Okay.

22 Q. Now, in the remaining minutes, if we could quickly cover the

23 third aspect of your priorities, which was the budget, because that was

24 the third thing that you indicated. If you could briefly describe to us,

25 why was this necessary? And perhaps even more importantly, what exactly

Page 33748

1 did you envisage as far as putting together the budget for HZ-HB?

2 A. One of the key reasons why the budget was passed was to ensure

3 the transparency in the way in which public revenue was used, so we had

4 to adopt a budget, we had to define what revenues were in the budget,

5 went into the budget, what outlays were to be financed from the budget,

6 because it was very important, in terms of assuming the powers that in

7 the meantime had been carried out by the municipalities, they enforced it

8 in their areas, and we had to show that we would be able to finance areas

9 that were of common interest, and that this was not just a matter of us

10 taking the money from the municipalities, but of us providing services

11 that used to be financed at the republican regional levels.

12 Q. It sounds a little bit like the accusations made against Barak

13 Obama, spreading the wealth around, collecting the money from the various

14 the municipalities and then spreading it to the various areas on an

15 on-need basis. Is that what you're telling us?

16 A. Well, more or less, because the municipalities of Citluk,

17 Siroki Brijeg, Ljubuski, Livno, Duvno, Posusje were able to get the

18 revenues, whereas for instance Mostar, Stolac, partly Capljina, to say

19 nothing about other municipalities such as Kupres, were simply not in a

20 position to have any kind of economic activity in their territory and

21 they could not collect any revenue.

22 Q. All right. So we're talking about, and correct me if I'm wrong,

23 is trying to establish, through your budget, a single economic space

24 within the area of the Croatian Community of Herceg-Bosna; am I correct?

25 A. Yes.

Page 33749

1 Q. All right. And just very briefly, I think I can fire off two or

2 three more questions before we break.

3 Looking at the three priorities, customs being the first one, I

4 take it with customs goes the tariff system, or is that separate?

5 A. Customs requires a decision on the organisation of the customs

6 service, the law on customs with the appropriate tariffs which are a part

7 thereof, so these are the requirements.

8 Q. And what about -- when you talk about the SDK and establishing a

9 budget, were efforts made concerning, for instance, a tax system, or did

10 you adopt simply the old system that was in existence?

11 A. At this stage, a system that was being established was the one

12 that was in line with the regulations adopted by the Republic of Bosnia

13 and Herzegovina, so for the most part this was a reconstruction of the

14 old system.

15 MR. KARNAVAS: All right. And perhaps this might be a good time

16 to break, and when we return, I'll be asking you about banking and

17 insurance, before we go into what happened in the municipalities.

18 JUDGE ANTONETTI: [Interpretation] Mr. Scott.

19 MR. SCOTT: Thank you, Your Honour. And good morning to Your

20 Honours, although I haven't had a chance to address you, except very

21 briefly. Good morning to you and good morning to counsel and all those

22 in the courtroom.

23 If we could just -- I don't think I have to say anything -- well,

24 perhaps out of an abundance of caution, we should go into private session

25 for a moment, because I know the Chamber's had a view about this.

Page 33753

1 Q. Now, Mr. Tomic, let's pick up where we let off, and I said that I

2 would briefly ask you about banking and insurance, whether any efforts

3 were made concerning those two items while you were part of the -- while

4 you were the head of the Department of Finance. So could you please

5 explain to us whether any efforts were made in those two areas?

6 A. Those were two very important areas, given the conditions under

7 which Bosnia-Herzegovina became independent, important both for the

8 communication with the world and for the economic system. Banking in the

9 territories that are part of the HZ-HB were -- was falling apart. No

10 bank had its corporate headquarters there. They had their corporate

11 headquarters in Sarajevo or Zagreb, Belgrade, Split, and no bank had its

12 corporate headquarters in HZ-HB. That was a huge problem for payment,

13 for receiving money from abroad, and it was a problem for both companies

14 and individuals, most of all for pensioners who had earned their pensions

15 abroad, in Germany or Austria, for example.

16 Talking about insurance, the situation was the same there. The

17 insurance companies had their corporate headquarters in Sarajevo or

18 Belgrade, Zagreb; whereas in Mostar and in the area of HZ-HB, they only

19 had branch offices, that is, organisational units with no legal

20 personality. Another problem with insurance existed until

21 Bosnia-Herzegovina became a member country of the Green Card

22 organisation, which has -- or, rather, the member states of which are

23 entitled to issue the car insurance green card which is valid in all

24 member countries and makes it possible for trucks and automobiles to

25 drive on the roads of those countries. For those reasons, the companies

Page 33754

1 in HZ-HB opened accounts with banks in Croatia or Slovenia. Those were

2 non-resident accounts, based on the pertinent agreement between

3 Bosnia-Herzegovina and the other country, so all the insurance actually

4 came from those banks. And we passed regulations to the effect that in

5 the area of HZ-HB, those banks can operate that are registered in

6 Bosnia-Herzegovina. That way, we practically closed down the branch

7 offices of Zagrebacka Banka, Privredna Banka Zagreb, Splitska Banka, and

8 made them establish new banks in Bosnia-Herzegovina, in line with

9 Bosnia-Herzegovinian legislation.

10 And those banks could also do business with partners abroad,

11 provided they have an agreement of the National Bank of

12 Bosnia-Herzegovina. The former branch offices that were active in the

13 area of HZ-HB could either get together and establish a new insurance

14 company or, alternatively, insurance companies from other countries could

15 come in. In this case, insurance companies from Croatia. That was

16 crucial for the circulation of people and goods because nobody could

17 actually travel abroad in their own vehicles. Only trucks with Croatian

18 or Slovenian license plates could enter Bosnia-Herzegovina, but ours

19 could not go to those countries because they didn't have a green card.

20 Due to the understanding of the green card office, national green

21 card office of Croatia, and the efforts of the Bosnia-Herzegovinian

22 authorities, a transitional solution was found for -- with regard to this

23 problem with the green card, so that Bosnia-Herzegovinian insurance

24 companies could use the green card issued by a company from Croatia.

25 These could be affiliated companies or they would -- they could be --

Page 33755

1 there could be a different relationship between them. But, anyway, a

2 solution was necessary to provide conditions for civilised and normal

3 life in HZ-HB.

4 Q. All right. Now, if we could just, to put it in a more concrete

5 fashion so we all understand it, I believe I -- I think I got the gist of

6 this, but perhaps you could tell us, Sarajevo, how did -- whether

7 Sarajevo made some sort of arrangements to have green cards being able to

8 issued, and if so, how?

9 A. The system of issuing green cards was not organised by Sarajevo.

10 It was organised as a result of the talks between representatives of the

11 BiH government in Zagreb and us, who tried to find a solution with the

12 green card office in Zagreb, a solution which would be in line with the

13 international regulations governing green cards. The insurance companies

14 from Sarajevo, such as Zojl, actually applied the same motto as we did in

15 HZ-HB. Zojl actually used the green card issued by the insurance company

16 Mediteran from Ploce. Croatian insurance from Ljubuski would use the

17 green cards issued by Croatian insurance, Zagreb; and Euroherc would use

18 the green card of a Croatian insurance company from Makarska.

19 MR. KARNAVAS: All right. Unless there are any questions from

20 the Bench, I'll move on.

21 JUDGE TRECHSEL: Thank you, Mr. Karnavas, as you invite us.

22 I would like you to explain what the relationship to the National

23 Bank of Bosnia-Herzegovina was in this, because you have told us that you

24 had contact with Croatian banks provided there was an agreement with the

25 National Bank of Sarajevo. Could you explain why it was necessary to

Page 33756

1 have such an agreement and what role the National Bank played at that

2 time, if any?

3 THE WITNESS: [Interpretation] Under the law on the National Bank

4 of Bosnia-Herzegovina and on the banking system in Bosnia-Herzegovina, to

5 found a bank you need the approval of the National Bank of

6 Bosnia-Herzegovina, in addition to meeting all the other requirements of

7 that law. So the approval of the National Bank is required for any bank

8 to be internationally acknowledged and to be licensed to take part in

9 international -- under the international payment system, to get a Swift

10 code, et cetera. The National Bank of Bosnia-Herzegovina, due to the

11 wartime conditions and the disruption of the communications lines, was

12 only carrying out part of its -- part of its activities. We still had

13 the -- the national currency still had not been introduced, and much data

14 was lost due to the collapse of the SDK system, so the activities of the

15 National Bank were reduced to a minimum and mostly limited to Sarajevo.

16 JUDGE TRECHSEL: Thank you. But there was contact and you had

17 some contact with the National Bank to authorise the creation of new

18 branches of Croatian banks as banks in Herceg-Bosna, if I understand

19 correctly.

20 THE WITNESS: [Interpretation] The branches of Croatian banks had

21 stopped operating. The Croatian banks that had operated in

22 Bosnia-Herzegovina, such as Privredna Banka, Zagrebacka Banka, Splitska

23 Banka, Croatia Banka, established a new bank, the Bosnia-Herzegovinian

24 Bank, and got approval for that. The former branch offices now became

25 the branch offices of the new bank, and the governor of the National Bank

Page 33757

1 of Bosnia-Herzegovina, with whom we were in contact because he did leave

2 Sarajevo, and after -- after an inspection, he issued an approval because

3 he had seen that the requirements of the Banking Act had been met.

4 JUDGE TRECHSEL: Thank you very much.

5 JUDGE ANTONETTI: [Interpretation] Witness, I'd like to get back

6 to the green card issue. My system -- sorry. My question would only be

7 meaningful if you, yourself, owned a car. Did you?

8 THE WITNESS: [Interpretation] Yes, I did have a car at my

9 disposal.

10 JUDGE ANTONETTI: [Interpretation] But you don't have a car which

11 belongs to you with a green card?

12 THE WITNESS: [Interpretation] [Previous translation

13 continues] ... car, but the green card had expired.

14 JUDGE ANTONETTI: [Interpretation] When you were driving around

15 in your car, your own car, how did you proceed if you didn't have a green

16 card anymore?

17 THE WITNESS: [Interpretation] I could not go to Croatia or other

18 countries without a green card, and the insurance companies that were

19 established in line with our regulations started issuing green cards, and

20 with such a green card you could travel to Croatia, Slovenia, or

21 elsewhere.

22 JUDGE ANTONETTI: [Interpretation] Was your car insured, and if

23 it was insured, with whom had you insured it?

24 THE WITNESS: [Interpretation] Until the beginning of the

25 hostilities and the collapse of the former system, it was insured by the

Page 33758

1 branch office of an insurance company in Mostar. The insurance -- the

2 policy is valid for a year, so that toward the end of 1992 problems arose

3 because the policies were no longer valid and you need new insurance.

4 That's why we passed new regulations to provide for the registering of

5 new companies, which then can issue green cards, so that in the following

6 year all those whose car registrations had expired were again in a

7 position to be able to go abroad.

8 JUDGE ANTONETTI: [Interpretation] If I have understood properly,

9 you were able to get a new green card, and your private car had a new

10 registration number.

11 THE WITNESS: [Interpretation] We got a new insurance policy

12 issued by a newly-established insurance company registered in the area or

13 in the territory of HZ-HB, but cars in Tuzla could get a registration and

14 a green card issued by Zojl following the same procedure.

15 JUDGE ANTONETTI: [Interpretation] Thank you.

16 MR. KARNAVAS: Thank you.

17 Q. And Zojl was able to operate because it was tied into a bank or

18 associated with a bank in Ploce, is that correct, which is in Croatia?

19 A. Zojl Sarajevo is one of the founders of an insurance company in

20 Ploce, in Croatia, and that insurance company guaranteed for green cards

21 issued by Zojl Sarajevo.

22 Q. Now, there was a question posed about the National Bank, and at

23 one point you said that at least at that point in time they had not

24 issued new currency. Did there come a time, to your understanding and

25 knowledge, that the central bank in Sarajevo issued a new currency, the

Page 33759

1 Bosnian or Bosnian-Herzegovinian dinar?

2 A. In September, we received information that Sarajevo had printed

3 money, the Bosnia-Herzegovinian dinar, and on that occasion the

4 government commissioner from Sarajevo came to the territory of HZ-HB to

5 organise the transportation of that money, which was printed in Celj, the

6 transportation of that money to Bosnia-Herzegovina. And speaking to that

7 commissioner, we insisted that one-third of that money remain on the

8 territory of HZ-HB, which was respected. In that manner, the BiH dinar

9 actually physically arrived to HZ-HB.

10 Q. All right. And the translation, we hear "territory," and I

11 believe you're using the word "area." Okay, which word are you using?

12 A. Okay, "area." Right, "area."

13 Q. But let me go back to that. Why is it there was sort of an

14 insistence that one-third of the printed money, this new dinar, remain in

15 the Croatian Community of Herceg-Bosna? On what basis was one-third

16 being requested to remain there?

17 A. The Presidency of HZ-HB had earlier decided not to acknowledge

18 any debts incurred by Bosnia-Herzegovina unless there is a clear link to

19 HZ-HB, so that the same principle of one-third was applied to oil or any

20 other aid which was arriving at the time.

21 Q. All right. I just want to make sure that we all understand this,

22 because -- I think I do, but maybe there's a bit of a subtlety here.

23 We're talking about debts incurred by Bosnia-Herzegovina. Are we

24 talking about debts throughout this period that are being incurred; in

25 other words, the government in Sarajevo incurring debts and then trying

Page 33760

1 to spread it to areas that are not benefitting from whatever the monies

2 are coming from these debts?

3 A. When a country takes up liabilities, then it does so with its

4 budget, and the budget is financed from the entire area of the state.

5 So, yes, that is correct.

6 Q. All right. Now, did -- can you tell us whether, indeed, some

7 monies from this new currency were left behind for the usage within the

8 area of the HZ-HB, and if so, how much?

9 A. The money was transported in three trucks, and one truck remained

10 in the area of HZ-HB, and the SDK received that money and put it into the

11 safes of their branch offices at Siroki Brijeg and Posusje.

12 Through the establishment of the SDK and the opening of accounts

13 for companies and institutions, the accounts with the SDK were opened in

14 BiH dinars. But due to the presence of other currencies, such as the

15 Croatian dinar and the German mark, subordinate accounts were opened in

16 German marks and Croatian dinars. But in HZ-HB, there was no demand for

17 BiH dinars because all trade was -- the trade relations were with

18 Croatian and other European countries. The BiH dinar was not worth much,

19 and there was high inflation, so nobody was willing to sell merchandise

20 for BiH dinars which were not freely convertible and to German marks or

21 Croatian dinars so as to preserve value.

22 In Central Bosnia, it was possible to use the BiH dinar, because

23 there, as it was an isolated area, it was much easier to control the BiH

24 dinar and its value; so that the BiH dinars that came to the area of

25 HZ-HB, following the decisions of the HVO, was transferred to the

Page 33761

1 municipalities in Central Bosnia, Travnik, Zenica, Vitez, Novi Travnik

2 and others, which municipalities bought coal with that money and paid for

3 food and other commodities, because the BiH dinar was used there. But in

4 Tuzla, which was practically an island, the BiH dinar -- the value of the

5 BiH dinar would be different, so the currencies used in HZ-HB were mostly

6 the Croatian dinar and the German mark.

7 MR. KARNAVAS: All right. If there are any questions from the

8 Bench on this. Otherwise, I'll move on.

9 Q. All right. Well, let's -- before we get into, concretely, some

10 of the documents that relate to the HZ-HB, let's focus on some of the

11 activity that was happening at the various municipalities, to give sort

12 of a flavour to the Trial Chamber and to others as to what's going on at

13 that time. So with that, let's look at -- we're going to look at first

14 various documents that relate to Mostar municipality. We've devised them

15 in various municipalities, as opposed to going chronological.

16 The first document is 1D 00559, and this is a decision to

17 transfer funds collected from taxes and contributions. We see

18 Mr. Topic's name. This is in June 1992.

19 Can you comment on this, sir?

20 A. Yes. Well, once the payment transaction system went down in the

21 SDK accounts, where taxes and contributions for pension insurance, health

22 insurance, culture, were collected, those were the things that were meant

23 to be at the republican and regional levels, the funds were there, but

24 now the municipality took over the role of the republic and orders that

25 those funds be transferred into its own accounts for the purpose of its

Page 33762

1 own budget.

2 Q. All right. 1D 00560. 1D 00560. This is a decision on the rate

3 of personal income tax and contributions. Again, it's from Mr. Topic.

4 It's dated 5 June 1992. Very briefly, can you comment on this and tell

5 us whether this, prior to the conflict, whether this would have been a

6 municipal function or a function carried out at the state level?

7 A. Here, the municipality takes upon itself the role of the former

8 socialist self-management communities of interest and funds in the

9 republic and sets a unique rate for taxes and contributions to be levied

10 on the salaries. And we have an arbitrary rate set here at 100 per cent.

11 Q. All right. 1D 00561. 1D 00561.

12 JUDGE TRECHSEL: Excuse me, Mr. Karnavas. So that I'm sure I

13 understand correctly, at rates of 100 per cent, does that mean that there

14 is an imaginary salary sum at the company for an employee, let's say a

15 thousand. Of these thousand, 500 are taxed and the rest is paid, so that

16 the tax paid is 100 per cent of the salary -- the net salary? Is this

17 what the 100 per cent means or is it something else?

18 THE WITNESS: [Interpretation] Yes. You have the salary that is

19 paid out to the worker, and then you have another salary, so to speak,

20 which is then paid in the form of taxes and contributions into those

21 funds.

22 JUDGE TRECHSEL: Thank you.

23 MR. KARNAVAS:

24 Q. And taking up that question, if I just -- to make sure that we

25 understood your earlier testimony, from that 100 per cent that would be

Page 33763

1 for the contribution, at least in the old system, then that would be

2 divided into various percentages that would go into various funds to

3 cover insurance, hospitalisation, and so on and so forth; correct?

4 A. Yes, yes, that's correct. That's how it used to be.

5 Q. All right, thank you. If we go on to the next document, 1D

6 00561, the same time, and this is a decision on the allocation of basic

7 and special sales tax on goods and services, and again can you just very

8 briefly -- it talks about a war budget. Just very briefly comment on

9 that.

10 A. Well, pursuant to this decision, it is ordered then that basic

11 and special taxes should be paid into the accounts of the Mostar

12 municipality. The situation was such that they were paid into the

13 Sarajevo account, and then Sarajevo paid back 25 per cent of it to the

14 municipality. And now the municipality collects all this revenue.

15 Q. All right. 1D 00573, 26th June 1992, a decision on the

16 conditions of sales of goods. Can you comment very briefly on that? If

17 you look at Article 4, for instance, the sale tax shall be paid in the

18 currency in which the goods were purchased or sold. Is that usual?

19 A. Well, this is yet another makeshift solution and an attempt to

20 regulate trade. In this case, we're talking about Mostar. Of course,

21 sales tax is paid in the currency that is the legal tender in the state,

22 and then this decision would indicate that it could be paid in BH dinars,

23 in Croatian dinars, in dollars, in German marks. The decision itself was

24 quite ineptly drafted.

25 Q. All right. 1D 00581. This is 1D 00581. This is a decision on

Page 33764

1 the introduction of the Croatian dinar as a means of payment in Mostar

2 municipality. And if we could focus our attention, for instance, to save

3 time, on Article 2. If you could comment on that.

4 A. Well, as a consequence of the openness of the market and

5 procurement from Croatia, and the large amount of cash that came in

6 through the refugees whose families had found accommodation in Croatia,

7 the Croatian dinar gained prevalence, and here it is introduced as a

8 means of payment for cash transactions, not when payments were made into

9 the accounts. So at this time, other currencies were also acceptable.

10 It was not exclusively Croatian dinar.

11 Q. All right. 1D 00597. 1D 00597, 25th July 1992. This is a

12 decision on the temporary ban on payment of salaries and other income to

13 workers employed by legal entities and other persons. And again just --

14 I know you're familiar with these documents, so if you could concentrate

15 on perhaps Articles 4 and 5 and give us an opinion.

16 A. This decision is again ineptly drafted, because it puts a ban on

17 legal entities operating by effecting payments from one account to

18 another in other countries where there are employees working for that

19 company in those countries, so it cannot be implemented at all. But

20 Article 5 is, in fact, a bigger problem in this decision, because it is

21 indicated here that the ban shall last until the members of the Mostar

22 municipal HVO have been paid. This is probably the reason why it was

23 passed. The soldiers were not getting paid. And then a ban was placed

24 on paying salaries to others.

25 In previous decisions, we saw that the taxes and contributions

Page 33765

1 levied on the salaries were, in fact, the source for the funds for the

2 municipal budget, where the soldiers would actually be paid from, so this

3 is a contradictory decision and probably was there for its psychological

4 effect at that time.

5 Q. All right. So, in other words, until the soldiers got paid,

6 these employees are not getting paid? That's what this means?

7 A. That's correct.

8 Q. But they still have to work, I take it.

9 A. Yes.

10 Q. All right. 1D 02002, if you could look at that document, sir.

11 Oh, I'm sorry, I skipped one document. That would be 1D 00605, 605.

12 It's a decision on the -- a change on the decision of the introduction of

13 the Croatian dinar. And we see from Article 1 that the prices -- all

14 participants in cash transactions are obliged to set prices and exhibit

15 them in Croatian dinar or Yugoslav dinar.

16 At that time, was the Yugoslav dinar still being circulated, and

17 if so, how much of value did it have, if you know?

18 A. This decision was passed 25 days after the decision indicating

19 that prices could also be listed in Croatian dinars, and now we have this

20 new "or" clause. Prices could be listed in Croatian dinars or Yugoslav

21 dinars. There still was some Yugoslav dinar cash in circulation, but

22 because of the inflation it was basically worthless, and prices had to be

23 listed both in Croatian dinars and in Jugo dinars, according to the old

24 regulations. But because of inflation, the prices changed every day, so

25 this was a decision enabling the shops to decide whether they wanted to

Page 33766

1 list the prices in Croatian dinars or in Jugo dinars.

2 JUDGE ANTONETTI: [Interpretation] Witness, we have just seen a

3 series of decisions taken by Mr. Topic, the president of the Municipality

4 of Mostar. I have a question which runs as follows. Maybe you can

5 answer it. For instance, if we look at this document, the last one we've

6 seen, in future the transactions must be made in Croatian dinars. Why

7 was this decision not taken by the Presidency of the HZ-HB, and even by

8 the executive authority, the HVO? Why is it that the municipality that

9 intervenes in an area in which it is not sovereign -- I don't understand

10 why the municipality is passing a series of decisions which could, of

11 course, be taken by the Presidency or the HVO.

12 THE WITNESS: [Interpretation] The HVO of the HZ-HB at this time

13 had not been established yet. The municipalities took upon themselves

14 all the powers and passed decisions, depending on the situation. That

15 sometimes also had to do with the currency, for instance. And why the

16 Presidency? Well, I really don't have an answer for you there.

17 JUDGE ANTONETTI: [Interpretation] In other words, you can't

18 answer this question, why the Presidency did not legislate, since this

19 body had legislative authority. Why is it that Mr. Tomic [as

20 interpreted] took these decisions at a municipal level? "Topic," I said,

21 not "Tomic."

22 THE WITNESS: [Interpretation] Well, at that time the HVO had not

23 been established yet. The finance department had not been established

24 yet, was not operational. The municipalities were trying to deal with

25 this on their own, trying to find their own solutions, and later on, once

Page 33767

1 the HVO was established, it issued regulations pertaining to this sphere

2 in its entirety.

3 JUDGE ANTONETTI: [Interpretation] If I understand properly,

4 during that period in which the HVO had not been established or was not

5 operating, the municipalities held both legislative and executive powers.

6 Is that right?

7 THE WITNESS: [Interpretation] Correct.

8 MR. KARNAVAS:

9 Q. And just so we're not -- we don't get confused months from now or

10 years from now, when we're talking about HVO, we're talking about HVO

11 HZ-HB, executive?

12 A. That's correct, yes.

13 Q. Now, also the Presidency that you spoke of, you did mention this

14 earlier, but the members of the Presidency are, indeed, the presidents of

15 these municipalities, are they not?

16 A. The presidents of the municipal HVOs were members of the

17 Presidency, yes.

18 Q. Also keeping this -- keeping it in context and perspective, this

19 is July 1992. What other choices, if any, were available to

20 municipalities, such as Mostar, when it came to these sorts of issues

21 relating to currencies, for instance?

22 A. At that time, the only option available was to accept and to use

23 either the Croatian dinar or the German mark, because they were present

24 there. The German mark was present because of the large number of guest

25 workers who worked in Germany, Austria, France, and were originally from

Page 33768

1 Western Herzegovina. Some of them still worked and remitted their income

2 back to their families in German marks or received their pensions in

3 German marks.

4 And as for the Croatian dinars, they were present because of the

5 refugees who had their families in Croatia and a great deal of trade.

6 This kind of makeshift solution is present in areas of the municipalities

7 Capljina all the way down to Jablanica. So simply this is a result of an

8 effort to make due in the situation as it was.

9 Q. All right. If we go to the last document on this -- on Mostar,

10 which is 1D 02002, and this is not a municipal document, but this is a

11 document by the board -- the members of the board of managers of a

12 particular holding company, and they issue a decision, we could see that

13 it's 3 August 1992.

14 If we look at the last page -- the second page in English, we

15 see, out of eight members, three have signed and one seemed to have been

16 present at the time. And in looking at this decision, can you please

17 give us a brief comment so that we can understand what is happening now

18 at -- what companies are doing during this period of time?

19 A. Yes. This is an example of how companies tried to make due in

20 those times. Immediately before the war broke out, there was this

21 process of ownership transfer. Social ownership was transferred into

22 private ownership and other kinds of ownership, and various new companies

23 were set up in accordance with the new rules. And here we can see this

24 was a holding company, and of course this process of ownership transfer

25 was done in a socialist manner, so to speak. Workers, employees, were

Page 33769

1 able to buy equity from their salaries, equity in the company. Of

2 course, it was a game, because their salaries would be increased to that

3 amount, the amount that then was used for them to buy shares.

4 But once the war broke out, there was no decision, no decree that

5 was to be passed by a republican authority regarding the ownership

6 transfer, to either say, "Put a stop to the ownership transfer," or to

7 provide a model for it. And here managers, members of the board of

8 directors, decided to put a stop to this ownership transfer process

9 because it was no longer possible to control the inflation, salaries were

10 not being paid; and if we're talking about this holding, it operated in

11 the territory of several municipalities, and each municipality had its

12 own system of running the economy and they virtually took over the

13 company's operating as part of this holding so that the holding no longer

14 served any purpose. And the members of the board of directors who could

15 meet at that time made this decision, and at the same time they had lost

16 the premises, some of the documents; and this was a makeshift solution

17 that could be implemented at that time. But this also shows that there

18 was this desire to protect the property at this time.

19 Q. All right. So I think what I'm hearing is that the intentions

20 were correct on their part, their intentions.

21 A. Yes.

22 Q. But was this a proper way of doing things? Did they have the

23 authorisation to do such a thing, for instance, if we're going to go

24 legally speaking?

25 A. I said that the republic did have power over that, but it failed

Page 33770

1 to pass regulations to deal with the process of ownership transfer in the

2 state of war or imminent threat of war, so this decision was based on the

3 conditions, the circumstances, and this intention to protect the property

4 of this company.

5 Q. All right. But you're not answering my question. My question is

6 very direct. I understand that their intentions were good. I understand

7 that the republic failed to do certain things. But my question is very

8 simple. Did they have authorisation to carry out such a decision?

9 A. No.

10 Q. Thank you. Could you please tell us, as far as this particular

11 holding company, you know, how many employees at one time did Apro have,

12 if you know?

13 A. Before the war, when Mostar had about 50.000 employees.

14 Q. All right. And do you know whether Mr. Prlic was involved in any

15 way with Apro, and if so, how?

16 A. Mr. Prlic, just before the war, was the chairman of the holding.

17 Q. All right. Let's move on to another municipality and see what is

18 going on in Livno. And so --

19 JUDGE ANTONETTI: [Interpretation] One moment. Let us stay with

20 the A pro holding for a moment, because what you said is of the utmost

21 interest for me.

22 As I understood it, there was a transition, a shift from public

23 ownership to private ownership, and the employees of the companies became

24 owners. Now, how could they be owners? Were they changed into owners by

25 having their wages increased? Is this a general principle that was

Page 33771

1 applied to all state or public companies that were somehow privatized by

2 having them changed into private companies? Were all companies subject

3 to this mechanism of shift from public to private ownership?

4 THE WITNESS: [Interpretation] In the process of the ownership

5 transfer or transformation, the employees had the right to buy the shares

6 first, and they decided how much -- how many of the shares in their

7 company they wanted to buy, and they were given some discounts. They

8 could buy those shares at a discount. The employees and the managers

9 mostly bought those shares. Managers usually bought more shares for

10 bigger amounts of money.

11 At that time, there was a recommendation in place by the

12 political structures that the salaries of the employees should be

13 increased in order to make it possible for them to buy those shares. So

14 it was a closed circle. Of course, you didn't get the raise that

15 corresponded to the amount of shares that you paid for the shares, but

16 there was an across-the-board raise, pay raise, in order to speed up this

17 process of privatization of companies and to make it possible for as many

18 employees to actually buy those shares in their private companies.

19 JUDGE ANTONETTI: [Interpretation] If I understand properly, with

20 the breakdown of the former Yugoslavia, it gave rise to a high number of

21 small owners. Those who were wage earners, employees, they were before

22 employees of public companies; and over night, in theory, they became

23 owners of their own companies, is that so, as long as they could buy

24 shares, as you said? But since they could not, a mechanism was found

25 which was to raise their salaries?

Page 33772

1 THE WITNESS: [Interpretation] Yes, that was one way in which the

2 process of the buying of shares was speeded up. This privatization was a

3 part of the economic package introduced by Ante Markovic while he was in

4 government.

5 The ownership was not transferred until the moment when the

6 employees paid the whole amount, and they actually paid it in instalments

7 every month through their salaries. So when the war broke out, this

8 process had not finished, and in particular in this case, it was a

9 holding, it was a new form of corporation which was not present before,

10 where the daughter companies of this holding were to transfer their

11 property to the holding, and the holding was supposed to manage the

12 property. And this process had not been completed, this process that was

13 part of the ownership transfer, so the management here decided to put a

14 stop to it.

15 JUDGE MINDUA: [Interpretation] Mr. Karnavas, just one question

16 before we move on to another municipality. I would, indeed, like to go

17 back to the issue of taxes and contributions on personal income in the

18 Mostar municipality. It's document 1D 00560.

19 We saw in this document that residents in the municipality had

20 decided that the employees would pay taxes and contributions on their

21 income. The amount was to be earmarked to the war effort.

22 Here's my question: Was it some kind of special levy, in

23 addition to the contribution paid usually by citizens to the state, or

24 was this the only contribution paid by citizens? And if it was, in the

25 Mostar municipality did the employees pay another contribution to the

Page 33773

1 government of Bosnia and Herzegovina or were all links severed, so that

2 when an employee would pay his or her contribution to the Mostar

3 municipality, they had nothing else to pay, in terms of contribution,

4 nothing to pay to Bosnia and Herzegovina?

5 THE WITNESS: [Interpretation] Taxes and contributions that were

6 paid in respect of salaries were the only form of taxation on salaries at

7 that moment. Later on, Mostar introduced a war tax of 10 per cent, so

8 the 100 per cent of salaries went to the municipal budget and there were

9 no other payments made to the Republic of Bosnia-Herzegovina because

10 there was no way of sending that money out there.

11 As for these 100 per cent, there is a certain part of taxes and

12 contributions that was, indeed, supposed to go to Sarajevo, but due to

13 the breakdown in communications and due to the fact that these services

14 were not rendered, those that were supposed to be financed by the

15 republic, that is, all the money was kept in the budget of the

16 municipality of Mostar.

17 JUDGE MINDUA: [Interpretation] Thank you. I understood your

18 answer. So that the part was not paid to the government of BiH because

19 there were problems in communication. Thank you.

20 MR. KARNAVAS:

21 Q. Tell us the other -- complete the process. Money can't go to

22 Sarajevo, but once -- if it went to Sarajevo, assuming it could go there,

23 was Sarajevo responsible for then returning some of that money back to

24 the various municipalities, and if so, was that able -- was Sarajevo able

25 to do that?

Page 33774

1 A. When taxes and contributions are paid, every one of these taxes

2 and contributions has an account of its own at the SDK. These are the

3 so-called transient accounts. A payment is made to these accounts, and

4 then automatically the SDK further sends the money to the beneficiary.

5 Now, regardless of whether it will be the republican budget, the

6 self-management interests community, or a fund for education, higher

7 education, health, et cetera, then all of the recipients of this money

8 finance these services at the level of all of Bosnia-Herzegovina.

9 So the retirement fund sends pensions to Mostar, Siroki Brijeg,

10 et cetera. The health fund sends salaries for doctors, nurses and so on.

11 The fund for higher education sends payments to the universities for

12 their work and for the salaries of the employees there, et cetera.

13 Q. All right. And if I understand you correctly so we can just move

14 on, essentially the money is kept at the municipal rather than being sent

15 on, but at the same time the municipality is paying for the activities

16 that would normally be paid from the contributions made by the state ?

17 MR. SCOTT: Your Honour, to that I'm going to object for a number

18 of reasons. One is I didn't object for the last few minutes, but then

19 began a series of leading questions on potentially important issues.

20 Secondly, I'm not sure the witness can confirm that in every

21 instance, in every municipality, no monies did or could have gone back.

22 This is incredibly -- read the question, Your Honours. Read the question

23 and whether this witness can -- absolutely has personal knowledge to

24 answer that question in every instance. I suggest that he cannot.

25 MR. KARNAVAS: I'll rephrase, I'll rephrase.

Page 33775

1 JUDGE ANTONETTI: [Interpretation] Yes, do rephrases, step by

2 step.

3 MR. KARNAVAS: Thank you.

4 Q. Earlier, you told us that the SDK wasn't properly functioning

5 because there was a breakdown in the telecommunications system. Do you

6 recall telling us this in the morning?

7 A. Correct.

8 Q. All right. Now, at least with respect to the areas where -- in

9 Herceg-Bosna, do you know whether there was a possible linkage in any of

10 those areas in Sarajevo, while Sarajevo was under blockade, for the SDK

11 to be linked up?

12 A. No.

13 Q. Let's take another example. What about Tuzla? Was Tuzla, for

14 instance, able to be linked up at the time, to your understanding and

15 knowledge, and you were there? Were they able to be linked up with the

16 central SDK system in Sarajevo?

17 MR. SCOTT: Excuse me, Your Honour. I don't -- perhaps I

18 misheard it or didn't hear it. Mr. Karnavas just said that Mr. Tomic was

19 in Tuzla. I --

20 MR. KARNAVAS: I never said that, I never said that. I don't

21 understand.

22 MR. SCOTT: Then that is my objection, then. What does Mr. Tomic

23 know about what was happening in Tuzla? Was he there during the war?

24 MR. KARNAVAS: That's why I left -- I understand the -- I

25 understand the technique, Your Honour, of obstructing. Let me go back.

Page 33776

1 Q. Based on you being in country - the rest of us were not, at least

2 the Bench, the Prosecution and some of the foreigners, but some of my

3 colleagues were there - but you being in Bosnia-Herzegovina at the time,

4 do you know whether Tuzla was connected with the SDK system in Sarajevo

5 at this point in time?

6 A. No, it was not connected, and people from Tuzla, who came to

7 Mostar, confirmed that. Also, it is evident from the decisions they made

8 that there was no communication with Sarajevo.

9 Q. Thank you. We're going to get to those decisions.

10 Now, assuming contributions were made to Sarajevo, was Sarajevo

11 capable at the time of returning those contributions if the SDK wasn't

12 functioning?

13 A. No.

14 Q. All right. Now, you said that the higher education, I believe,

15 at the university, that was something that had to be paid by Sarajevo.

16 Do you know whether Sarajevo was making those contributions to pay the

17 salaries and for the infrastructure and upkeep of the University of

18 Mostar, for instance, at the time?

19 A. No, no.

20 Q. All right. Let's move on to Livno.

21 1D 00798. Let's see what Livno is to go. We'll get to Tuzla at

22 some point, but let's do Livno first. This is an order to introduce

23 uniform pricing and methods of payment in privately-owned catering

24 establishments. If you look at Article 1, we see payments both in

25 Croatian dinar and in Yugoslav dinar. Now, at the time -- you briefly

Page 33777

1 spoke about this, but there was some sort of private enterprise in

2 Bosnia-Herzegovina, and catering establishments, would that one of those

3 forms of private enterprise?

4 A. Yes, correct.

5 Q. Do you know whether Livno was any better off than, say, Mostar

6 when it came to being able to control the inflationary swings of the

7 Yugoslav dinar?

8 A. Livno had no possibility whatsoever to influence that in any way.

9 Q. If we go on to 1D 00801, this is May, 29 May 1992. Again, this

10 is Livno. This is a decree on the introduction of wartime turnover tax

11 on goods and services. If you could please look at this and give us a

12 very brief opinion on it.

13 A. The municipal assembly, in the old system, did not have the

14 authority to impose wartime taxes in respect of the circulation of goods

15 and services, so this part pertained to increasing levies in the field of

16 trade and services. The revenues were sent to the budget of Livno.

17 Q. All right. And then if we look at the -- towards the end of this

18 document, we see that this is delivered to the Livno SDA branch office.

19 That was the Muslim party in Livno, was it not? The SDA, that's the

20 Muslim party, and this is the branch party in Livno?

21 A. Yes.

22 Q. If we go to 1D 00803 --

23 JUDGE ANTONETTI: [Interpretation] One moment.

24 Witness, please look at Article 4 of the document. Based on the

25 document, it looks as though the outcome -- or the tax will be paid into

Page 33778

1 gyro account 11700-840-055, held at the Livno SDK. Does this mean that

2 the turnover tax is going to be managed by the Livno SDK? At least

3 that's what Article 4 says.

4 THE WITNESS: [Interpretation] Money was paid into this account,

5 this gyro account with the SDK of Livno, and they would be supposed to

6 send that money to the number of the account in Livno. That is what

7 I can see from the numbers here. That is to say that there is no

8 circulation with Sarajevo or other municipalities. It was only within

9 that municipality.

10 JUDGE ANTONETTI: [Interpretation] Very well, thank you.

11 MR. KARNAVAS: Perhaps one last document before we take our

12 break.

13 1D 00803. 1D 00803. This is 29 May 1992. And if we look at

14 Article 1, it says all shops whose parent company has its headquarters

15 outside Livno are ordered to open up a gyro account at the Livno SDK.

16 And then if we look at Article 4, Roman numeral IV, it says:

17 "All funds remaining after the payment of the turnover tax and

18 taxes and contributions shall be transferred to the account of the parent

19 company as soon as this can be done."

20 Q. Can you please tell us what Livno is doing with this particular

21 order?

22 A. Trading companies from Sarajevo, Mostar, Tuzla, that had stores

23 in Livno, did not have an account in Livno. The account was only at the

24 head office of the company involved. The only possibility in Livno was

25 to collect their daily earnings in cash and to deposit them with the SDK

Page 33779

1 having the account of the parent company as the ultimate beneficiary.

2 Now, this order states that these stores have to open their own

3 accounts at Livno. So in these stores, there would just be a store

4 manager, people who are not even trained to manage a bank account, and

5 there were sales people. But this order was being issued to have them

6 open an account where they would deposit their daily earnings, because

7 turnover tax would be paid on the basis of that.

8 And then in number 4 it says that the turnover tax would have to

9 be paid, although according to the old law, it is the head office of the

10 trading company that is supposed to do that, not the actual store. And

11 it says that this would be transferred to the account of the parent

12 company as soon as this can be done; that is to say, that Livno did not

13 have communication with other SDKs, where the parents company were,

14 Mostar, Banja Luka, Tuzla, everybody else.

15 MR. KARNAVAS: Your Honour, as I understand it, it was the wish

16 of the Bench to have a break at this point.

17 JUDGE ANTONETTI: [Interpretation] Yes. We're going to take the

18 last break for today, and it will be a 20-minute break.

19 --- Recess taken at 2.18 p.m.

20 --- On resuming at 2.41 p.m.

21 JUDGE ANTONETTI: [Interpretation] Mr. Karnavas, you may proceed.

22 MR. KARNAVAS: Thank you. Thank you, Mr. President.

23 We were still on Livno. If we look at 1D 00804, if you could

24 look at this very quickly and again give us a brief comment.

25 Q. What is Livno doing on the 19th of June, 1992?

Page 33780

1 A. This was an order to confiscate funds from all the accounts that

2 were in Yugoslav dinars, to transfer all that money to the account of the

3 Municipality of Livno.

4 Q. All right. If we go on to 1D 00806, 1D 00806, again Livno, this

5 is an order on transactions by a group 685, a gyro account. What is this

6 about? You may want to focus on, say, Article 1 and 2.

7 A. These economic entities, that is to say, small privately-owned

8 shops and restaurants, were not duty-bound to have gyro accounts. Now

9 they were being told to open gyro accounts and to operate exclusively

10 through these gyro accounts. The municipality has no jurisdiction

11 whatsoever over the SDK, according to the old law. They are not entitled

12 to issue such orders to them.

13 Q. All right. Let's look at another municipality very quickly.

14 This would be Siroki Brijeg, starting off with 1D 02331. This is a

15 decision on the means of payments in the area of Siroki Brijeg, and we

16 see from -- Article 1, and then look at Article 2 very briefly, if you

17 could comment.

18 A. This decision introduces the Croatian dinar as means of payment

19 in the area of Siroki Brijeg municipality. This is one of those

20 decisions that was passed by almost all municipalities.

21 Q. All right. If we look at the next document, which is 1D 02332,

22 1D 02332, a decision on the work of the SDK, Siroki Brijeg. If you could

23 comment on it for us very briefly. Look at Article 2 in particular.

24 A. If we look at this decision, the municipality is practically

25 establishing its own SDK in Siroki Brijeg, of course, based on the former

Page 33781

1 branch office of the publicly accounting service, the SDK, and they say

2 that all changes should be made in Croatian dinars, and it also says that

3 there was no payment or communication between Siroki Brijeg and other SDK

4 offices.

5 Q. All right. Let's look at 1D 02333. 1D 02333. This is a

6 decision on the source of the budget of the Municipality of

7 Siroki Brijeg, and if you could again comment and put it in perspective,

8 as you have been doing.

9 A. On the basis of this decision, the Municipality of Siroki Brijeg

10 takes over the revenues that, according to law, belong to the republic,

11 and hereby they transform them into municipal revenues, 1, 2, 3. Road

12 taxes always went to the self-management interest community or fund that

13 was involved in road maintenance. Only a small part of the taxes under

14 number 2 and 3 remained in the municipality, but now they are simply

15 being taken over by the budget of the Municipality of Siroki Brijeg.

16 Q. All right. 1D 0 --

17 THE INTERPRETER: Microphone, please.

18 JUDGE ANTONETTI: [Interpretation] One moment. Let's remain with

19 this document, Witness.

20 I'm curious about one thing, but I don't have the law before me,

21 because this is a decision which is pursuant to regulation 66,

22 paragraph 3, of the law that was published in the Official Gazette of the

23 RBH. Now, what is this Article 66? Are you aware of it?

24 THE WITNESS: [Interpretation] I think that it pertains to the

25 right of municipalities to pass decisions, generally speaking, general

Page 33782

1 decisions.

2 JUDGE ANTONETTI: [Interpretation] Yes, because we can see that

3 this municipality is based -- or is invoking the legislation or the law

4 of the Republic of Bosnia and Herzegovina, but maybe Mr. Karnavas will

5 have time to find Article 66 for us.

6 MR. KARNAVAS: Yes, and that can be found -- it's in the e-court,

7 Your Honours, at 1D 00897. 1D 00897. And I had intended to bring it,

8 and it was an oversight on my part. I looked at that in the office. But

9 we can easily deal with that tomorrow as well.

10 Q. 1D 02334, 1D 02334, this is a decision on a turnover tax on goods

11 and services of Siroki Brijeg, and if you could comment on this. And

12 perhaps for those of us who are not terribly familiar with the taxation

13 system, what is a turnover tax?

14 A. Turnover tax is a tax that is paid when products are sold. There

15 is a turnover tax on retail goods and also there is a turnover tax on

16 wholesale goods, that is to say, when one big company is selling goods to

17 another big company, whereas retail turnover tax is when it is the

18 ultimate consumer who is involved in the purchase. Then this tax has to

19 be included in the price.

20 At any rate, this decision was made by the Municipality of

21 Siroki Brijeg. It was supposed to be the Republic of Bosnia-Herzegovina

22 to pass this decision. Practically, this is the law in its entirety, in

23 abbreviated form, though, and the tariff as well. The tariff is

24 important because the tax is calculated on the basis of that tariff.

25 So, for example, this tariff shows that municipalities where

Page 33783

1 trade could be conducted tried to be more favourable than others, as it

2 were. For example, in this tariff, the tax on gasoline, cigarettes, is

3 lower than before; and the municipalities, for the most part, took over

4 the former republican tariff. Now the Municipality of Siroki Brijeg is

5 introducing lower rates so that their companies would be less expensive

6 and thereby bring more revenue to the budget of the Municipality of

7 Siroki Brijeg.

8 Q. Thank you. If we look at the final document in this batch, and

9 that's 1D 02337, this is a decision on the control of movable goods in

10 the area of Siroki Brijeg municipality. And focusing on Article 1, we

11 can see it says:

12 "Control of entry and exit of all goods in the areas of

13 Siroki Brijeg municipality will be carried out by the relevant inspection

14 services, with mandatory assistance by military and civilian police."

15 And then again in Article 2, it talks about entry and exit points

16 to and from Siroki Brijeg, you know, that they must record every invoice

17 and all goods in transit through the area of Siroki Brijeg municipality.

18 Could you -- and then of course you can look at Article 4 as well. But

19 could you please give us an opinion on this particular decision?

20 JUDGE TRECHSEL: May I -- I'm sorry, it was a rather long

21 question, but I have a question to the previous chapter. And I wonder,

22 Mr. Tomic, whether I understood you correctly. I seem to have heard that

23 the Municipality of Siroki Brijeg, via the turnover taxes, also

24 interferes with competition in giving an advantage to their own

25 companies. Have I understood that correctly?

Page 33784

1 THE WITNESS: [Interpretation] Yes.

2 JUDGE TRECHSEL: Thank you.

3 MR. KARNAVAS:

4 Q. And in light of that question, do you know whether other

5 municipalities did sort of the same thing or was this unique to

6 Siroki Brijeg at the time or even thereafter?

7 A. That was typical of municipalities, depending on what kind of

8 companies could be found in their area. They would try to favour them to

9 sell as much as possible because, in return, they would get more revenue

10 for their own budgets.

11 Q. All right. Now, if I could focus your attention to the document

12 of 1D 02337, and if you could give us a brief commentary on this

13 particular document. Again, it's dealing with Siroki Brijeg.

14 A. In order to tax trade transactions, you need documents, and there

15 is no customs administration in place so there is no document showing the

16 entry of goods into Bosnia-Herzegovina or into the municipality of

17 Siroki Brijeg. That's why this municipality of Siroki Brijeg establishes

18 its own check-point, something of a para-custom service or a para-tax

19 administration to introduce an entry document for commodities entering

20 the municipality for the purpose of taxation, or in the case of transit,

21 to know that the commodities are transiting. More or less all

22 municipalities were doing that in order to protect their areas.

23 MR. KARNAVAS: All right.

24 JUDGE ANTONETTI: [Interpretation] Witness, I'm a little startled

25 by the first article. Why is this part to be played by the military

Page 33785

1 police? What is the reason for that, in your view? Was it because the

2 country was in a state of war? Why is the military police supposed to

3 play a specific part?

4 THE WITNESS: [Interpretation] The state of war existed and many

5 people were moving about with weapons, so that for the inspection to be

6 carried out efficiently, it was necessary to protect the inspectors; and

7 the municipalities also used those monies to pay for their own units, and

8 they would then, in return, assist in the process of collection of

9 revenue which was necessary for defence.

10 MR. KARNAVAS: Thank you.

11 Q. Now, for the sake of time, we're going to skip over the documents

12 dealing with the Municipality of Orasje. That would be 1D 01733 and 1D

13 01737, and we'll also skip over the documents dealing with Capljina,

14 which is 1D 01111 and 1119; and let's go on to Tuzla, starting off with

15 1D 01374. But before we get to this document, there was an objection

16 raised, "How would you know about what is happening in Tuzla," so just to

17 provide us with a little bit of information right now: After the signing

18 of the Washington Agreement -- I'm getting ahead of myself a little bit,

19 but after the signing of the Washington Agreement, what positions did you

20 hold?

21 A. I was appointed minister of finance of the Federation and the

22 Republic of Bosnia-Herzegovina.

23 Q. So you were both for the Federation and for Bosnia-Herzegovina --

24 THE INTERPRETER: Your microphone.

25 MR. KARNAVAS:

Page 33786

1 Q. You were both for the Federation, which that was -- which was

2 established by the Washington Agreement, as well as for

3 Bosnia-Herzegovina as a whole; correct?

4 A. Yes.

5 Q. Is Tuzla in the Federation or in the Republika Srpska?

6 A. It's in the Federation.

7 Q. And at the time when you were involved as minister of finance for

8 the Federation, did you have an opportunity to become acquainted with

9 what events were going on in Tuzla concerning financial instruments

10 during the war period, the conflict period?

11 A. I visited Tuzla personally or -- in that period, and my deputy

12 was from Tuzla, who he was in charge of finance matters in Tuzla in the

13 period.

14 Q. All right. Let's focus on Tuzla a little bit. We're on 1D

15 01374, and again we can see at the very top, at the preamble, that this

16 is pursuant to Article 66 on the Law of All People's Defence.

17 And, Your Honours, I'm told that if you do wish to look at that

18 article which is in 1D 00897, it's on page 7 of the English translation,

19 and it would be on -- and I also have the page number for the B/C/S,

20 which is 1D 28-0440. I mean, so if Your Honours wish to ask any

21 questions concerning that. Otherwise, I will move on.

22 So if we look at -- if we look at this decision --

23 JUDGE ANTONETTI: [Interpretation] One moment. I have a question

24 for the witness.

25 You've just told us that you were the finance minister for the

Page 33787

1 Federation, which is a very high-ranking position in a government. It's

2 a very high position to be the finance minister. How long were you the

3 finance minister for the Federation?

4 THE WITNESS: [Interpretation] I was the first minister of finance

5 after the Washington Treaty, and I stayed in that position up to the

6 agreement on the creation of the Federation, that is, immediately before

7 the Dayton Accord. And after that, I became minister of foreign trade

8 and international communications of the Republic of Bosnia-Herzegovina.

9 JUDGE ANTONETTI: [Interpretation] I assume that when you were

10 appointed finance minister, you were appointed because you had special

11 competences in that area.

12 THE WITNESS: [Interpretation] Yes, I met all conditions for that

13 position, since I had been active in the area for a while.

14 JUDGE ANTONETTI: [Interpretation] A moment ago, we talked about

15 taxes. I was wondering if the taxes on goods and services aren't what we

16 call in the European Union the VAT. Is it the same system?

17 THE WITNESS: [Interpretation] There are two systems of taxing

18 turnover. In the former socialist countries, there was this one form of

19 turnover tax applied, and in the West it was VAT. Nowadays in

20 Bosnia-Herzegovina, we have VAT also.

21 JUDGE ANTONETTI: [Interpretation] Very well. When

22 municipalities adopted that kind of law on taxes, I guess that they were

23 thinking about this tax in terms of value-added tax.

24 THE WITNESS: [Interpretation] In the Western world, it is VAT.

25 In Bosnia-Herzegovina and former Yugoslavia, we had turnover tax, the

Page 33788

1 basic difference being that turnover tax, that is, the tax on retail

2 transactions, is paid in the final phase, whereas in VAT it is levied in

3 every -- for every transaction.

4 JUDGE ANTONETTI: [Interpretation] Very well, thank you.

5 Mr. Karnavas, you may proceed.

6 MR. KARNAVAS: Thank you.

7 Q. All right. If we look at this decision, 1D 01374, this is a

8 decision on the calculation of payment of turnover tax on goods. And if

9 you could give us a comment on this particular document.

10 A. This decision is practically an amendment of the law on the -- on

11 turnover tax. It says that there are no exceptions on the obligation to

12 pay turnover tax, which tax must be calculated and paid into the account

13 of the Tuzla budget.

14 Q. All right. Well, prior to the conflict and the seize of

15 Sarajevo, was a municipality such as Tuzla permitted to pass a decision

16 such as this one?

17 A. No, municipalities could not amend laws passed at the level of

18 the Republic, which they have done with this decision.

19 Q. All right. 1D 01375, this is a decision on redirecting turnover

20 tax and goods under tariff number 8 of the schedule of basic turnover

21 tax. If you could comment on this very briefly.

22 A. The decision itself is titled "Decision on Redirecting," so

23 instead of paying it into the budget of the Republic, it is paid into the

24 budget of the Tuzla municipality.

25 Q. All right. So going back to the question that I asked earlier,

Page 33789

1 which provoked the objection: From this, can you draw any conclusions

2 concerning the SDK and the operation of the SDK and its linkage to

3 Sarajevo?

4 A. Obviously, the communication lines were disrupted.

5 Q. All right. Well, 1D 0 -- incidentally, this gentleman,

6 Selim Beslagic, do you know him?

7 A. Yes.

8 Q. And by the name, can you tell us whether he's a Serb, a Croat, or

9 a Muslim?

10 A. A Muslim.

11 Q. And I take it while you were in Bosnia-Herzegovina, granted you

12 were in one particular area, you didn't hear about any mutiny by the

13 Tuzla municipality against the state government in Sarajevo, where they

14 at some point had their own sort of Boston tea party, you know, decided

15 not to provide taxes to the state government?

16 A. I haven't heard of anything of the kind.

17 Q. All right. If we look at 1D 01396, this is an order for

18 calculation of tax on cigarette trade. If you could give us a comment on

19 this, and I particularly would like to know why -- what's so important

20 about cigarette trade?

21 A. This is also a redirection of monies levied from the tax on the

22 turnover of cigarettes into the budget of Tuzla, under 1. And under 2,

23 the deadline for paying turnover tax is shortened to five days. It used

24 to be seven or fifteen days. And cigarettes are important because they

25 are heavily taxed, and they are one of the major contributors to the

Page 33790

1 budget.

2 MR. KARNAVAS: All right. And for the record and for everyone's

3 convenience, if we look at the preamble, it invokes Article 39 of the

4 Decree Law on Defence, Your Honours, in the event you wish to look that

5 up. That's in 1D 00828, but that's the article that they're invoking for

6 this particular order.

7 Q. Moving on to the next document, 1D 01399, this is an order

8 establishing check-points for the inspection of export and import of

9 goods, and we can -- if we look at this, we can see, especially in

10 Article -- or Roman numeral II, check-points for inspection of exports

11 and imports to and from Tuzla municipality which will work 24 hours a day

12 after being established. And it talks about, in Article 5 -- Roman

13 numeral -- I mean Roman numeral IV about the Tuzla municipal inspection

14 service is to control it.

15 Can you give us a comment on this?

16 A. This is almost the same encounter as the decisions passed by the

17 Municipality of Siroki Brijeg. To control the movement of commodities,

18 the documentation must be provided to make possible a timely taxation and

19 thus filling the budget of the municipality.

20 Q. All right. Just to make sure that we're crystal clear on this

21 one, because we started off by me asking you about your initial -- how

22 you prioritise your functions and your tasks when you were assigned to

23 the position of Department of Finance, and you indicated customs was one

24 of them, and when looking at this particular order, as well as the one at

25 Siroki Brijeg, can you tell us whether it would appear that some sort of

Page 33791

1 a customs system is being put in place in Tuzla and in this other

2 municipality, Siroki Brijeg, by an order such as this?

3 A. It is obvious from these decisions that there had been no such

4 system, especially as both municipalities are establishing check-points.

5 But neither Tuzla nor Siroki Brijeg are situated along the border between

6 Bosnia-Herzegovina and Croatia, so they are creating the preconditions in

7 order to levy revenues.

8 Q. Well, my question is by way of -- are there any similarities

9 between establishing a custom border and what is happening here, where

10 everything that goes in and goes out is being checked and some sort of

11 tax is being levied on it?

12 A. The establishment of a customs administration is a precondition

13 for producing documents which serve as a basis for levying taxes. These

14 check-points are something of a para-customs service doing this kind of

15 work for the municipality.

16 Q. All right, thank you. If we go to the next document, 1D 01400,

17 this is an order imposing a war tax, and if you could look at this very

18 quickly, and please tell us what is this -- comment briefly on this, and

19 what is a war tax?

20 A. A war tax on turnover was introduced, which is in addition to the

21 existing tariff, the rate of which was 10 per cent, and an additional

22 30 per cent for cigarettes. But bread, flour, fats, et cetera, are

23 exempt. This revenue is for the Municipality of Tuzla.

24 Q. All right. Well, and then one more point, very briefly.

25 If we look at Roman numeral VII and Roman numeral VIII, it says

Page 33792

1 that noncompliance in this order will be considered a violation with

2 serious consequences. And then if we look at Roman numeral VIII, it says

3 that the order shall take immediate effect and special inspection organs

4 of the Tuzla Municipal Assembly shall monitor its implementation.

5 Now, looking at this, can you tell us what is meant by "serious

6 consequences," and who are or what is the special inspection organ or

7 organs, if you know?

8 A. I don't know for sure.

9 Q. All right. 1D 0 --

10 JUDGE ANTONETTI: [Interpretation] Witness, let's talk about

11 economic and financial issues.

12 You've just said that there was a 10 per cent turnover tax. I

13 assume that this tax was levied on those who were selling those goods,

14 but this tax probably had an inflationary effect, because companies

15 probably had to increase their prices by 10 per cent in order to be able

16 to pay it. Wasn't that an effect of this 10 per cent levy, and didn't it

17 cause distortions in competition?

18 THE WITNESS: [Interpretation] Of course, the result of all these

19 municipal decisions was that there was ever less money, because the

20 municipalities sucked out more and more money in terms of taxes; and it

21 was difficult to do business, to purchase goods, et cetera.

22 But, of course, you can't tackle inflation at municipal level.

23 Municipalities are fighting for their survival and to finance their

24 defence. And if you read all these municipal decisions, you will

25 conclude that they were passed by more or less competent people, but for

Page 33793

1 the most part there was a low level of competence and little knowledge

2 about inflation and about the exhaustion of economic operators,

3 et cetera.

4 JUDGE ANTONETTI: [Interpretation] Fine.

5 MR. KARNAVAS: If we look at 1D 01401, this is an order adjusting

6 the work of the pension and disability insurance fund to war conditions.

7 Q. If you could give us a brief comment on this, and of course this

8 is 8 July 1992. And was this municipality, for instance -- was it the

9 sort of function that a municipality could undertake on its own?

10 A. This is about an order which a municipality has no authority to

11 pass, because the fund of disability and pension insurance of

12 Bosnia-Herzegovina was obliged to adopt its own official document about

13 its activities in wartime conditions and prescribe how the branch --

14 branches of that institution throughout Bosnia-Herzegovina are to work.

15 Here, the municipality sets forth the rules for Tuzla in order to meet

16 the needs of the Tuzla citizens for the services of the pension fund.

17 Q. All right. If we go to the last document dealing with Tuzla, and

18 that's 1D 00836. 1D 00836. This is an order to impose a war tax on net

19 salaries, and if you could give us just a very brief comment on that, on

20 this one. And of course you could look at Roman numeral I and Roman

21 numeral VI in particular, but feel free to look at other parts of this

22 document as well.

23 A. This is an example of how those decisions about the imposition of

24 the wartime tax were passed. It was not a single, flat-rate tax. It

25 depended on the salary. But in Article 6, you can see this exhaustion

Page 33794

1 and the confiscation of the financial assets of the businesses, because

2 it says here that once the salaries and contributions to the salaries are

3 paid, all surplus funds are to be transferred to the Tuzla municipality

4 as the beneficiary. So it is impossible for the companies to use those

5 funds to increase their production, to expand and to develop, but any

6 surplus money was to be paid into the Tuzla account because the Tuzla

7 municipality took upon itself the responsibility of procuring various

8 goods and materiel for the purpose of the war, as you can see in

9 Article 3.

10 Q. All right. And again if I may ask you very concretely, prior to

11 the conflict, the breakout of the war in Bosnia-Herzegovina, was a

12 municipality such as Tuzla, or any other municipality, capable or were

13 they permitted to carry out such functions, to pass such decisions as

14 this one?

15 A. No.

16 Q. And -- okay, I won't ask you the next question because it may be

17 calling for speculation.

18 All right. Now, let's -- we're going to turn to another chapter,

19 and this is a period dealing with when the Croatian Community of

20 Herceg-Bosna, the HVO HZ-HB, was up and running, you told us that you

21 were appointed on or about the middle of August; and so now let's look at

22 this period in history. And I'm going to start off with 1D 00003.

23 And if you have it in front of you, sir, this is dated, we see,

24 14 August 1992. This would have been a day, I take it, before your

25 appointment. This is a decree on the establishment of public

Page 33795

1 accounting -- public auditing service. We see it's signed by the

2 president of the HZ-HB, Mate Boban.

3 Could you please give us a very brief comment on this?

4 A. Well, this is a fundamental decree establishing the public

5 auditing or accounting service, and it was on the basis of this decree

6 that other regulations were passed, ensuring the functioning of the SDK.

7 Q. Was this necessary at the time, in your opinion?

8 A. It shows that -- how necessary and how crucial the SDK was in the

9 effort to organise life, and this is probably why it was among the first

10 decisions to be passed, although there are no specifics here in --

11 pursuant to Article 3, the HVO HZ-HB was supposed to regulate those

12 specifics.

13 Q. All right. If we go to the next document, 1D 00012, that would

14 be "12," this is a -- of 14 August 1992, this is a conclusion on refusal

15 to accept credit obligations which were accepted by the Republic of

16 Bosnia-Herzegovina. I believe you did make some reference to what's

17 contained in this conclusion, but can you please look at it and give us a

18 brief comment?

19 A. Well, at that time information started coming in about the

20 government in Sarajevo incurring debts, and this was, in fact, a response

21 to those news, since none of the money that was obtained through those

22 loans reached the HZ-HB, so this is probably a response to the situation.

23 Q. All right. And in Article 1, we see one-third of the resources

24 acquired. Do you see that part?

25 A. Yes.

Page 33796

1 Q. All right, and the reason why I'm focusing on this one-third is

2 because earlier you had indicated that there were three trucks of that

3 new currency on BiH, and can you tie in that part of your testimony with

4 this particular conclusion?

5 A. Yes. Well, pursuant to this conclusion, a request was made every

6 time contacts were made that one-third would always be transferred to the

7 HZ-HB. Here, we are talking about the BH dinars, but I know that the

8 economy department always thought that one-third of the oil, fuel oil,

9 wheat, whatever, be transferred to HZ-HB.

10 Q. All right. If we look at the next document, 1D --

11 JUDGE ANTONETTI: [Interpretation] Witness, I'm looking at this

12 document, and I'm wondering whether this document is not the

13 manifestation by Mr. Mate Boban of his hostility towards the Republic of

14 Bosnia and Herzegovina, since this document seems to be saying that he is

15 refusing the obligations which were accepted by the Republic of Bosnia

16 and Herzegovina, credit obligations, that is, and that he doesn't want to

17 have any responsibility whatsoever, in financial or economic terms. What

18 conclusions can be inferred from such a document?

19 THE WITNESS: [Interpretation] The conclusion is as follows: The

20 areas of HZ-HB, the municipalities that were in the area of the HZ-HB,

21 would not participate in the servicing of those loans if -- unless

22 one-third of the money has come into their area, because when a state

23 takes a loan, it has to repay it from its budget, and the revenues from

24 the budget are collected from the municipalities. And this is one of the

25 problems that we had inherited from the former Yugoslavia, I would say,

Page 33797

1 when it came to the investments made into some areas in the former state.

2 JUDGE ANTONETTI: [Interpretation] At the time in August or July,

3 June, August 1992, who was lending money to the Republic of Bosnia and

4 Herzegovina? Were there international institutions, were there

5 countries, private entities? Who was lending important amounts to the

6 Republic of Bosnia and Herzegovina?

7 THE WITNESS: [Interpretation] At that time, I had a guarantee

8 issued by the Komercijalna Banka, bank from Sarajevo for the Ministry of

9 the Interior. The amount was huge. The guarantee was to the amount of,

10 let's say, 10 million US dollars, and in case of default and the

11 activation of the guarantee, then the debt would have to be repaid from

12 the budget of the Republic of Bosnia and Herzegovina; and I am not aware

13 of any other debts that existed at that time.

14 JUDGE ANTONETTI: [Interpretation] But the lender in this

15 particular case, this is the Bank of Sarajevo, the Commercial Bank of

16 Sarajevo, did it not ask for guarantees when lending money or did the

17 bank blindly lend $10.000 [as interpreted] without worrying where the

18 money was going, or had they asked for guarantees?

19 THE WITNESS: [Interpretation] Specifically in this case, it was a

20 bank that had the Minister of the Interior among its founders. That was

21 the guarantee that I saw. But the guarantor under this guarantee was the

22 budget of the Republic of Bosnia and Herzegovina, so if the Ministry of

23 the Interior were unable to repay the debt, then the state would have to

24 repay it. So if the situation normalised, let's say, and if anyone

25 paid -- if everyone were to pay their taxes, then we would not get as

Page 33798

1 much revenue back because those debts would have to be serviced.

2 MR. KARNAVAS: Perhaps a hypothetical may assist.

3 Q. Let's just say that the government in Sarajevo or the president

4 of the Presidency were to order a number of satellite phones. Let's just

5 say nine. And the cost would have to be borne, obviously, by

6 Bosnia-Herzegovina. Is what Mate Boban saying here, that those costs

7 should not be borne by Herceg-Bosna unless three of those satellite

8 phones were also provided for their use, for the use in Herceg-Bosna?

9 A. That's correct, yes.

10 Q. Thank you. If we go on to the next document, 1D 00013, we can

11 see that this is a decision on the establishment of the competence of the

12 Customs Administration in the territory of the Croatian Community of

13 Herceg-Bosna during an imminent threat of war or a state of war. That's

14 the title of it. It's dated 28 August 1992, and it's signed by

15 Dr. Jadranko Prlic.

16 Are you familiar with this document, first of all?

17 A. Yes.

18 Q. Okay. And how are you familiar with it?

19 A. Because I drafted it.

20 Q. All right. And could you please explain this very briefly for

21 us?

22 A. Well, this is the initial decree establishing the Customs

23 Administration, and here we simply say that all the valid regulations,

24 passed in accordance with the decree of the Republic of Bosnia and

25 Herzegovina in the Official Gazette 2/92, will be in force, and that the

Page 33799

1 finance department will create other conditions for the functioning of

2 the Customs Administration.

3 Q. All right.

4 THE INTERPRETER: Microphone, please.

5 MR. KARNAVAS:

6 Q. [Previous translation continues] ... dwelling too much on the

7 preamble, perhaps you could look at that very quickly, because it begins

8 by saying:

9 "Starting from the fact that the Republic of Bosnia and

10 Herzegovina has derogated the federal institutions with its declaration

11 of independence and the fact that due to the state of war, it has not

12 established a customs service in the territory of the Croatian Community

13 of Herceg-Bosna, and with the aim of protecting legal entities and

14 natural persons in foreign transactions, the Croatian Community of

15 Herceg-Bosna, pursuant to Article 18 of the statutory decision ..."

16 And it goes on.

17 What is this preamble attempting to state at the beginning, when

18 it talks about the Republic of Bosnia-Herzegovina and its declaration of

19 independence and what have you?

20 A. It is clear from this that the Republic of Bosnia and Herzegovina

21 has the authority to establish the Customs Administration, because once

22 Bosnia and Herzegovina declared its independence, the Customs

23 Administration of Yugoslavia no longer had any authority in the territory

24 of Bosnia and Herzegovina.

25 Q. Concretely, do you know whether the state authorities of

Page 33800

1 Bosnia-Herzegovina were ever prevented by anyone, especially those

2 residing in the areas of the Croatian Community of Herceg-Bosna, from

3 establishing a customs administration at the borderline between these two

4 countries now?

5 A. None of the organs ever came up with this idea of establishing a

6 customs service and taking control of the border and the border

7 crossings.

8 Q. All right. If we go to the next document, P 00412, P 00412,

9 dated 28 October 1992, this is a decree on the opening of accounts of the

10 budget of the Croatian Community of Herceg-Bosna during an imminent

11 threat of war. If you could look at this very quickly, and perhaps I

12 should first ask you: Are you familiar with this decree, and if so, how?

13 A. Yes, I am familiar with this decree because I took part in

14 drafting it, and this decree indicates the accounts where the revenue

15 of -- revenues should be paid that are meant for the HZ-HB budget. Those

16 accounts should be opened with the SDK Mostar and with the commercial

17 bank. What it meant was that a non-resident account should be opened in

18 a commercial bank.

19 Q. All right. If we go on to the next document, 1D 00047, here we

20 have instructions on the opening accounts, possession of assets and

21 implementation on the decree of opening deposit accounts of the budget of

22 HZ-HB during an imminent threat of war or state of war. Do you recognise

23 this document, and if so, could you please comment on this very quickly?

24 What does it attempt to do; these instructions, that is?

25 A. This instruction now specifies the account number where those

Page 33801

1 monies are to be transferred to public revenues, and it is quite clear

2 from this that for revenues 1 to 3 to 5, those accounts are to be opened

3 in every unit because this revenue should be shared with the

4 municipalities, and other accounts are to be opened only in the central

5 unit in Mostar, where the finance department has its seat. And here we

6 also deal with some technical issues about the organisation of the SDK,

7 what the accounts should look like, the various codes for various

8 municipalities, things like that.

9 Q. All right. And we see that it bears your name, so that is you,

10 right, Neven Tomic?

11 A. Yes. This is a bylaw on instruction that I could pass, because

12 it was put in my powers.

13 Q. All right. So this is sort of like an implementing instrument to

14 the previous instrument that we saw, the decree; correct?

15 A. That's correct, yes.

16 Q. 1D 00019. This is a decision on the application of Articles 25

17 to 35 of the Law on Customs, and of course we see the Official Gazette of

18 the Socialist Federative Republic of Yugoslavia in the territory of the

19 Croatian Community of Herceg-Bosna. Could you please tell us what this

20 decision is about, focusing again on some articles such as 2. We see

21 Bosnia-Herzegovina is being invoked, citizens of Bosnia-Herzegovina in

22 Article 3 and so on. If you could please comment on this very briefly.

23 A. The Law on Customs in the former Yugoslavia, which was adopted by

24 the Republic of Bosnia and Herzegovina, stipulated that there should be a

25 special decision on the implementation of customs privileges, exemption

Page 33802

1 from payment of customs. This was a lower level of legislation and it

2 could be changed at that level. You didn't have to go through the

3 Assembly, through the Parliament, with this. So this decision, 25 to 35,

4 as it was known in the business community, defined the exemptions for

5 citizens, institutions, companies and so on. Here you can see in

6 Article 4 that there are exemptions for the armed forces of the HZ-HB and

7 the Republic of Bosnia and Herzegovina and for the organs of the Ministry

8 of the Interior of the Republic of Bosnia-Herzegovina; and you can see

9 further down that it is a non-discriminatory decision, that it applies to

10 all the citizens of the Republic of Bosnia and Herzegovina who were

11 entitled to those exemptions.

12 Q. All right. I'm going to kindly ask you to slow down just a

13 little bit. And also when you -- if you're pointing out something in the

14 document, it might be helpful to some of us if you made reference to a

15 particular article. You talked about the armed forces. I suspect you

16 were referring to Article 4, where it says the armed forces of HZ-HB and

17 RBH, the Republic of --

18 A. Article 4.

19 Q. Right. All right, thank you. Now, if you look at the next

20 document, 1D 00066, this is -- these are the rules governing procedure

21 for claiming exemption from customs duty. Again, what -- are you

22 familiar with this document? You must be, because it bears your name.

23 And could you please explain, what are these rules?

24 A. These are the rules on the implementation of the 25/35 decision

25 on the exemptions, and it specifies documents that are necessary to claim

Page 33803

1 the exemption in an appropriate procedure before the customs service. So

2 this lists all the elements of the rules that regulated this area -- that

3 used to regulate this area before.

4 Q. All right. Let's look at 1D 00020. This is a decision on the

5 flat tax of customs duty and value of goods. If you could please give us

6 a brief commentary. We note that your name is after Article 7, and we

7 also can see, in Article 3, that it makes reference to US dollars.

8 A. This decision was there because of the nature of the customs

9 system. There had to be a flat customs rate that existed in the Yugoslav

10 system. And dollars are mentioned here because dollars were used in the

11 previous law instead of the German mark when values were determined for

12 the value of goods that could be transported across the border, imported

13 and so on.

14 Q. All right. 1D 00023, this is a decision on determining goods

15 subject to a special duty to meet taxation requirements, and it goes on.

16 Again, we see your name. Could you please tell us what this is?

17 A. Well, this is yet another para-fiscal rate, which is the result

18 of a former system, the laws that were in force in Yugoslavia and were

19 adopted by Bosnia and Herzegovina.

20 For all intents and purposes, this is a repetition, and this

21 repetition is here only because this was published in the

22 Official Gazette, which was to be distributed, and then people could

23 regulate this because the Official Gazette that regulated this area,

24 dated from 1991 and 1992, the amendments were from 1992; and it was not

25 at the disposal of the businesses and citizens.

Page 33804

1 So together with the customs tariff, you had to also pay the two

2 times 7.5 per cent and 1 per cent for the recording fee, so a total of

3 16 per cent. This is a fiscal duty. Why? Because it was meant, in

4 Yugoslavia, as a source of revenue for the subsidies to some producers of

5 some goods in Yugoslavia that were supposed to produce goods so that they

6 don't have to be imported anymore.

7 Q. All right. 1D 00026, this is a decree on governing the

8 application of the RBiH decree on the provisional regulation on the

9 turnover tax of goods and services, and it goes on. Could you tell us

10 what this is -- what this decree is about?

11 A. This is the implementation of the decree that was passed in early

12 1992, after the declaration of independence, and practically this is the

13 law that was in force in Bosnia and Herzegovina at the time. But I have

14 to say, once again, that because there were no official gazettes, which

15 are important for the functioning of the budget of the economy of the

16 custom service of the tax system, this decree was to be published and

17 adapted to the wartime, to the state of war; so it was provisional in all

18 of its versions, and it was the same as the one that was passed in

19 accordance with the tariff and also not on the other bases, and that's

20 the -- that was the basis for the calculation of customs, duty and tax.

21 Q. All right. 1D 00027. Here we see a rate scale of turnover tax

22 of goods and services, dated 31 August 1991. And if you could look at

23 this, and of course we do have the benefit at the very end of this

24 document of a statement of reason -- statement of reasons, and of course

25 I'm sure you will assist us in understanding what is a statement of

Page 33805

1 reasons that's attached to this.

2 A. Well, this is the tariff of the rate on the basis of which the

3 rate of the turnover tax is calculated. I've already said that this is a

4 tariff that was taken over from that that was applicable throughout

5 Bosnia-Herzegovina. We can see here 65 per cent, or engines and

6 gasoline, Siroki Brijeg, 40 per cent; cigarettes, 90 per cent; and --

7 well, that's what happened before the war as well, whereas Siroki Brijeg

8 had 40 per cent, I think. So practically this is a document on the basis

9 of which the turnover tax for goods and services would be calculated for

10 the HZ-HB in case of imminent threat of war.

11 Q. All right. 1D 00025, this is a decree on the allotment of

12 revenue generated from the turnover tax. If we look at it very quickly,

13 and please tell us what this is about.

14 A. Well, we've already seen accounts for all municipalities for the

15 turnover tax of goods and services. The SDK would automatically,

16 depending on the kind of tax involved, send 75 per cent of the turnover

17 tax to the HZ-HB account and 20 per cent to the municipality, from which

18 the payment of the said tax was made. This decree was very important in

19 terms of preparing the municipalities to accept this system and to know

20 that part of the revenues would remain directly in the budget of the said

21 municipalities, and through the budget of the HZ-HB they would also

22 benefit because services would be paid for that particular municipality

23 as well, those that would have to be paid for by the republican budget

24 otherwise.

25 Q. All right. 1D 00028, this is the decree on the rate of income

Page 33806

1 tax and contribution. And if we look at Article 2, it talks about a

2 synthetic rate of 80 per cent. Perhaps you could explain to us what this

3 decree is about, and what do you mean by "synthetic rate"?

4 A. In terms of net salaries, taxes and contributions had to be paid.

5 When the state of war came into existence and when funds were no longer

6 there, and they had been financed by revenues, this prescribed a flat

7 rate of 80 per cent of taxes and contributions.

8 On the eve of the war, it was roughly 80 per cent or so, but now

9 it was a flat rate. That is to say, there was no analysis involved in

10 terms of how much would go for higher education, how much for this, how

11 much for that. Rather, 80 per cent would be paid to the budget of the

12 HZ-HB. However, 10 per cent of those resources paid from a particular

13 municipality would be returned to that municipality for the municipal

14 budget.

15 Q. All right. 1D 00030, this is a decree on the introduction of war

16 tax in the territory of the Croatian Community of Herceg-Bosna. If you

17 could just very briefly discuss this.

18 A. This is one of the decisions that was supposed to be of

19 assistance in building a united economic space. The municipal decisions

20 relating to 10 per cent, 8 per cent, 20 per cent, all of this involved

21 differences, meaning that companies would move from one municipality to

22 another, thereby creating additional chaos in the field of control and

23 checks. Therefore, a war tax was established that would be imposed

24 throughout the HZ-HB.

25 MR. KARNAVAS: All right.

Page 33807

1 JUDGE ANTONETTI: [Interpretation] It is better to stop now,

2 since we have two minutes left. And as you know, there is an important

3 hearing at half past 4.00, so we mustn't run late.

4 The Registrar has just told me that you have had three hours and

5 forty-six minutes so far.

6 MR. KARNAVAS: Three hours and how much? Forty-six?

7 JUDGE ANTONETTI: [Interpretation] Forty-six minutes.

8 MR. KARNAVAS: Thank you very much, Mr. President.

9 Unfortunately, we're going to have to carry on with some of this tax

10 documentation. Joe the plumber would not be happy, who is being

11 mentioned in the US presidential race. But, in any event, thank you.

12 JUDGE ANTONETTI: [Interpretation] Witness, as I have told you

13 already, you must not contact the Defence counsel anymore, and we shall

14 see you again tomorrow morning at 9.00.

15 I wish you all a pleasant evening, and see you tomorrow.

16 --- Whereupon the hearing adjourned at 3.58 p.m.,

17 to be reconvened on Tuesday, the 28th day of

18 October, 2008, at 9.00 a.m.