Prosecutors charging Agrokor founder Ivica Todorić for causing damage of HRK 1.6 billion



Croatian businessman Ivica Todoric emerges from the Royal Courts of Justice with his wife Vesna, and one of his legal team, Cherie Booth, after the court ruled on his extradition, in London, Britain, October 25, 2018. REUTERS/Henry Nicholls
Henry Nicholls / REUTERS

Ivica Todorić emerges from the Royal Courts of Justice with his wife Vesna, and one of his legal team, Cherie Booth, after the court ruled on his extradition, in London, Britain, October 25

The authorities have started two investigations into suspected extraction of funds and doctoring of financial reports in the fallen retailing conglomerate Agrokor's case, both implicating former owner Ivica Todorić, who is to be extradited to Croatia from London, where he escaped Croatian judiciary prior to formal indictments.

As soon as he is extradited to Croatian authorities, founder of the fallen Agrokor food and retail conglomerate Ivica Todorić will be taken directly to Remetinec prison as the Zagreb County Court ruled he is to be detained last year.

After that, Todorić should be taken to the Zagreb County State Attorney's Office, which is leading the process against him.

It is expected that Todorić could be taken to a so-called initial interview at the State Attorney's Office (DORH) in Zagrepčanka building in Savska Street in the first days of his stay in Croatia, where he will have the opportunity to present his defense and comment on accusations brought against him.

Doctored financial reports

Prosecutors started two processes against Todorić thus far. The first investigation, started in October last year, was directed against Todorić, his sons Ante and Ivan, son in law Hrvoje Balent and their former associates at the top of Agrokor - Ivica Crnjac, Ljerka Puljić, Piruška Canjuga, Tomislav Lučić, Damir Kuštrak, Ivica Sertić, Mislav Galić, Alojzije Pandžić and Marijan Alagušić as well as Agrokor's former auditors from Baker Tilly, Olivio Discordia and Sanja Hrstić.

Prosecutors accused them of abuse of trust in economic transactions, forgery of official documents and violation of bookkeeping regulations.

The investigation is focused on forgery of Agrokor's financial reports in the last ten years or so. It is based largely on the findings of experts and auditors from PwC and notes that Agrokor untruthfully reported it was operating with profit, which allowed owner Ivica Todorić to claim dividend he was not entitled to for years. Over the years, Todorić extracted some HRK 720 million through his Dutch company Adria Group Holding BV. The second point of the charge refers to reported costs of preparing Agrokor's initial public offering (IPO). The controversy surrounds not just the way expenditures of more than HRK 2 billion were reported, but also connection between these costs with the mentioned project. According to the indictment, the lion's share of these costs were private loans as well as private costs of Ivica Todorić and people connected with him, that in the end Agrokor has to pay.

Kulmer Castle

The third point is the financing of purchase of the Kulmer Castle. According to prosecutors, Todorić did not use just loans from Agrokor, which he later repaid, but also extracted some HRK 122 million from Agrokor through financial manipulation.

There is also the point on the very complicated set of financial transactions from 2013, when Ivica Todorić bought Agrokor's preferred shares from the European Bank for Reconstruction and Development (EBRD) for EUR 100 million. According to the indictment, Todorić acquired the shares without using his money, but used exclusively Agrokor's money. In the end, he transferred his debt towards Agrokor to Agrokor Investment BV in Amsterdam, which has approximately EUR 20,000 at its disposal, so investigators are considering it a non-performing loan.

The next point against Todorić refers to extraction of funds through Agrokor AG registered in Zug in Switzerland, a subsidiary of the Croatian conglomerate. He is accused of raising cash from the company's account for years and keeping it as well as using Agrokor AG's account to pay private expenditures, travel costs and more. According to investigators, this is how he extracted at least HRK 64 million.

Ivica Todorić and his, until recently, closest associates, are also accused of covert financing of the conglomerate through promissory notes with the aim of hiding Agrokor's debts. According to the indictment, the group deceitfully presented Agrokor's debts as close to HRK 1.5 billion lower.

The second investigation, launched in December last year, focuses on what prosecutors describe as illegal loans that Nexus Private Equity and Partners fund provided to Agrokor through Nexus ulaganja company in 2016.

Besides Ivica Todorić, his son Ivan Todorić, Nexus CEO Marko Lesić and Management Board member Krešimir Ružđak as well as Nexus PEP and Nexus ulaganja companies are under investigation. Prosecutors accuse them of abuse of trust in economic transactions and illegally providing Agrokor with HRK 47.5 million at the expense of investors.

Nexus case

According to the indictment, Ivica and Ivan Todorić enticed the co-accused to approve loans worth HRK 117.5 million to Agrokor without informing investors, against regulations and the decision of the Board of Trustees, despite the fact that the funds in question were explicitly allocated for investing in Zagreb Montaža civil engineering company. Agrokor repaid a portion, with HRK 47.5 million remaining uncollected.

The investigation was later expanded to similar financing of Agrokor through Nexus, for Agrokor's Plat hotel project. According to the indictment, a portion of the funds was redirected towards Agrokor, in violation of regulations, with Agrokor not returning HRK 52 million.

In that case, the investigation was expanded to former Tourism Minister Veljko Ostojić as Karisma Hotels Adriatic (KHA) CEO, Marko Makek from Nexus as well as Marinko Benić and Krunoslav Šimatović from KHA 4, through which the financing was done.

It is expected that he will be taken to so-called initial interview to DORH in Zagrepčanka

The investigation is focused on doctoring of Agrokor's financial reports over some 10 years, which allowed owner Ivica Todorić to claim dividend he was not entitled to. The sum in question stands at some HRK 720 million.