Tribunal Criminal Tribunal for the Former Yugoslavia

Page 1808

 1                           Tuesday, 28 October 2008

 2                           [Open session]

 3                           [The accused entered court]

 4                           [The witness entered court]

 5                           --- Upon commencing at 9.00 a.m.

 6             JUDGE ANTONETTI: [Interpretation] Mr. Registrar, could you call

 7     the case.

 8             THE REGISTRAR:  Thank you, Your Honour.  This is case number

 9     IT-04-74-T, the Prosecutor versus Jadranko Prlic et al., thank you.

10             JUDGE ANTONETTI: [Interpretation] Thank you, Mr. Registrar.

11     Today is the 28th of October, 2008.  Good morning to the accused, the

12     Defence counsel.  Good morning to you, Mr. Scott and to your associate,

13     and good morning to all the people helping us.  Good morning, Witness.

14             Mr. Registrar, you have an IC number, I believe.

15             THE REGISTRAR:  Yes, Your Honour, thank you.  Prlic Defence has

16     submitted objection to the OTP list of documents tendered through Witness

17     Simunovic Marinko which was previously given Exhibit number IC 00872.

18     The objection list submitted by 1D shall be given Exhibit number

19     IC 00875.  Thank you, Your Honour.

20             JUDGE ANTONETTI: [Interpretation] Thank you, Mr. Registrar.

21     Again good morning, Mr. Karnavas.  You may proceed.

22                           WITNESS:  NEVEN TOMIC [Resumed]

23                           [Witness answered through interpreter]

24             MR. KARNAVAS:  Good morning Mr. President, Your Honours, everyone

25     in and around the courtroom.

Page 1809

 1                           Examination by Mr. Karnavas: [Continued]

 2        Q.   Good morning again, Mr. Tomic.

 3             MR. KARNAVAS:  Before I begin, Your Honour, just to let you know,

 4     we have provided you hard copies of 1D 00828.  Yesterday the Bench was

 5     interested in Article 38, and again we provided 1D 00897, Article 66 was

 6     of interest, so we provide the hard copies in the eventuality you wish to

 7     look at them and ask questions later on.

 8        Q.   Let's pick up where we left off, Mr. Tomic.  Let's look at

 9     1D 00031.  We're still dealing with the issues of taxation.  You'll see

10     that this is a decree on the level of interest to be applied to the

11     amounts of taxes, contributions, stamp, duty, and so on.  Could you

12     please tell us what this is about?

13             THE INTERPRETER:  Microphone for the witness, please.

14             MR. KARNAVAS:

15        Q.   You can go ahead.

16        A.   This is about a decision which defines the obligation to pay

17     interest in the case of belated payments of public revenue.  This is

18     meant for the protection of the monies due to the inflation at the time.

19     The latest decision at republic level was 8 per cent from March till

20     August, and then we continued to set monthly penal interest.

21        Q.   All right.  Next document is 1D 00034.  This is the decree on the

22     implementation of the law on customs and customs tariffs, and we can see

23     it's rather comprehensive.  If you could please provide us a brief

24     explanation.

25        A.   This is a customs tariff which was taken over from the

Page 1810

 1     ex-Yugoslav customs tariff.  That was based on a decision made by

 2     republic.  It was published in the Official Gazette and became available

 3     to all who needed the services of the customs administration.  The

 4     customs tariff is 1 to 2 points below that in Croatia.  The intention was

 5     to create a financial interest for the import of goods into the area of

 6     HZ HB instead of buying goods in Croatia and a tax being paid in Croatia

 7     too.

 8        Q.   All right.  1D 00041.  This is a decision on the application of

 9     currency rates, and if you could provide us with a commentary on this, in

10     particular with respect to Articles 1 and 2.

11        A.   This decision defines the manner of converting foreign currency

12     into the currency use by HZ HB.  There was no communication with the

13     central bank of Bosnia-Herzegovina, and thus there was no official list

14     of exchange rates.

15             In the area of HZ HB there was no bank with its head office

16     there, so they wouldn't set exchange rates either.  So this was a

17     decision to apply the list of exchange rates of the Privredna Banka

18     Zagreb, a commercial bank which was one of the co-founders of the

19     Hrvatska Banka Mostar.

20        Q.   If we go on to the next document, P 00447, dated 22 September

21     1992.  This is a decree on the regulation of payment transactions in

22     Croatian dinars, and if you could please provide us with an explanation

23     on this.

24        A.   The situation on the ground was the following:  The Croatian

25     dinar was already means of payment in all municipalities of HZ HB, and

Page 1811

 1     this decree defines how the payment system in the area of HZ HB is to be

 2     conducted -- or, rather, is to take place.  All accounts with the SDK are

 3     in BiH dinars, and this decree stipulates that subordinate accounts shall

 4     be set up in Croatian dinars.  So that technically if the account number

 5     was 11800630128, the account number in Croatian dinars would be

 6     118006301000128.  It was a subordinate account of the main account opened

 7     in BiH dinars.

 8             Later, subordinate accounts in German marks were opened, too, and

 9     the initial -- initial figure would be 2.  Accounts in dollars would

10     start with 3, et cetera.

11        Q.   Well, why was it necessary to pass a decree regulating the

12     payment transactions in Croatian dinars?  Was this some sort of attempt

13     to Croatise the area by way of introducing the Croatian dinar?

14        A.   The title of the decree is "Decree on the regulation ... " The

15     Croatian dinar was already present.  Due to the situation it found its

16     way into the area of HZ HB.  Now the question was how we can control the

17     money to avoid cash payment, because if payment is effected through the

18     SDK it is easier to levy taxes and contributions which is one of the main

19     tasks.  So this has nothing to do with a rapprochement with Croatia,

20     because the same was later done with the German mark.

21        Q.   Well, maybe I failed to ask this question yesterday, but wasn't

22     there any way to impose the Bosnian dinar on everyone?  In other words,

23     use that as the only means of transactions, monetary transactions, and

24     disallow the usage of any other currency such as the Deutschmark, the

25     Croatian dinar, the US dollar, the French franc?

Page 1812

 1        A.   At first there were such attempts, but as I said yesterday, there

 2     was no demand for BiH dinars on the part of the companies that operated

 3     at the time, because they couldn't do anything with those dinars in

 4     Croatia or anywhere.  They -- they couldn't convert them into other

 5     currencies because in Croatia the BiH dinar was not on the list of

 6     exchange rates, and the same applies to other countries.

 7        Q.   All right.  1D 00038.  This is a decree on the organisation and

 8     functioning of the Public Accounting Service, and this is 29 September

 9     1992.  If you could comment on this, please.

10        A.   This decree sets forth the organisation and functioning of the

11     Public Accounting Service, and it says here that it shall be organised

12     and function in accordance with the provision of the law on the SDK of

13     the Republic of BiH so that the organisation of the SDK in HZ HB was the

14     same as that in Republic of BiH, only in a limited area.

15        Q.   All right.  Next I'm going to go through a series of documents

16     that are interconnected.  I'll read them off first and then we'll go

17     through them one by one, but I'll read them off for everyone's

18     convenience.  We're going to start off with 1D 01678, then we'll go to

19     1D 01350, 1D 02127, 1D 02128, and then finally P 01063.  So if we could

20     look at the first one, 1D 01678.  Could you please tell us what this is.

21        A.   After the agreement with the government commissioner about one

22     truck with BiH dinars remaining in HZ HB, that truck stayed or was left

23     in Siroki Brijeg and Posusje, and in the offices of the SDK at Siroki

24     Brijeg and Posusje that money was stored.  This is a report or protocol

25     on the acceptance of that money.

Page 1813

 1        Q.   All right.  And this -- in the document we see your name, but we

 2     also see Mr. Mate Erkapic.  Could you please tell us who he was or is?

 3        A.   He was the government commissioner.  I mean the government of BiH

 4     from Sarajevo.  And it was his duty to transport the BiH dinars that were

 5     printed in Celje, Slovenia.

 6        Q.   All right.  Now, yesterday during your narrative you did indicate

 7     that that money could be used and in fact was used, I believe in Central

 8     Bosnia.  So let's look at some of these other documents.  1D 01350.

 9     Could you please tell us what -- what this document is about?

10        A.   This is a report of the SDK, and it was sent to the finance

11     department.  This shows under which orders which quantity of BiH dinars

12     were issued.  We're talking about a total of 13 orders, and the total

13     value of the BiH dinar as delivered is stated here also.

14        Q.   All right.  We go on to the next document 1D 02127.  1D 02127.

15     And here's -- this is a decision on the method of granting monetary

16     assistance to the municipal Croatian Defence Councils in Central Bosnia,

17     and if you could comment on this document.

18        A.   The HVO HZ HB at its meeting on November the 27th, 1992, decided

19     that this quantity of BiH dinars is -- shall be given to the HVOs in

20     Central Bosnia which were areas where the BiH dinar was in circulation,

21     and that money shall be used for the provision of commodities and for

22     other needs of the HVOs.

23        Q.   Thank you.  And we can see from Article I where it talks about

24     the monetary assistance granted in BH dinars; right?  That's in Article

25     I.

Page 1814

 1        A.   Correct.

 2        Q.   All right.  Let's about on to 1D 02128, 1D 02128.  This is a

 3     conclusion.  If you could please comment on this document.

 4        A.   After the allocation of that money in -- a person with individual

 5     protocol signed with each municipal HVO, a report was drafted on the

 6     allocation of that money, and based on that the HVO HZ HB adopted this

 7     conclusion about the distribution of BiH dinars and the assistance

 8     granted to municipal HVOs in Bosnia.

 9        Q.   All right.  Thank you.  And then finally if we go to P 01063.

10             MR. KARNAVAS:  And we're going to focus on page 8, Your Honours.

11        Q.   Please tell us what -- what is this document about, and if you

12     could give us -- provide us with a comment on page 8.

13        A.   These are the minutes of the meeting where the conclusion was

14     adopted about the allocation of dinars to Central Bosnia, and based on

15     that, the conclusion was drafted and signed as we saw on -- in document

16     1D 02128.

17        Q.   All right.  The conclusion's on page 4 in your document, page 8

18     in the English document.  Do you see it on page 4 of the B/C/S where it

19     makes reference to Zenica, Vitez, Travnik, Novi Travnik, Usora --

20        A.   Yes.

21        Q.   Okay.  Thank you.  And finally along with this package, I should

22     have also noted is 1D 02222, 2222.  This is from 29 April 1993.  This is

23     an article in Slobodna Dalmacija and subject introduction of BH dinar.

24     It's an article apparently authored by Dr. Jadranko Prlic.  Are you

25     familiar with this article and if, so, can you please comment?

Page 1815

 1        A.   Yes, I'm familiar with it.  This article was triggered by the

 2     successless attempt to introduce the dinar as the currency of

 3     Bosnia-Herzegovina, because in a very short time the exchange rate

 4     dropped drastically, and it was mostly used for transactions in the black

 5     market, if I may say that.  And the exchange rate itself differed from

 6     island to island, as it were, whether we're talking about Tuzla or some

 7     other territory in Bosnia-Herzegovina.

 8             Due to our allocation of aid to the Croatian municipalities in

 9     Central Bosnia, and in late September the exchange rate was about 5.000

10     dinars to a Deutschmark, and in December when the last shipment was made,

11     the last shipment of BH dinars to municipal HVOs in Central Bosnia, the

12     exchange rate was from 8.000 to even 10.000 BH dinars to a Deutschmark.

13     And this is an article written by Dr. Prlic.  He wrote it as an expert,

14     and it's about confidence in currency.  A currency should be able to make

15     people safe and avoid -- prevent them to -- to be afraid for their

16     property.

17        Q.   One last question concerning this article, concerning Dr. Prlic's

18     observations.  Do you agree or disagree with them, and do they accurately

19     reflect the situation as it existed at the time?

20        A.   I agree fully.

21        Q.   Unless there are any questions from the bench, I'll -- concerning

22     this discrete issue, I'll move on, Your Honours.  I see there are no

23     questions.

24             JUDGE ANTONETTI: [Interpretation] I do have a question.

25             Witness, earlier on we saw a series of documents showing that BiH

Page 1816

 1     dinars that had been printed in Slovenia had been dispatched to municipal

 2     HVOs in Zenica, Vares, and so forth.  The amounts in BiH dinars that

 3     would get to the Vares HVO, for instance, what would happen to that

 4     money?  What would become of it?  Would that stay in safes?  Was it

 5     distributed?  What happened to it?

 6             THE WITNESS: [Interpretation] The HVOs in the municipalities in

 7     Central Bosnia bought commodities.  For example, coal, coal for heating

 8     in Travnik.  They could pay for that coal in BiH dinars.  In Zenica they

 9     could buy iron, construction iron for BH dinars.  So the HVOs were

10     turning that money into commodities immediately, or they would pay the

11     liabilities already incurred and thus they would protect themselves

12     against inflation.

13             JUDGE ANTONETTI: [Interpretation] If I understand properly,

14     initially the HVO did not oppose the BiH dinar to be circulated since the

15     BH dinar was used for the purchase of commodities.  You give the example

16     for Travnik, but you might be able to give other examples.

17             Correct me if I'm wrong, but my impression is that based on the

18     documents and based on your statement, my impression is that the HVO used

19     the BH dinar and was not against it being used.  Is this a possible

20     conclusion one can draw?

21             THE WITNESS: [Interpretation] Yes, that's correct.  There is no

22     one decision of the HVO HZ HB that bans the use of BiH dinars for -- as a

23     means of payment.  This has exclusively to do with the market at the time

24     and the demand for BH dinars on the one hand, and on the other hand it

25     has to do with the protection of public revenue and property, because the

Page 1817

 1     inflation of the BiH dinar was too great, and also the quantity of the

 2     money was limited.  We later also had such problems with the Croatian

 3     dinar.  That's why subsequently the German mark was introduced into the

 4     payment system, because in the area there simply was not enough cash.

 5             JUDGE ANTONETTI: [Interpretation] If I read again what you have

 6     just said about in -- oh, the inflation, if I link that to the article

 7     written by Dr. Prlic that was published on the 29th of April, 1993, that

 8     is several months later, in that article Dr. Prlic speaks about the

 9     inflation, and towards the end of the article Dr. Prlic seems to indicate

10     that as far as he can assess the situation, the best solution to combat

11     this excessive inflation would be to have an agreement between the

12     Republic of Bosnia and Herzegovina and the Republic of Croatia in order,

13     as it were, to regulate interstate regulations.

14             Is this the solutions -- the solution he advocates in order to

15     solve the problems that arise because of the war and the events, that is,

16     an agreement between the two republics, possibly to restore confidence?

17             THE WITNESS: [Interpretation] In the conclusion of this article

18     there is an explanation about the creation of the fiscal and financial

19     system in Herceg-Bosna, and there is this claim that it is the best of

20     all the bad solutions, because given the circumstances, given the chaos,

21     the fact that the state was not functioning, the institutions were not

22     functioning, there are no good solutions.  All solutions are bad.  All

23     solutions are makeshift solutions, but here it says that this solution,

24     in line with the legal system in the Republic of Bosnia-Herzegovina and

25     the legal system in the Republic of Croatia insofar as it pertains to the

Page 1818

 1     use of the Croatian dinar.  In other words, we did not use the Croatian

 2     dinar in contravention of the Croatian laws.  We could not issue money.

 3     We did not participate in the monetary policy.  We did not influence it

 4     in any way.  We used the Croatian dinar in the same way in which citizens

 5     of Slovenia or any other state where Croatian dinar existed on the

 6     exchange rate lists could use it.

 7             JUDGE ANTONETTI: [Interpretation] My last question.  You seem to

 8     be well-versed in your subject, a specialist as it were, as was

 9     Mr. Prlic.  These are rather technical and complex issues.

10             In light of inflation, in light of the fact that three currencies

11     were used, the Deutschmark, the Croatian dinar, and BH dinar, at any time

12     did you contemplate contacting the IMF, the World Bank, the large

13     international organisations that are competent in such matters?  But

14     since it was a state of war, were you not able to get that kind of

15     support or find such a solution and turn to these institutions?

16             THE WITNESS: [Interpretation] In formal terms Bosnia and

17     Herzegovina was not a member of the International Monetary Fund, the

18     World Bank, the EBRD, or the European Bank.  States are members of those

19     institutions, and we did not have any contacts, and we did not pursue any

20     activities in this regard.

21             JUDGE ANTONETTI: [Interpretation] We have seen some documents and

22     other witnesses have mentioned this already.  Did the EU not take an

23     interest in what was happening in Bosnia-Herzegovina and was not

24     interested in your field of endeavour?  Had studies not been carried out?

25             THE WITNESS: [Interpretation] There were no contacts with the

Page 1819

 1     representatives of the European Union in this sphere.  They mostly

 2     focused on humanitarian work and military aspects.

 3             JUDGE ANTONETTI: [Interpretation] Thank you very much for your

 4     answers.

 5             Mr. Karnavas.

 6             MR. KARNAVAS:  Thank you.

 7        Q.   Do you know whether the World Bank or the IMF sent

 8     representatives at that time, we're talking 1992, 1993, to

 9     Bosnia-Herzegovina to provide any technical assistance or any assistance

10     that they might have been able to provide?

11        A.   I've already said that at that time Bosnia and Herzegovina was

12     not a member of the World Bank and of the International Monetary Fund.

13     This issue was regulated only after the Washington agreements were

14     signed.  The first contacts with the World Bank were established after

15     the Washington Agreement was signed.

16        Q.   And when the World Bank eventually did come to BiH after the

17     Washington Agreement, were you involved in any way with their activities?

18        A.   At that time, as the Minister of Finance, I together with the

19     governor of the central bank of Bosnia-Herzegovina led a mission to

20     Warsaw, Poland, and this mission initiated talks about the establishing

21     of the financial system in Bosnia and Herzegovina.

22        Q.   Now, when you say Minister of Finance, you're talking about being

23     the Minister of Finance for Bosnia-Herzegovina while at the same time you

24     were the minister of finance for the federation of Bosnia-Herzegovina; is

25     that correct?

Page 1820

 1        A.   Yes, that's correct.  That was my title after the Washington

 2     Agreement.

 3        Q.   All right.  If we go on now to 1D 00032.  This is a decree on the

 4     conditions for organising an insurance organisations during the state of

 5     war.  If you could please look at this and give us a brief commentary.

 6     We note in Article 1, for instance, references to republican laws.  Could

 7     you please give us a brief explanation?

 8        A.   Well, this decree regulates the -- the issue of organising the

 9     organisations in the sphere of insurance in the area of the HZ HB.  The

10     republican laws are adopted, and those laws in turn adopted the laws of

11     the former Yugoslavia, because no new laws had been passed at the

12     republican level.  And since, as I've already indicated, in the area of

13     the HZ HB they were for the most part just the branch offices of those

14     insurance companies.  This makes it possible for those branch offices to

15     establish legal entities in the area of the HZ HB and thus to continue

16     operating and providing services in the field of insurance.  And as far

17     as the insurance companies from countries not in Bosnia and Herzegovina,

18     they had to establish new legal entities in Bosnia and Herzegovina in

19     HZ HB.

20        Q.   All right.  And I believe that was part of your narrative

21     yesterday with respect to the green card, and now we see the actual legal

22     instrument related to this -- this matter; right?

23             Did you hear my question?

24        A.   [In English] Yes.  [Interpretation] Yes, yes.

25        Q.   Thank you.  1D 00035.  This is a decree on the terms under which

Page 1821

 1     legal and natural persons with headquarters outside the Republic of

 2     Bosnia and Herzegovina may conduct business in HZ HB territory.

 3             Could you please explain this -- this document for us.

 4        A.   Well, I've already said a number of times.  Banks had their

 5     branches there, and the branches continued to operate as part of those

 6     companies that had seats in Croatia, Slovenia, or any other state, in

 7     fact.

 8             Of course this created great problems from the point of view of

 9     the payment of taxes and contributions, and we simply passed this decree

10     that by the 31st of October they had to, if they wanted to continue to

11     operate in the area of HZ HB in Bosnia and Herzegovina that they had to

12     register as legal entities.  In other words, they had to have their

13     management there and they had to have their account opened with the SDK,

14     and that was one of the reasons -- the principal account.  That was one

15     of the reasons why banks did found banks in Bosnia and Herzegovina.  The

16     insurance companies founded the insurance companies in Bosnia and

17     Herzegovina, and other companies followed suit and founded their daughter

18     companies in Bosnia and Herzegovina, and they were then compelled to pay

19     taxes and contributions in HZ HB.

20        Q.   All right.  1D 00051.  This is a decree on individual business

21     activity during the imminent threat of war.  Just a very brief comment

22     looking at Article 2 in particular.

23        A.   This decree adopts all the regulations enforced in Bosnia and

24     Herzegovina about small enterprises, cafes, restaurants, butcher shops,

25     transport companies, hauliers, because this was regulated by a special

Page 1822

 1     law, and this decree in fact adopts the republican regulations and they

 2     apply in the area of HZ HB.

 3        Q.   All right.  1D 00052.

 4             JUDGE ANTONETTI: [Interpretation] Since this document on the

 5     screen talks about those companies set up during the state of war, I

 6     would like to thank Mr. Karnavas for having shown us document ID 00897

 7     and Article 66.  When I read Article 66 of this document, I realise the

 8     following:  I would like you to comment this for me since you were a

 9     major player in the implementation of Article 66.

10             First of all, this law is a law that goes back to the 1980s since

11     this bill had been adopted in the time of the former Yugoslavia.  As far

12     as I see, this general popular defence goes back to the 9th of February,

13     1984.  This text must have been adopted in the event of an attack against

14     Yugoslavia, perhaps by X, Y, or Z, but this text in Article 66 states

15     that during a wartime or during a state of imminent war, the -- the

16     Assembly is responsible for the municipality and may act.

17             On looking at this Article 66, I'm wondering whether in Mostar

18     the following was acknowledged:  President Izetbegovic made a statement

19     and declared that it was an imminent state of war.  The municipality

20     then, on the basis of this text, decided to take on some areas.  For

21     instance, if we look at Articles -- the last Articles, 308 -- 389, for

22     instance, the municipal laws are there to finance the purchase of

23     weapons.

24             Now, when these texts were adopted pursuant to Article 66, was

25     this because everybody felt that since there was a state of war, imminent

Page 1823

 1     threat of war, that the municipalities had full powers as had been

 2     enshrined in the law adopted in 1984?

 3             THE WITNESS: [Interpretation] This article, Article 66, envisaged

 4     the establishment of the Presidency of the municipality, and it's taking

 5     over from the Assembly that could not be in session at the time.  The

 6     Presidency could take decisions in the sphere of the defence that had to

 7     do at the municipal levels, because they were republican laws that

 8     stipulated what the republican TO should do, and this was financed from

 9     the budget of the republic, the organisation of the republican

10     Territorial Defence.  And here the municipal -- the municipality has to

11     finance the needs in its area, and it passes decisions related to the

12     mobilisation, the procurement of whatever is needed for the civilian

13     protection, for the preparation of the reserve forces, because if you

14     look at Article 389, in paragraph 3 it says preparations of the reserve

15     militia except for the needs financed by the republic.

16             So the republic had its own jurisdiction and the municipality had

17     its own jurisdiction, but at the beginning of the war in Bosnia and

18     Herzegovina because the republic [as interpreted] did not perform its

19     job, the municipalities took upon themselves to perform both the tasks

20     that were in their jurisdiction and also those tasks that under the

21     jurisdiction of the republic.

22             JUDGE ANTONETTI: [Interpretation] In other words, what the

23     municipalities were doing, well, they were doing this in line with the

24     law passed in 1984.

25             THE WITNESS:  Partly in accordance with the law.  Under the law

Page 1824

 1     they had certain powers but they also assumed the powers of the republic

 2     because the republic did not perform those tasks.

 3             JUDGE ANTONETTI: [Interpretation] Thank you.

 4             MR. KARNAVAS:  And I believe on line 15 of the previous -- of

 5     page 16 it should say republic and not municipality where he says

 6     "because the municipality did not perform its job," it should say

 7     "because the republic did not perform its job."  That can be checked

 8     later on.

 9        Q.   1D 00052.  This is a decree on placing in abeyance the process of

10     transformation of social capital, and yesterday, for instance, we did see

11     one document, I believe it was Apro Holding, where you did comment a

12     little bit on the privatisation process, as it were, that had -- had been

13     started by I think it was Markovic, but can you comment on this

14     particular decree?  What does it set out to do?  This is 14 October 1992.

15        A.   This decision was passed to protect property.  At the time it was

16     still socially owned property which was in the process of being

17     privatised to protect it against wild privatisation, out of control

18     privatisation.  There was not any institution at the republican level to

19     monitor the process of privatisation.  Once the war broke out this

20     institution no longer functioned.  The payment of salaries, that was the

21     way in which the workers were able to purchase shares in their companies.

22     The salaries were not paid out regularly in most companies.

23             And the third thing was to protect the property against

24     speculators, against those who wanted to buy shares and not actually pay

25     what they were worth in an illegal manner.  And this whole process was

Page 1825

 1     placed in abeyance, it was suspended, and the companies could continue

 2     operating in accordance with the regulations.

 3        Q.   All right, thank you.  1D 00039.  This is compensation of war

 4     damages sustained in the Croatian Community of Herceg-Bosna.  If you

 5     could give us a brief explanation and of course please look at Article 1

 6     because we see the date 20 October 1991 as the commencing date.

 7        A.   In the area of the HZ HB, there were companies that wanted to

 8     resume operation, and they had sustained a lot of damage to their

 9     property, buildings, facilities, equipment, and they wanted to be given

10     some privileges in order to be able to restore and reconstruct this

11     property.  The same went for private property, houses, vehicles, things

12     of that sort.

13             The municipalities each issued their own decisions regulating

14     this, but this disrupted the financial system because they exempted

15     companies from paying taxes, contributions, and so on.

16             This decree tried to regulate this issue for the whole area of

17     Bosnia and Herzegovina and to establish single methodology, commissions,

18     the way in which they were to operate.

19             There is an addendum to this decree which defines the manner in

20     which damage is to be determined for each kind of facility and building.

21     The date, the 29th of September, 1992, it was -- or, rather, the 20th of

22     October, 1991, interpreter's correction, this had to do with the arrival

23     of the reservists to Mostar because this was the date when the damage

24     began to be inflicted because the tanks caused destruction in the street.

25     They destroyed some lamp posts, things of that sort, and then it

Page 1826

 1     proceeded from there.

 2        Q.   All right.  If we go on to the next document, 1D 00048.  This is

 3     a decree on the implementation of the law on stamp duties.  Could you

 4     just give us a very brief commentary on this.  It's rather comprehensive,

 5     but perhaps you can comment.  We can see from the very first article that

 6     it makes reference to the Republic of Bosnia and Herzegovina.

 7        A.   Here this is again the adoption of the republican law on stamp

 8     duty, and its published in an Official Gazette so that it could apply.

 9     The difference between this regulation and the republican regulation is

10     that the stamp duty is denominated of Croatian dinars and the organs of

11     the HZ HB are not treated as state organs, because in the republican

12     regulations there is always mention of state organs and this is yet

13     another indication of the fact that this is just a provisional decision.

14        Q.   All right.  1D 00049.  This is a decree on the budget of the

15     Croatian Community of Herceg-Bosna.  If you could please comment on this.

16     And it might be of interest also at this point in time because we see

17     this quite often in other decrees, Article 2 says:  "All provisions of

18     the Law on Financing Budgetary Expenditures in the Republic of Bosnia and

19     Herzegovina which are not contrary to the provisions of this decree shall

20     be applied."  We see similar language with other decrease and perhaps you

21     could comment why was it necessary to include this language which is not

22     contrary to provisions of this decree?  Why was it necessary to have that

23     language?

24        A.   Because of the communications breakdown and because there was no

25     flow of information about legislative activity at the level of Bosnia and

Page 1827

 1     Herzegovina.  Those laws, because of the situation in the field and the

 2     general circumstances, had to be adapted in some ways, and this is why,

 3     for instance, the introduction of the Croatian dinar as the currency in

 4     which the budget is denominated, in the process regulating the budget of

 5     Bosnia and Herzegovina, it is denominated in BH dinars, but we used the

 6     Croatian dinars although -- because we had decided to regulate the

 7     payment transaction -- transactions in this manner, and we decided to

 8     denominate the budget in the Croatian dinars because the Croatian dinars

 9     were the prevalent currency in this area.

10             This decree is important because it was an attempt to lay

11     foundation for the adoption of the first budget, because the funds that

12     came in were used pursuant to individual decisions of the HVO HZ HB, but

13     in line with the practice it was necessary to have a budget, but the

14     budget has the revenues and the expenditures.

15             In the initial stage the budgetary revenues could not meet the

16     expenditure side, so technically the budget was in a deficit because we

17     could not cover the budgetary deficit by getting loans or with the

18     primary issue from the central bank because it was not -- it was simply

19     not possible to do that.  And that is why the budget as a document that

20     should balance the revenues and expenditures was not adopted in 1992.

21     This was an attempt to lay foundations for the budget in 1993, but again

22     in 1993 it was not adopted as a document.  The first budget was adopted

23     pursuant to this decree in 1994, not before that, and that is why Article

24     5 reads that each department of the Croatian Defence Council of the HZ HB

25     should state their needs for every three months.  It is usually done

Page 1828

 1     annually.  And the draft budget should be made by the finance department

 2     based on the materials put forward by the departments, other departments,

 3     and then the HVO HZ HB should go through it, consolidate a draft which

 4     would then be put before the Presidency of the HVO HZ HB for its

 5     adoption.

 6        Q.   All right.  1D 00130.  This is a decree on establishing the

 7     Chamber of Commerce.  It says Chamber of economy, but as I understand it

 8     we're talking about the Chamber of Commerce.  And if you could explain to

 9     us what the chamber of Commerce did, how it functioned, just very, very

10     briefly and of course perhaps give us an explanation of why we see Mate

11     Boban's name at the end of this particular decree.

12        A.   The Chamber of the Economy before the war was a para-state

13     institution.  It was founded pursuant to a state law, and all economic

14     operators had to be its members and pay membership dues.  At the same

15     time, the state transferred some public powers on the Chamber so that the

16     Chamber dealt with some issues on behalf of a public body acting like a

17     public body, such as setting the number of workers to be sent abroad.

18     The former Yugoslavia would get a certain quota, say a hundred thousand

19     workers per year, who were allowed to go to Germany to work, and the

20     chamber would then identify the needs or the interest of individual

21     companies and then make a list of priority and make -- make allotments --

22     make allotment.  So the state had to establish a chamber for that system

23     to continue operating.

24             Before the war, in the area of HZ HB, there was a regional

25     chamber in Mostar, and the people from that chamber had drafted this

Page 1829

 1     decree which was adopted, and the chamber was to continue functioning

 2     along -- in accordance with the regulations that were in force in Bosnia

 3     and Herzegovina at the time.

 4        Q.   All right.  If we go to 1D 00122, just very briefly.  We see

 5     these are the rules on the pass of a special emblem -- I mean 112.

 6     1D 00112.  Rules on the pass and special emblem of authorised officials,

 7     and if you could focus primarily on Article 3 but very briefly tell us

 8     what it is about.

 9        A.   For the identification of officers of the customs administration

10     of HZ HB we had to issue them IDs and badges, and this defines the

11     content of that ID card, just like memorandums and decisions had in the

12     letterhead the Republic of Bosnia-Herzegovina, and then HZ HB, et cetera.

13     So the same applied to official documents of the customs administration.

14        Q.   Okay.  I'm going to ask you to slow down just a little bit to

15     make sure that --

16             THE INTERPRETER:  Microphone for the Prosecutor [sic].

17             MR. KARNAVAS:

18        Q.   I'm going to ask you to slow down so that the interpreters can

19     keep up with you.  If we go on to 1D 00106.

20             Yesterday we talked a little bit about the SDK.  You told us how

21     it functioned.  You also told us how at one point it wasn't functioning.

22     If you could look at this document, 1D 00106.  Please tell us about this

23     decision.

24        A.   That is decision on the appointment of the management of the SDK.

25     Mate Erkapic was appointed, who before the war was director of the

Page 1830

 1     principal branch office, which was in Sarajevo before the war, and his

 2     deputy is Jusuf Skoljic, who was a director of the principal branch

 3     office in Mostar.

 4        Q.   All right.  I'm going to ask you to please slow down a little

 5     bit, because -- while you know the area, some of us do not.

 6             Now, Erkapic worked at the -- in Sarajevo, so did he have any

 7     specific knowledge in order to get -- in order for him to be appointed to

 8     this particular position?

 9        A.   Yes.  I said that he was the director of the central unit of the

10     SDK of Bosnia and Herzegovina, and its remit went as far as the main

11     branch offices.  So he had the greatest knowledge of all persons

12     available.  And Mr. Skoljic was the director of the branch office of

13     Mostar, which is the next lower level, and Mr. Skoljic was appointed

14     deputy.

15        Q.   All right.  And the deputy, was he a Croat or was he a Muslim?

16        A.   The deputy was a Muslim, and the director was a Croat.

17        Q.   All right.  P 00735.  This is a decision on the import of goods

18     from the Republic of Croatia.  If you could please give us a quick

19     explanation.  Why was this decision necessary, and what does this

20     decision attempt to -- to do?

21        A.   At that time activities are in progress to establish border

22     crossings and attempt to make possible the import of goods into the area

23     of HZ HB or, at the time, Bosnia-Herzegovina.  There were dozens of

24     crossings, of course, between Croatia and Bosnia-Herzegovina, roads and

25     footpaths, because previously there had been no border.  Goods came in

Page 1831

 1     from Croatia without obstacles, and taxes were paid in Croatia.

 2             As I said, it was our goal to have as many goods imported in

 3     Bosnia-Herzegovina, the HZ HB, and to levy taxes there, but so -- but we

 4     found out that if we implement the existing laws and regulations there

 5     would be a price difference between goods produced in Croatia and

 6     imported into the area of HZ HB and that difference would exceed 20 per

 7     cent.

 8             If you remember those customs tariffs, 7 per cent plus 7.5 per

 9     cent plus 1 per cent, and if we add to that the rate, the applicable rate

10     from the tariff, the total is a difference of at least 20 per cent.

11             So what was happening, people were going to Croatia, they would

12     buy goods there, and without any control they imported those goods into

13     the area of HZ HB.  We could not control that.  We had no data, and taxes

14     were not levied for the budget of HZ HB.  That's why this decree was

15     passed under which for goods from Croatia only a -- only a small amount

16     was paid for the process of clearing customs, and thus we wanted to

17     achieve that people stop going to Croatia and pay for fuel, et cetera,

18     because we wanted to make it more attractive for them to buy goods in the

19     area of HZ HB.

20             Article 4 reads that goods that transit the area of HZ HB and go

21     on to, say, Zenica or Tuzla, that no customs duties would be levied on

22     them although they are goods from Croatia.  They will only be registered

23     by customs, and the drivers of the vehicles would be given accompanying

24     documents which they would submit at their final destination as is

25     stipulated by the laws of Bosnia-Herzegovina.

Page 1832

 1        Q.   All right.  Now, you mentioned that there was no border before.

 2     What do you mean by that?  I mean, just so the Judges understand what is

 3     happening for the first time in this area.

 4        A.   Throughout history there was no physical border that you could

 5     make out on the ground.  The border wasn't marked.  There were no ramps

 6     or no structures.  So this was a border that actually ran through

 7     people's houses, because people had their houses on one side of the

 8     border and their fields on the other.  It was very common.

 9             Likewise, it was very difficult to identify the borderline, so

10     that overnight the ramps would be moved a hundred or 200 metres to one or

11     the other side because the locals would say, "No, no.  This isn't where

12     the border is.  It's over there," et cetera.  We didn't have detailed

13     maps based on exact surveys.

14        Q.   All right.  Well, let's look at 1D 00 --

15             JUDGE ANTONETTI: [Interpretation] One moment, please, before we

16     move to this document.

17             This issue of the border, as to this issue, if I understand

18     properly, during the former Yugoslavia you did not have any internal

19     borders as they are currently understood.  For instance, a border between

20     Switzerland and Germany, do you mean to say that there was no such

21     border?

22             THE WITNESS: [Interpretation] It was an administrative border, so

23     it was known which plots of land were in Bosnia-Herzegovina or in

24     Croatia.  So it was clear in the cadaster, but there were no markings on

25     the ground.

Page 1833

 1             JUDGE ANTONETTI: [Interpretation] If I understand properly, it

 2     was you at the level of Herzegovina who set up a border between

 3     Herzegovina and Croatia by putting check-points or -- or border posts and

 4     customs control in order to fight the import of goods which would distort

 5     or have economic or financial negative consequences in Bosnia and

 6     Herzegovina.  So you were the ones who created the border.

 7             THE WITNESS: [Interpretation] That is correct.  Initially we had

 8     check-points, but when the customs service arrived there, ramps were set

 9     up which were controlled by civilian and military police, and on the

10     other side Croatia set up their own ramps and structures with police and

11     customs, et cetera.

12             JUDGE ANTONETTI: [Interpretation] So when crossing borders,

13     everybody here in this courtroom must have crossed a border at some point

14     in their lives.  Sometimes you have flags, you have uniforms, and you

15     have people who man the borders.

16             On the side of Herzegovina, what kind of flags would you find?

17             THE WITNESS: [Interpretation] After the emblems had been defined,

18     the flag was the flag of the HZ HB.

19             JUDGE ANTONETTI: [Interpretation] Was there anywhere any mention

20     of the Republic of Bosnia and Herzegovina?

21             THE WITNESS: [Interpretation] The authorised persons at those

22     border crossings, that is to say customs officers and police officers,

23     had ID cards that read Republic of Herzegovina HZ HB customs or police or

24     whichever service they belonged to.

25             JUDGE ANTONETTI: [Interpretation] Were stamps created for trucks

Page 1834

 1     transporting goods?  Would their papers be stamped, their manifestos,

 2     their customs papers, would they be stamped?

 3             THE WITNESS: [Interpretation] Yes.  The stamp of the customs

 4     administration of HZ HB was applied.

 5             JUDGE ANTONETTI: [Interpretation] Would you find the words

 6     "Republic of Bosnia-Herzegovina" on those stamps?  Maybe I go too much

 7     into detail, but if I raise the issue it's because it's important.

 8             THE WITNESS: [Interpretation] The same -- the stamp looked just

 9     the same as all other stamps used in HZ HB.  I can't remember exactly,

10     but I know that all memorandums also read Republic of Bosnia-Herzegovina,

11     but I'm not sure now about the stamp.

12             JUDGE TRECHSEL:  Witness, just to get things clear, do you know

13     whether an analogous border existed between Bosnia and Herzegovina, the

14     Muslim part of it, and probably Croatia and maybe other states?

15             THE WITNESS: [Interpretation] No such border was in existence,

16     because the area controlled by the army of BiH was in direct contact with

17     the Croatian border.  The nearest such area was the area around Bihac,

18     but then on the other side of the border there was the area of the

19     Serbian Krajina in the Republic of Croatia, and a border -- border

20     authorities were for the first time established there after the Storm

21     operation in Croatia.  That's the border crossing of Izacic.  That was

22     the first border crossing manned by the staff of the then border service

23     of Bosnia-Herzegovina.

24             JUDGE TRECHSEL:  Thank you.

25             MR. SCOTT:  Excuse me, Mr. Karnavas.  Before we start, just a

Page 1835

 1     clarification for the record, if I might suggest, and if I'm wrong then

 2     I'll certainly be told so, but the witness said at line -- on page 27,

 3     line 10, "No such border was in existence because the area controlled by

 4     the army of BiH was in direct contact with the Croatian border."  I

 5     suppose he meant to say that it was not in contact with the Croatian

 6     border.  If that could be clarified, please.

 7             JUDGE ANTONETTI: [Interpretation] Witness, could you clarify

 8     that?

 9             THE WITNESS: [Interpretation] There was no area controlled by the

10     army of BiH which bordered on the Republic of Croatia except for that

11     part of Croatia which was then under the control of the Serbian Krajina,

12     and the customs of the Republic of Bosnia-Herzegovina had check-points

13     and would levy customs on goods at check-points --

14             THE INTERPRETER:  Could the witness please repeat?  We didn't get

15     the end.

16             MR. KARNAVAS:

17        Q.   Please repeat your answer.  Please repeat the last part of your

18     answer so -- because the interpreters have not understood it.

19        A.   So the customs administration of the Republic of

20     Bosnia-Herzegovina had the first contact with the documentation about

21     goods entering Bosnia-Herzegovina or would receive such documentation

22     from check-points in areas under the control of the HVO or the BiH

23     army -- and the BiH army.

24             JUDGE ANTONETTI: [Interpretation] Yes, Mr. Kovacic?

25             MR. KOVACIC: [Interpretation] Your Honours, as there is an

Page 1836

 1     interruption now, it may be good to clarify a possible error.

 2             Page 26, line 16 and 17.  You asked the witness whether the

 3     authorised persons at border crossings, that is customs officers or

 4     police officers -- sorry, that is actually the answer.

 5             You asked whether anywhere on the border there was explicit

 6     mention of the Republic of Bosnia-Herzegovina.  The witness replied that

 7     the authorised persons on the border, that is customs officers and police

 8     officers, wore badges which read "The Republic of Bosnia-Herzegovina

 9     HZ HB customs or police," et cetera, but the transcript reads that they

10     have ID cards.

11             Your question obviously referred to the symbols, what was -- what

12     anybody would be able to see, but ID cards are not clearly visible.  They

13     are mostly carried in pockets.

14             JUDGE ANTONETTI: [Interpretation] Yes.  This is extremely

15     relevant.  Could you clarify this point, Witness?

16             THE WITNESS: [Interpretation] All right.  The badge and the

17     official ID were two parts of a whole.  The -- the ID card was under the

18     badge, and it read "Republic of Bosnia-Herzegovina HZ HB," the way it is

19     described in the document that we saw a short while ago.  It was

20     document --

21             MR. KARNAVAS:  112.

22             THE WITNESS: [Interpretation] 112, yes.

23             JUDGE TRECHSEL:  In order to get the full picture about borders,

24     was there or was there not a border between the HZ HB and the rest of

25     BiH, Bosnia and Herzegovina?  Was there a border?  Was there no border?

Page 1837

 1     Was there something between a border and no border?

 2             THE WITNESS: [Interpretation] In the interior of

 3     Bosnia-Herzegovina there were check-points, and at those check-points

 4     there were no staff of the customs administration of HZ HB, because to us

 5     in practice, in the implementation and in the documents, these

 6     check-points were never treated as border crossings.  So goods coming

 7     from Zenica, for example, such as the construction iron bought in Zenica

 8     or iron bought from Grude, it was transported without levying customs

 9     duties.  It was treated as internal transport within Bosnia-Herzegovina.

10             Unfortunately, it didn't work the same way in the opposite

11     direction.  The customs administration of the Republic of

12     Bosnia-Herzegovina would levy customs duties on goods that were

13     accompanied with invoices issued in Grude or other places in HZ HB.  So

14     those goods were treated the same way as goods coming from Croatia,

15     Slovenia, or any other country.

16             And in this part about the import of goods from Croatia, in

17     Article 4 you can see that goods transiting the area of HZ HB, that is

18     goods travelling to areas controlled by the army of BiH, are -- on such

19     goods no customs duties were levied.

20             JUDGE TRECHSEL:  Thank you very much.

21             JUDGE ANTONETTI: [Interpretation] Mr. Karnavas, I think that it's

22     time for a break.  We're going to have a 20-minute break.

23                           --- Recess taken at 10.29 a.m.

24                           --- On resuming at 10.53 a.m.

25             JUDGE ANTONETTI: [Interpretation] I shall first give the floor to

Page 1838

 1     our registrar, because we need an IC number.

 2             THE REGISTRAR:  Thank you, Your Honour.  The Prosecution has

 3     submitted an objection to Prlic Defence list of documents tendered

 4     through Witness Simunovic Marinko, which was previously given Exhibit

 5     number IC 00870.  The objection list submitted by the OTP shall be given

 6     Exhibit number IC 00876.  Thank you, Your Honour.

 7             JUDGE ANTONETTI: [Interpretation] Mr. Karnavas, you have the

 8     floor.  I would like to advise you of the fact that you have had so far

 9     four hours and 41 minutes.

10             MR. KARNAVAS:  Thank you, Mr. President.  I should advise the

11     Bench that it may be necessary to go beyond the six hours that I had

12     anticipated.  Of course it will be taken out of our overall scope of

13     time, and as you've indicated to the witness yesterday that there's a

14     high probability that we will go into next week.  There is no witness

15     scheduled for next week precisely because of that reason, but I do think

16     that this is a very important witness and a complicated subject matter.

17        Q.   Picking up where we left off at 1D 00108, we see this is a

18     decision on the border crossings with the Republic of Croatia, and this

19     is dated 12 November 1992, and we can see in Article 2 the various

20     locations.

21             Can you confirm that the border crossings are between the

22     republic of -- of Bosnia and Herzegovina and the Republic of Croatia, all

23     of these border crossings?

24        A.   Yes.  These are the border crossings in the area of Herzegovina,

25     between Croatia and Bosnia and Herzegovina, and those border crossings

Page 1839

 1     are in fact still in existence today, and they're used for crossing of

 2     goods and passengers.

 3        Q.   All right.  If we go on to the next document, 1D 00114, and we'll

 4     discuss this rather in detail.  This is a decree on organising and

 5     operation of the financial police, and I'm going to ask you a series of

 6     questions.  We'll go step-by-step.  This is dated 12 -- 2 December 1992.

 7             First and foremost, could you please tell us what the financial

 8     police was, whether it existed prior to this decree in

 9     Bosnia-Herzegovina, this institution?

10        A.   This institution did not exist before.  It is part of the

11     transition.  After the Washington Agreement the financial police was set

12     up in Bosnia and Herzegovina too.

13             Why was financial police established at that time?  For two

14     reasons.  First of all, the republican public revenue department, an

15     organ that controlled the work of the municipal public revenue

16     departments, did not function.  There were republican inspectors who came

17     from Sarajevo to municipalities to control how the municipal public

18     revenue departments, for instance, I was a director of one of those

19     before the war, how we collect taxes to be paid into the budget of the

20     republic, of the SIZ, and so on.  But this no longer existed.  Municipal

21     public revenue departments were still there, and under the laws they

22     still had the duty to collect taxes at the municipal level, but they did

23     not have any kind -- any way to exercise control above the municipal

24     level.

25             The second reason was that the SDK also did not function at its

Page 1840

 1     full capacity, and its inspectors did not function.  And for this reason

 2     and the situation in the field was such that the municipalities issued

 3     their own regulations the way they saw fit and then violated the

 4     regulations that we passed in order to make sure that they have as much

 5     money as possible for their own municipality.  They amended our

 6     regulations, in fact.  And this decree sets up a special institution

 7     called the financial police that in effect replaced the republican

 8     inspectors from the republican public revenue department and the

 9     inspectors of the SDK that existed before the war.  The fundamental task

10     was to control the implementation of the HZ HB regulations at the level

11     of the HZ HB in municipalities, public enterprises and other entities

12     that were duty-bound to implement those regulations.

13        Q.   Again I'll ask you to --

14             THE INTERPRETER:  Microphone, please.

15             MR. KARNAVAS:

16        Q.   I'll ask you to go a little slower.  Now, you indicated that

17     after the Washington Agreement, financial police were instituted

18     throughout the federation, and as I understand it today, it's throughout

19     Bosnia-Herzegovina.  Is that correct?

20        A.   No.  It remained a federal institution, because

21     Bosnia-Herzegovina, in the next step of the transition, adopted the VAT

22     and an administration for indirect taxation was established, and at the

23     level of the state it actually controlled the implementation of the laws

24     covering that area.

25        Q.   All right.  But the federation, when it adopted or when it

Page 1841

 1     implemented a financial police, was it based on a new methodology, new

 2     functions, new responsibilities, or was it based essentially on what was

 3     initiated by the HVO HZ HB?

 4        A.   The first law on financial police of the Federation of Bosnia and

 5     Herzegovina practically copied the text of this decree.  The principles,

 6     the contents, the powers were all copied from this decree.

 7        Q.   All right.  If we just go through this very quickly.  Article 5

 8     sets out essentially what are the duties and functions of the financial

 9     police; correct?  Inspect, monitor, supervise, check, prepare, undertake,

10     carry out.

11        A.   That's correct.

12        Q.   And if we look at Article 8, it would appear that the financial

13     police answer to your particular department, the HVO HZ HB financial

14     department.  Is that right?

15        A.   That's correct.

16        Q.   Under Article 11 we see the requirements for somebody holding the

17     post or various posts within the financial police.  And then we see in

18     Article 14 that the appointments and dismissals are actually published in

19     the Official Gazette.  I take it through Article 14 there's -- it

20     provides for transparency, does it not?

21        A.   That's correct.

22        Q.   And just very quickly, if we look at Article 23, which may be of

23     assistance for other purposes, Article 23 reads:  "At the proposal of the

24     head of the finance department the HVO HZ HB shall adopt a separate set

25     of rules," and it goes on.

Page 1842

 1             If you could explain to us what is meant by proposal by the head

 2     of the finance department?

 3        A.   This means that the finance department drafts some rules or other

 4     regulations about uniforms, arms, and so on, and then that the head of

 5     the department would submit this document to the HVO HZ HB so that it

 6     could be put on the agenda.  And then at its session the HVO HZ HB has a

 7     discussion about the document and adopts it.  Once it is adopted it is

 8     signed by the authorised official.  If the HVO HZ HB can adopt it, then

 9     the president of the HVO HZ HB signs it and after that this regulation is

10     published in the Official Gazette.

11        Q.   All right.  Well, is a proposal automatically adopted?  In other

12     words, are there proposals which are rejected or modified?

13        A.   Well, there were proposals that had to be modified or returned to

14     the author for corrections because of some other elements that were

15     important, some information, input that was provided by other

16     departments.

17             For instance, if in our decree or a decision we stipulated that

18     the misdemeanour court would have jurisdiction over violations and then

19     the justice department indicates that it is not the misdemeanour court

20     but some higher court, then we had to amend the decision, and then after

21     that the decision would be adopted and published.

22        Q.   All right.  Do you know whether proposals that were presented

23     before the HVO HZ HB were rejected?  Can we assume that once -- if it

24     says "proposal," automatically it would be adopted -- it would have been

25     adopted at some point?

Page 1843

 1        A.   The departments submitted documents and then there was the

 2     debates at the session, and if there was a number of objections or

 3     amendments, they would return to the author for modification, and then

 4     they would be again subject of a discussion at the next session and then

 5     finally they were adopted.

 6        Q.   All right.  Thank you.  If we look at Article 24, if you could

 7     just comment very briefly, because it talks about:  "In performing the

 8     duties within their remit and under the circumstances specified by the

 9     Law on Internal Affairs of the Socialist Republic, financial police

10     inspectors may bring in citizens into a competent organ."  What is this

11     referring to?

12        A.   I've already said that the municipal public revenue departments

13     were under the jurisdiction of the municipal HVO, HVOs, and they were in

14     charge of the implementation of the financial segments of the

15     regulations, but because of the needs of the municipal budgets and

16     because of the pressure exerted by the presidents of the municipal HVOs,

17     they often violated those provisions and implemented the municipal

18     regulations in order to ensure extra revenue.  But when we wanted to hold

19     them responsible for that, the fact is that they were appointed by the

20     municipal HVO presidents and they were at the same time members of the

21     HVO Presidency and we were supposed to report to them.  We were

22     responsible to them.  So it was a weird situation where for all intents

23     and purposes our hands were tied.  We could not really implement the --

24     we could not enforce the legislation.  And the purpose of this

25     institution was to be an independent institution set up at the level of

Page 1844

 1     the HZ HB who could then enforce the regulations.  The problem was in the

 2     field, because there were a lot of efforts to obstruct the work of the

 3     inspectors.  Sometimes the companies would summon members of the units to

 4     intimidate the inspectors of the financial police to prevent them from

 5     carrying out the inspection.  Those units received donations from those

 6     companies.

 7             This decree stipulated that financial police could carry arms and

 8     wear a uniform, and they had the power to act in accordance with the Law

 9     On Internal Affairs of Bosnia-Herzegovina which was in force at the time.

10     What it meant was that they could bring in those people to the police or

11     whatever it was that this law stipulated.

12        Q.   All right.  Since this is a new institution, could you please

13     tell us, if you recall, how long it actually took to put this institution

14     in place, in other words, to advertise for the positions, make the

15     selections, do the training so that actually the financial police are

16     able to carry out the functions as envisaged.

17        A.   First of all, it was very difficult to find competent people to

18     do this job and to do it for the HZ HB, because people felt much more

19     comfortable in their municipalities when it came to monitoring and

20     checking the revenues.

21             We appointed the director of the revenues -- revenue department

22     from Ljubuski, one of the municipalities.  Before the war he was the

23     director of the revenue department.  He had a lot of experience and

24     knowledge.  He was a colleague of mine.  And when I was a director of one

25     of the revenue departments he was appointed the chief inspector of the

Page 1845

 1     revenue department.

 2             It was difficult to find people.  Some people were mobilised.  We

 3     had to get them to be demobilised.  And we also hired some interns, young

 4     people who did not have much experience but who had university degrees,

 5     so they went out in the field with their more experienced colleagues.

 6             But I think that at the end of 1993 the financial police had 11

 7     employees, not more than that, but it operated throughout the area, and

 8     it contributed significantly to the effort to locate and collect revenues

 9     for the HZ HB budget.

10        Q.   And I believe you said it was at the end of 1993, just to make

11     sure that it's accurately reflected in the record, that you had the 11

12     members of the financial police.  We're talking about the end.  Okay.

13        A.   That's correct.  At the end of the next year.  They were

14     established in December 1992, and now we're talking about the end of

15     1993.

16        Q.   All right.  If we look at 1D 02103 --

17             JUDGE MINDUA: [Interpretation] Mr. Karnavas, I'm sorry.  Before

18     moving on to another document, I'd like to spend a little bit more time

19     discussing this document on the special police.

20             In Article 14 it is stated that the appointments and dismissals

21     are being published in the Official Gazette.  We said this was being done

22     for the system to be transparent.  But in Article 13, let me translate,

23     the officers of the special police have exceptional powers and are hired

24     without vacancies being posted beforehand.  How can one reconcile Article

25     13 with Article 14, Witness?  Why are those vacancies not posted?

Page 1846

 1             THE WITNESS: [Interpretation] In my document I don't have Article

 2     13.  I can't see it on the screen.

 3             MR. KARNAVAS:  Perhaps you could check the English version.

 4             THE WITNESS:  Okay.

 5             MR. KARNAVAS:  It perhaps might be of some assistance.  It's a

 6     bad scan.

 7             THE WITNESS:  Okay.  [Interpretation] Yes.  That's clear now.

 8             In Article 13 it is stipulated that the financial police, the

 9     financial police, officials with special powers shall be employed without

10     job vacancies being announced.

11             We felt there was no need for any job vacancies being announced

12     publicly because we knew all the people who met the requirements in HZ HB

13     more or less.  We didn't have the time to go through this process because

14     we wanted to be operational as soon as possible, to have the system in

15     place, but to ensure transparency and to make it possible for people to

16     react after their appointment, we published the appointments in the

17     Official Gazette.  So you could see from the Official Gazette who was

18     appointed, and then the Presidency of the HZ HB could ask questions if

19     they thought that somebody did not meet the requirements.  It had the

20     power to do so.  All the more so because the municipal authorities that

21     had representatives in the Presidency of the HVO HZ HB were not happy

22     with the fact that the HVO HZ HB actually passed this kind of a decree,

23     because if you look at Article 47, it says that if an inspector of the

24     financial police of this institution that we're talking about observes

25     any irregularities in the work of the inspectors of the municipal

Page 1847

 1     administrations, at the municipal level, the financial police inspector

 2     can submit a request to the head of the office in the municipality to

 3     launch proceedings for the dismissal of the said inspector.

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

 5             JUDGE ANTONETTI: [Interpretation] One small comment of a

 6     technical nature.  I saw a contradiction between Article 28 and 33.

 7     Article 28 states that the inspectors are entitled to carry weapons in

 8     the event of four situations.  In Article 33, it is stated that the

 9     inspector needs to refer to the local police.

10             Is there not a contradiction here, to provide an inspector with

11     weapons and then turn round and say, well, if he needs a problem, he has

12     to turn to the police for help?

13             THE WITNESS: [Interpretation] It says in this Article that if the

14     inspectors -- if the inspector is unable to deal with the situation with

15     his own sidearms.  For instance, if he or she faces five armed people, of

16     course then the inspector cannot do anything and then they have to go to

17     the police and the police has to provide protection to the inspector.

18             JUDGE ANTONETTI: [Interpretation] You told us that there were 11

19     of them and this was operating until 1993.  Was this department

20     efficient?  Were you able to highlight violations of customs laws?

21             Unless these were the questions you were about to put,

22     Mr. Karnavas, I don't know.

23             MR. KARNAVAS:  No, Your Honour.  There may have been something

24     lost in translation.  He indicated that it wasn't operational until 1993.

25     In other words, it began at the end of December 1993 for it to be

Page 1848

 1     operational, and the question, at least in English, it appears that from

 2     1992 to 1993 the question is what was able to be done.

 3             JUDGE ANTONETTI: [Interpretation] So this department operated

 4     after December 1993.  And did you achieve any positive results?

 5             THE WITNESS: [Interpretation] Yes.  The department became

 6     operational in December 1993, and in the first reports there is a column

 7     about the revenues obtained through the work of the financial police, and

 8     we're talking about substantial amounts.  I have to say that the

 9     financial police worked until the federal financial police was set up.

10     So that was in 1995, 1996, and at that time the director of the financial

11     police became the deputy director of the federal financial police and the

12     employees, the inspectors, became part of the federal financial police.

13             MR. KARNAVAS:

14        Q.   You're speaking of the director.  This would have been under the

15     Croatian Republic of Herceg-Bosna because you say in 1995 and you mention

16     a director and it's important for us to understand which director at

17     which period and from where.  So the director and the employees, this

18     would have been under -- at that point the director would have been 1994,

19     at least would have been the Croatian Republic of Herceg-Bosna when the

20     financial police began to operate.

21             All right.  Let me -- Mr. Tomic, let me ask the question again.

22     There's no need -- the answer's not in the documents.  I just want to

23     clarify your answer here, because you said the director and the employees

24     became part of the federal system.  Which director are we speaking of?

25        A.   We're speaking of the chief inspector of the financial police,

Page 1849

 1     the director of the financial police in the common parlance.  The chief

 2     inspector of the financial police, he was the chief of the financial

 3     police of the HZ HB, and in the next stage of the HR HB, and then when

 4     the federal institution was set up he became the deputy director because

 5     that was the agreement, that the Muslim should be the director and a

 6     Croat his deputy.

 7        Q.   All right.  That's what I wanted to clarify.  And the employees

 8     who had been working with the financial police that had started under the

 9     Croatian Community of Herceg-Bosna, later on the Croatian Republic of

10     Herceg-Bosna, they were also employed or continued to be employed in

11     their capacity but now for the federal financial police; is that correct?

12        A.   That's correct.

13        Q.   All right.  If we go on to the next document 1D 02103.  This is

14     dated 2 December 1992.  We see this is a conclusion, and it relates to

15     export customs documentation.  Could you please explain what this is

16     about.

17        A.   This is one of the conclusions that had to assist the

18     strengthening of the financial system and the collection of customs duty

19     and taxes.  Up until that time, humanitarian aid was declared -- was

20     cleared through the customs when the truck came to the border crossing,

21     and there was this option that people availed themselves of, and this is

22     why this conclusion was passed, that somebody buys a truck full of

23     underwear to be sold on in HZ HB, but on the arrival at the border

24     crossing this person states to the border control service that this is

25     humanitarian aid and this person then has a piece of paper indicating

Page 1850

 1     that it is humanitarian aid.  And this conclusion stipulates that once

 2     the goods come to the border crossing in HZ HB, it must have regular

 3     export documentation originating from the country where the goods were

 4     manufactured.

 5             If it comes from Croatia, it has to have export declaration from

 6     the municipality where the relevant customs office is, for instance, in

 7     Zagreb, indicating that this is humanitarian aid.

 8             This made is easier for us to distinguish between humanitarian

 9     aid and commercial goods, because in the customs offices in Slovenia,

10     Croatia, Germany, wherever the goods originated from, they wanted to

11     get the -- asked for the original documents indicating where the goods

12     were from.

13             So this is not about imposing customs duty on the goods but just

14     on the classification of the goods.  They had to be classified as

15     humanitarian aid at the time of their arrival at the border crossing.

16        Q.   All right.  1D 02744.  This is dated 3 December 1992, and here we

17     have an example of a sales contract.  If you could explain what is this

18     about.  If you just briefly look at it.

19        A.   This is a contract about the purchase of salt for -- for the

20     roads in the wintertime.  And these goods were bought by the HZ HB at

21     Ceste, which is a public company for road maintenance.  And this salt was

22     intended for the maintenance of the Road of Salvation, which at the time

23     was the only link between Herzegovina, Central Bosnia, and Tuzla, and

24     further on to Croatia and other countries.

25             This contract shows that HVO Ceste had bought salt from a company

Page 1851

 1     in Tuzla and that delivery is to be made at the service stations of the

 2     maintenance company along the road.  And the manner of delivery is also

 3     stated, and there is also an additional remark that if the buyer wants

 4     the seller to transport, to deliver the goods, then the buyer must also

 5     pay for the fuel, the reason being that there wasn't enough fuel

 6     available for commercial activities.

 7             Means of payment with regard to this, you can see that the

 8     company from Tuzla, the salt mine, had a non-resident account with

 9     Zagrebacka Banka and the payment was to be made to that account, 30 per

10     cent in -- in dinars and the rest as compensation by way of barter.

11             There is also mention of the UNHCR, who they turned to for the

12     maintenance of this road, which was, as I said, the only link between

13     these areas in Bosnia-Herzegovina.

14        Q.   All right.  Thank you for that -- for that.  Now I want to go

15     step-by-step and go back a little bit.  First you indicated that this was

16     a company in Tuzla.  Was Tuzla under the ABiH at the time?  Was it

17     controlled under the ABiH?

18        A.   Yes.

19        Q.   Now, looking at the payment method, again just if we go

20     step-by-step, we see that it makes reference to Croatian dinars.  So this

21     is a Muslim municipality under ABiH control.  It makes reference to

22     Croatian dinars, and also we see a non-residential account.  Would this

23     be -- is this account in BiH or is it in the Republic of Croatia?

24        A.   That account was in the Republic of Croatia, and it was opened

25     based on an agreement between Croatia and Bosnia-Herzegovina on

Page 1852

 1     non-resident accounts, but this company we're talking about before the

 2     war delivered salt for roads throughout Yugoslavia, and they had their

 3     warehouses in Croatia, Slovenia, and other republics where in the

 4     summertime they would deliver salt which in the wintertime was used for

 5     the roads.

 6             When war activities started, this company, like others that had

 7     similar warehouses opened, a non-resident account under the agreement I

 8     mentioned, and the goods they sold off their warehouses in Croatia were

 9     paid to those non-resident accounts.  And using the money on that

10     account, they purchased goods that they distributed to their employees or

11     to the municipality to survive at that time.

12        Q.   All right.  And I -- I only mentioned that because we have heard

13     testimony concerning the use of non-residential accounts and whether they

14     were legal or illegal at the time.

15             If we go on to the next item we see now that about -- about 50

16     per cent is to be paid in what appeared Bosnian dinar, but then there's

17     some reference to the Deutschmark medium rate at the Tuzla bank,

18     Tuzlanska Banka.  Could you explain what this is about in a very concrete

19     way?

20        A.   This is a contract based on a template, a standard template, and

21     50 per cent of the price was to be paid in BH dinars to the account

22     stated, but the prices in the contract are in Deutschmarks.  And this is

23     about setting the exchange rate, and the exchange rate was that of the

24     Tuzlanska Banka.  Through the Zenica branch office of the SDK or another

25     branch office conducting domestic payment transactions the Republic of

Page 1853

 1     BiH with the SDK Tuzla branch office, which means that there was no

 2     communication between Herzegovina and Tuzla.  And they leave open the

 3     possibility for payment to be effected in Zenica.  So that somebody

 4     brings cash and pay it into the account in Zenica, and Zenica will then

 5     transfer it to Tuzla, the one SDK branch offers to the other.  Which

 6     means that there was communication between Tuzla and Zenica.  So payment

 7     had to be done at a branch office that was connected with Tuzla, be it

 8     Zenica or a place around Tuzla.  And the exchange rate is the median rate

 9     of the Tuzlanska Banka, Tuzla.

10        Q.   All right.  Just one question with respect to communications.

11     You said that from Herzegovina to Zenica these communications and from

12     Zenica with Tuzla there are communications.  Can you please explain to us

13     why wasn't it possible to have direct communications from Herzegovina all

14     the way to Tuzla, if you know?

15        A.   Well, we spoke about that yesterday.  Telecommunications had been

16     disrupted and could not be used.  We couldn't transfer the monies in the

17     usual way.  Zenica is -- was mentioned as the chief branch office that is

18     closest to Herzegovina.  Even Zenica and Tuzla were not in direct

19     communication.  There were payment orders brought in written form or

20     carried in written form from Zenica to Tuzla.  They had to go over a

21     mountain.  And then Zenica would -- would effect payment based on those

22     orders on behalf of Tuzla.

23        Q.   Zenica was under the control of the ABiH.  Was it not?

24        A.   Correct.

25        Q.   Okay.

Page 1854

 1             JUDGE ANTONETTI: [Interpretation] Witness, let me take this

 2     example of a company selling salt, which was in an ABiH-controlled area.

 3     We're now talking about 1992, 1993.  Back then did the Republic of Bosnia

 4     and Herzegovina export abroad, for instance to Croatia?  Were they

 5     companies that kept exporting manufactured goods, goods that were

 6     manufactured in the Republic of Bosnia and Herzegovina, as far as you

 7     know?

 8             THE WITNESS: [Interpretation] Yes, there were companies which

 9     sold such goods throughout that time, goods that they had in their

10     warehouses and that were produced in Croatia.

11             JUDGE ANTONETTI: [Interpretation] My question relates to the

12     conflict.  During the conflict were there companies that kept producing

13     and exporting?

14             THE WITNESS: [Interpretation] Produce, no, or very little, but

15     they exported the stocks of merchandise that they had.  So the salt had

16     been produced before the war, and it was put into warehouses.  A half of

17     those companies were not really operational due to most of the employees

18     being drafted.  So they only were able to dispose of their stock.  So the

19     steel plant of Zenica had a huge stock of construction iron, and this

20     salt mine had a stock of salt.  And after the conflict broke out, they

21     sold those goods to Croatia, Slovenia.  Mostly it was to these two

22     countries.

23             JUDGE ANTONETTI: [Interpretation] Very well.  Let me take the

24     example of Zenica.  You said that there was a company in Zenica that

25     manufactured iron.  There is indeed a well-known steel plant in Zenica.

Page 1855

 1             During the conflict, if I understood you properly, there was

 2     export to Croatia.  If that was so, since the border was being controlled

 3     by the HVO, how did these companies transit their goods through

 4     Herzegovina?  Would they ask for approval from the HVO?  Did they have to

 5     pay export taxes?

 6             THE WITNESS: [Interpretation] In Bosnia-Herzegovina there were no

 7     export taxes.  There were none in HZ HB either.  If a company had sold

 8     goods to a firm in Split, Croatia, the truck would come to the customs

 9     office in Mostar or any other customs office in HZ HB that were

10     operational, let's say Tomislavgrad, and there, based on the invoice they

11     had and other documents, the export customs declaration would be made.

12             They -- the exporter had to find a forwarding agent to make that

13     declaration for the exportation of goods, and that documentation had to

14     be stamped by the customs administration of the HZ HB.  Then they could

15     go on to Croatia and would continue the process of clearing customs in

16     Croatia under Croatian regulations.

17             JUDGE ANTONETTI: [Interpretation] Very well.  Thank you.

18             MR. KARNAVAS:  Very well.  Thank you very much.

19        Q.   And maybe I wasn't quite complete in my earlier questioning.  You

20     said that there was communications between Herzegovina and Zenica.  Was

21     there a linkage between the SDK of the two?  In other words, if you

22     understand my question, from Mostar was there -- was there a direct link

23     to Zenica at the time?

24        A.   No.  There was no -- not even a link between Mostar and the

25     municipalities and areas belonging to the HZ HB in Central Bosnia.  So

Page 1856

 1     there was no communication with Central Bosnia at all.  This applies to

 2     Zenica also.  So there was no -- no way of effecting payment from Mostar

 3     to Zenica or from Mostar to Vitez.

 4        Q.   But when you indicated earlier, because this is -- and it may be

 5     something that's being lost in translation because as I understand,

 6     "communication" in your language, you know, has various meanings.

 7     Earlier you indicated there was communication between Herzegovina and

 8     Zenica.  What exactly did you mean by that?  Are we talking about road

 9     communication, telecommunication, radio communication?  So please explain

10     to us what did you mean by that.

11        A.   When I speak about the payment system, I always mean

12     telecommunications.  That is telecommunication lines used by the SDK to

13     effect payment.

14             A road is a communication too.  It was possible to go to Zenica

15     physically.  A truck could drive to Zenica.  But payment could

16     exclusively be made either in cash or through non-resident accounts, but

17     direct payment between the SDK and Mostar and Zenica was not possible.

18        Q.   All right.  I think I cleared that point up.  I'm clear.  I don't

19     know if anybody else is un-clear.

20             And then finally I think the last part of this document we see 20

21     per cent looks like it's going to be paid in some sort of a bartering

22     system, exchange of commodities.  Am I correct?

23        A.   Yes.  As I said, this contract was based on a template, and

24     companies were partly paid in kind in order to be able to distribute,

25     say, flour, sugar, and other commodities to their employees.

Page 1857

 1        Q.   All right.  Let's look at 1D 00140.  1D 00140.  This is December

 2     1992.  This is a decree on payment transactions via accounts and

 3     subaccounts with the SDK.  If we could look at this.  And a brief

 4     explanation.  I'm going to ask you to look at Article 1, 2, and perhaps

 5     even comment on Article 11.  That may be of some assistance.

 6        A.   We're speaking about a decree that defines how payments through

 7     giro accounts are to be made, giro accounts and subaccounts.  In Croatian

 8     dinars and BH dinars and any other currencies that we used as official

 9     currencies in -- for payment.  First of all, the Deutschmark.

10             I must first point to Article 11.  It is customary in the banking

11     world but also in the SDK of the former Yugoslavia to distinguish between

12     cash and money on accounts, I mean the amounts on accounts because money

13     on accounts is not always -- does not always have cash coverage.  That is

14     normal in countries that have a Central Bank, primary mission, et cetera.

15             Article 11 says, in simplified terms, the -- at the SDK HZ HB, at

16     the end of each working day the balance of each giro account and

17     subaccount on the one hand and the cash balance must be equal.  What does

18     that mean?  That all money that goes through the SDK must have cash

19     coverage.  We only used Croatian dinars and Deutschmarks, but we didn't

20     have any power over those currencies.

21             One of the great problems in the former Yugoslavia was when

22     pressurised by politics, the SDK allowed some accounts, that payment is

23     effected from some accounts although there was no money on those

24     accounts.  This is like -- this is as if the Central Bank had issued a

25     new quantity of money, if I can explain it that way, and that eroded the

Page 1858

 1     confidence in those services, et cetera.

 2             Now, we mostly used Croatian and German currencies.  We could not

 3     allow anything similar to happen, and that's why we introduced this

 4     obligation to check the balances on a daily basis and report about that

 5     because we wanted to show that money flows through the SDK only for the

 6     purpose of controlling the payment of taxes, contributions and other

 7     payments that were prescribed at the time.

 8             THE INTERPRETER:  The interpreters would be grateful if such

 9     complex matters could be expressed and explained more slowly.

10             Microphone, please.

11             MR. KARNAVAS:

12        Q.   I'm told that while you're eloquent in your explanations, you

13     need to be rather slower in articulating your thoughts, because these are

14     rather complex matters that some of us who are less acquainted with this

15     system are having a difficulty following, let alone translating.

16             If I could just ask you to comment on Article 12, because Article

17     12 makes reference to a law on financial operations of the federative

18     republic -- the Socialist Federative Republic Of Yugoslavia, and could

19     you please tell us, because this is now 17 December 1992.  Why is it

20     making reference to this particular law, and what is this law about, if

21     you recall?

22        A.   This was one of the basic laws for the functioning of the payment

23     system, for the opening of accounts for effecting payment inside the

24     country and so on.  It was a large piece of legislation.  And this decree

25     mostly regulates the segment I spoke about, and the rest -- to all the

Page 1859

 1     rest the provisions of this Yugoslav law had to be applied.

 2             Yugoslavia, of course, had its own currency, its Central Bank and

 3     other mechanisms to exert control over the currency.  This law was also

 4     adopted or taken over by the Republic of Bosnia-Herzegovina.

 5        Q.   All right.  Thank you.  Unless there are any questions concerning

 6     this particular document, I'll move on.

 7             JUDGE ANTONETTI: [Interpretation] Witness, this is a question

 8     that doesn't relate specifically to this document, but I'm trying to

 9     understand the intricate mechanisms that prevailed at the time.  Several

10     currencies were in circulation at the time, the Deutschmark, the BH

11     dinar, the Croatian dinar.

12             Now, in Mostar did you not circulate coupons?

13             THE WITNESS: [Interpretation] No.  The BH dinar was called coupon

14     for a while.  It was called that because it wasn't real money.  It was

15     printed based on decision of the Ministry of Finance rather than the

16     Central Bank.  That's why colloquially it was -- it was occasionally

17     called a coupon.  What's meant was the BH dinar.  We never issued

18     coupons.  In other words, we never printed money.

19             JUDGE ANTONETTI: [Interpretation] In statistical terms, according

20     to you in the field, in the percentage terms as far as these various

21     currencies are concerned, how many Deutschmark, how many Croatian dinars,

22     BH dinars or perhaps US dollars were there circulated?  Do you have -- do

23     you have some empirical data you could give us concerning the circulation

24     of these currencies?  I assume that there was a black market.  And on the

25     black market transactions were carried out in various currencies, I

Page 1860

 1     assume.

 2             THE WITNESS: [Interpretation] Let me first say that in the era of

 3     HZ HB there was no black market.  As is stated in Article 11, there was

 4     no need for the conversion of one currency into the other -- into

 5     another, because all currencies that were present at the time could be

 6     used for payment if so desired.  So you have no need to convert dinars

 7     into Deutschmarks because you could pay in Deutschmarks.  Or you could

 8     also pay in dollars.  I'm mentioning these because these were the most

 9     common currencies.

10             About the quantity of money in terms of value, I can say that the

11     greatest quality was in Deutschmarks, then in Croatian dinars, then

12     dollars, and then BH dinars in terms of value, I say.  In terms of

13     quantity, I cannot say anything off the top of my head now.

14             When in 1996 we took the decision at federation level about the

15     unification of the payment system, in other words, the linking up of the

16     HZ HB SDK with the SDK in the areas controlled by the army of BiH, then

17     all currencies were practically accepted and payments between these two

18     systems were first -- at first effected in Deutschmarks, and when the

19     system started functioning as one, the German mark was the only currency

20     left, and later it was the convertible mark, the currency of

21     Bosnia-Herzegovina.

22             At the moment when these two systems were -- were turned into

23     one, when a closing balance had to be made, and we did that together with

24     people from the World Bank and people from the International Monetary

25     Fund, it was established that in the area of the HZ HB and its SDK, there

Page 1861

 1     was no difference between money -- the money on accounts and the cash

 2     in -- in the safes, whereas in areas controlled by the army of BiH, the

 3     difference established was 24 million Deutschmarks.  That is the

 4     difference between the money printed and the cash -- and the cash at hand

 5     under this difference had to be compensated to regain confidence.

 6             JUDGE ANTONETTI: [Interpretation] Since international officials

 7     were present, the Spanish battalion and the EU representatives, how did

 8     they pay?  Did they use US dollars, DEM, Croatian dinars, or BH dinars?

 9     How -- or what currency did they use?

10             THE WITNESS: [Interpretation] For the most part in German marks.

11     The sales contract for the salt was paid in cash in German marks by the

12     UNHCR.

13             JUDGE ANTONETTI: [Interpretation] The international organisations

14     had cash, did they?  They hadn't opened an account somewhere, had they?

15     Everything was being paid in cash.  Is that how it happened?

16             THE WITNESS: [Interpretation] Yes.

17             MR. KARNAVAS:  Thank you.

18        Q.   We'll move on to the next document, P 01579.  And we can see that

19     is decree on border crossings and traffic.  Now, this is I believe March

20     1993.  It's actually signed in February, published in March, February 26,

21     1993.

22             If you could focus first on Article 2.  Please tell us what is

23     this decree about and why was it necessary since we already have a border

24     crossing from the previous legal instrument that we saw?

25        A.   Well, this is a decree that is within the purview of the

Page 1862

 1     department of the interior, so it is mostly regulated by the jurisdiction

 2     that is managed by the police, and it becomes necessary when the system

 3     is being built in order to define the border belt which is under the

 4     control of the border police, the police controlling the border, and this

 5     is an area where the border police can intervene.  This law was adopted,

 6     the law on the crossing of the state border and movement in the border

 7     belt.  The Republic of Bosnia and Herzegovina in turn adopted the federal

 8     law, the Yugoslav law, and this pertains only to a segment of the border

 9     belt of the Republic of Bosnia and Herzegovina that is in the area of the

10     HZ HB.  The area facing the area controlled by the BH army was not

11     treated as a border area to which the provisions of this law would apply.

12        Q.   All right.  And -- and I believe that was an earlier question

13     that was posed by Judge Trechsel concerning whether there were those

14     sorts of borders on that site.  If we look at Article 3 it says that:

15     "The proposal of the head of the HVO HZ HB defence department or the HVO

16     HZ HB department of interior, the Croatian Defence Council may determine

17     that the border area shall be more than 100 metres wide."

18             So again we see a proposal, this is a proposal, and of course the

19     HZ HB -- the HVO HZ HB may, it's discretionary, determine that it may be

20     wider than a hundred metres.  Why was this necessary, if you recall, if

21     you know?

22        A.   Well, first of all, this is in order to control illegal border

23     crossings, illegal crossing of goods, weapons, individuals, and it is

24     usual practice to have an area that is 100 metres deep.  This is a belt

25     where the border services can respond to a situation and demand that the

Page 1863

 1     persons crossing the border undergo the appropriate procedure.  But if,

 2     geographically speaking if the terrain is rugged, it's inaccessible, it

 3     is impossible to go into this 100-metre wide belt to effect any kind of

 4     control and if this area is important for security or defence reasons,

 5     then at the proposal of the defence department or the department of the

 6     interior this belt can be extended to include some other points where

 7     this kind of control can be effected, where illegal crossings can be

 8     prevented.

 9        Q.   You see Article 6, maybe you can help us out, because you see it

10     makes reference to an international border crossing and then local border

11     crossings, and it speaks of citizens of the Republic of

12     Bosnia-Herzegovina in order for them to sojourn into certain zones of the

13     neighbouring state.  Can you please explain to us the difference between

14     an international border crossing and a local border crossing, what is

15     meant by this?

16        A.   International borders crossings are crossings used by persons and

17     goods, and in the decision that we saw before, those are international

18     border crossings.  At the international border crossings goods can be

19     cleared through the customs and cars, trucks, and so on can cross the

20     border.

21             Local border crossings cannot be used by trucks transporting

22     goods because goods cannot be cleared through the customs, cannot be

23     exported, cannot be imported.  They can be used only by the residents of

24     the municipality where those crossings are situated, enabling them to

25     cross into the neighbouring municipality where they either work or they

Page 1864

 1     have fields where they have to do some farm work.

 2             So for instance people from Mostar cannot use those crossings.

 3     They cannot even cross them as persons even if they don't have any goods

 4     in their possession.  They have to go to the international border

 5     crossings.  But residents of Ljubuski, a municipality that borders

 6     Croatia, they can use the local border crossings and cross into Croatia,

 7     do whatever work they have to do.  There is the police, there is a

 8     customs office at the local border crossings, but they're only there to

 9     check the identity of the persons crossing.  These still the case today,

10     and we refer to shows border crossings as local border crossings.

11        Q.   All right.  1D 02187.  1D 02187.  This is a report and it's from

12     the Ljubuski Public Auditing Service, SDK.  Perhaps you can explain this

13     to us.

14        A.   This is a typical report from the SDK where a branch office in

15     the Ljubuski municipality submits a report about the collection of sales

16     tax and other taxes, and as you can see from this document, the sales tax

17     on the sales of goods emptied by the Mostar HVO, so we're talking about

18     the 75 per cent of the sales tax collected in Ljubuski by the 1st of

19     April it was taken out for the HZ HB budget, and the 25 per cent, the

20     39.000 -- or 39 million, that would be the 25 per cent that was taken out

21     by the Ljubuski municipality.

22             So this is just a report on the current situation indicating how

23     it functioned between the municipalities and the HZ HB.

24        Q.   Unless there are any questions on this document, I'll move on.

25             1D 01679.  If we could look at this particular document.  And

Page 1865

 1     again this is just as an example.  Could you tell us first of all whether

 2     you're familiar with the document and whether you can identify what it is

 3     to start with.

 4        A.   I am familiar with this document.  I saw it in the course of the

 5     proofing.  This is a document from the Elektroprivreda public company.

 6     It's actually the payroll for the employees where you can see the taxes,

 7     contributions and wartime tax that was levied on the salaries in

 8     accordance with the regulations valid in HZ HB.

 9        Q.   Okay.  Now this is May 1993.  Or actually the -- this is the

10     wages for May 1993.  The document was generated, it would appear, 12 June

11     1993 and of course we see the levy on wages is 90 per cent and then we

12     have another 10 percent is the war taxes, is that correct, on the first

13     page?

14        A.   10 per cent, that's correct.

15        Q.   If we go to the page 2, again this is for other purposes.  We can

16     see that the head of the directorate Zulfo Robovic, is he a Croat or is

17     he a Muslim?

18        A.   A Muslim.

19        Q.   All right.  Now I'm going to go through the rest and I'll ask

20     you, then I'll point to various numbers, and again it's for other

21     purposes, but on page 3, for instance, number 5 and number 16, are they

22     Croat or Muslim?

23        A.   What page?  What page?

24        Q.   This would be 3 in English.  It's -- and it may be easier if you

25     just look at the English version.

Page 1866

 1        A.   [In English] Okay.

 2        Q.   It's on the screen.

 3        A.   Okay.

 4        Q.   Number 5 and number 16.

 5        A.   [Interpretation] Number 5, Ruso Begovic [phoen], well, they are

 6     Muslims, and Jugo, and number 16 as well.

 7        Q.   And 16 as well?

 8        A.   Right, 5 and 16.

 9        Q.   And going to page 4, number 17, number 18, number 20, number 24,

10     number 26, number 27.  Can you please tell us whether they're Muslim or

11     Croat?

12        A.   Muslims.

13        Q.   Going to page 5, number 6, number 13, number 14, number 15.

14     Croat or Muslim?

15        A.   6, 13, 14, 15, Muslims.

16        Q.   All right.  Page 6, number 1, number 3, number 4, number 9,

17     number 10, number 12, number 13, number 15.  Croat or Muslim?

18        A.   Muslims.

19        Q.   Page 7.  Number 16, number 18?

20        A.   Muslims.

21        Q.   Page 8.  Number 4 and number 7.  Croat or Muslim?

22        A.   4, 5, 7 --

23        Q.   4 and 7.

24        A.   Muslims.  Muslims.

25        Q.   Page 9.  These are wages for May 1993.  This is number 3, number

Page 1867

 1     11, number 12, number 14.

 2        A.   Muslims.

 3        Q.   Page 10, number 3, number 4 number 8.

 4        A.   Muslims.

 5        Q.   All right.  If we go on to the next document, 1D 02136, and this

 6     is a conclusion, and it's dated 5 July 1993, and it says here under point

 7     1:  "The finance department is obliged in relation to defence financing

 8     to make the estimate of inflow of funds into the budget of HZ HB for the

 9     month of July 1993."

10             Now, first I'm going to ask you to comment about this document,

11     this conclusion, what is it; and number two and more importantly, I

12     wanted to ask you about this word "obliged."  Is this an instruction?

13     Are you being instructed?  Are you be ordered?  What does the word

14     "obliged" mean in the context with the way the HVO HZ HB operated under

15     the statutory decisions and other regulations?

16        A.   So after the conflict in Mostar broke out, the finance department

17     was no longer functioning, and it was relocated to the municipality of

18     Siroki Brijeg for a while, and in that period the SDK in Mostar no longer

19     functioned, and the central unit was temporarily related to Siroki

20     Brijeg, and again the municipalities exploited the situation and failed

21     to implement, to enforce the Herceg-Bosna regulations.

22             After the situation was analysed at the -- at a session of the

23     HVO HZ HB, this conclusion reaffirmed our obligation to determine the

24     monthly and quarterly budgetary revenues as indicated in the decree on

25     the budget, because that decree stipulated that the departments had to

Page 1868

 1     plan their needs on a monthly and quarterly basis.

 2             So this conclusion reaffirms our obligation to do so, because it

 3     was necessary to get the system functioning again as soon as possible.

 4        Q.   All right.  If you look at --

 5             JUDGE TRECHSEL:  If -- thank you, Mr. Karnavas.

 6             Speaking from -- from a simple mind of a non-financial expert, is

 7     this to be understood in the sense that the government, Mr. Prlic and his

 8     colleagues, want to know how much money will be available in -- for July

 9     so that they can plan how much they can spend for defence purposes?  Is

10     that the idea behind it?

11             THE WITNESS: [Interpretation] Yes.  My department had to say how

12     much we could expect in terms of real revenue in July, for the month of

13     July, and this was actually the result of the situation that I was

14     telling you about, because we were unable to do that in June and in May

15     because of the situation as it was.

16             JUDGE TRECHSEL:  Thank you.  Thank you.

17             MR. KARNAVAS:

18        Q.   And just a point of precision.  This is a conclusion.  We could

19     see that this is signed by Dr. Jadranko Prlic, but whose conclusion is

20     this?

21        A.   This is the conclusion reached at the session of the HVO HZ HB.

22        Q.   Okay.  So it's the collective body that's making this conclusion

23     and not Dr. Jadranko Prlic, because we see his signature there?

24        A.   Yes.

25        Q.   All right.  Now, if we go to the next document, 1D 01934.  This

Page 1869

 1     is 12 August 1993.  We see that -- that it is a document that you

 2     prepared as the head of the finance department.  It's -- we see all this

 3     lovely legislation and instruments that are passed for the financial

 4     institutions to function.  Now, if you could comment, please, on this

 5     report, especially if we look at, for instance, in the second paragraph

 6     towards the bottom half you seem to be indicating that all things are not

 7     operating as envisaged by the legal instruments that were drafted and

 8     adopted by the Croatian Community of Herceg-Bosna, the HVO HZ HB.

 9        A.   This is a memo that I sent to the Croatian Defence Council and

10     the presidents of the municipal HVOs about the functioning of the

11     financial system.  As I say here, after the regulations were passed and

12     after efforts were made for them to be enforced, in the first six months

13     of 1993 this appeared to be functioning with the application of all the

14     mechanisms that we had put in place.

15             After the conflicts broke out, particularly the conflicts in

16     Mostar, and after there was a disruption in the functioning of the SDK

17     and other institutions that had to be relocated to other places because

18     of combat operations, the municipalities again exploited the situation to

19     channel the revenue meant for the HZ HB budget to their own accounts.

20     And in this context, on the 4th of August, I had a meeting with the heads

21     of the municipal finance offices.  And on the 5th, in Siroki Brijeg,

22     there was a meeting with the presidents of the municipalities where we

23     warned them that this kind of conduct was not acceptable and that they

24     could cause great problems for the functioning of the HZ HB in terms of

25     the defence and the functioning of civilian -- civilians' lives.

Page 1870

 1             At those meetings we concluded that in fact we had to comply with

 2     the existing regulations and reinforce the control and collection and

 3     that the municipal HVOs had to adopt their own budgets because they did

 4     not have their budgets, although there was no reason for that to be so.

 5             Of course here we again see this conflict.  We talked to the

 6     presidents of the municipal HVOs, and at the same time they're members of

 7     the Presidency of the HZ HB, and they are the persons who are in fact

 8     responsible for the functioning of the system.

 9        Q.   And that's what I was going to be asking you, that essentially in

10     Siroki Brijeg on 5th August when you're warning the representatives of

11     the municipalities, which are the presidents as you've told us,

12     essentially you have the Presidency there, albeit it's not a Presidency

13     meeting.  They're sitting there individually and collectively.  Do I have

14     it right?

15        A.   Yes.

16        Q.   All right.  And collectively, at least from yesterday as I

17     understood you correctly, they're the legislative body that sits above

18     the executive HVO HZ HB?

19        A.   Yes, and they are there as the Presidency of the HZ HB and as

20     such they had to in fact warn me that regulations had to be enforced and

21     not the other way around.  In reality I was there to warn them in their

22     capacity as the presidents of the municipal HVOs that they had to enforce

23     the regulations.

24             JUDGE ANTONETTI: [Interpretation] Mr. Karnavas, we need to have a

25     break, a 20-minute break.

Page 1871

 1                           --- Recess taken at 12.25 p.m.

 2                           --- On resuming at 12.51 p.m.

 3             JUDGE ANTONETTI: [Interpretation] The court is back in session.

 4             MR. KARNAVAS:  May I proceed, Your Honour?

 5             JUDGE ANTONETTI: [Interpretation] Yes, you may proceed.

 6             MR. KARNAVAS:

 7        Q.   Okay.  Let's go on to 1D 02135 and we're going to have to speed

 8     it up just a little bit.  No, I'm sorry, I believe we covered this.  No?

 9     Oh, we didn't.

10             This is another conclusion where under 1 it says:  "All bodies,

11     offices, commissions, and services are obliged to present their needs for

12     the period of October-December, so that the draft budget of the HR HB

13     could be defined."

14             Just very briefly again, I think I understand this but could you

15     please comment on it?

16        A.   After the establishment Croatian Republic of Herceg-Bosna, at one

17     of the meetings in September the conclusion is adopted to update the

18     implementation of the law on the budget of the HZ HB which says that

19     revenues are planned on a quarterly basis, revenues and expenditures.

20        Q.   All right.  Thank you.  Now we're going to look at a series of

21     documents to sort of put things into perspective.

22             THE INTERPRETER:  Your microphone, please.

23             MR. KARNAVAS:

24        Q.   We're going to look at a series of documents that put things into

25     perspective and shows how things were supposed to operate or did operate

Page 1872

 1     at least in part.  And we'll start off with 1D 02132.  That is a decision

 2     on the allocation of funds for the needs of the Department of Justice,

 3     and if you could please tell us exactly -- explain this document for us.

 4        A.   At the time when this was adopted in December 1992 there was no

 5     budget of the HZ HB, but the monies were spent in accordance with the

 6     decisions of the HVO HZ HB.  A -- the relevant department, in this case

 7     the justice department, would make a relevant submission.  This was, I

 8     believe, that they needed money for the renewal of buildings, et cetera.

 9     And based on their submission, the finance department stated how much

10     money there was in the budget, and then the HVO decided about the

11     allocation of that money for the needs of individual departments and the

12     like.

13        Q.   All right.

14             JUDGE TRECHSEL:  I'm sorry.  I'm dreadfully sorry, Mr. Karnavas,

15     because I am disrupting you and I'm going a step back.

16             MR. KARNAVAS:  It's okay.

17             JUDGE TRECHSEL:  Because we had this interesting document, number

18     1943 just before the break where you told off to some extent, told

19     municipalities what their duty was and asked them to comply, and I would

20     like to know whether there was any effect to that, whether you were

21     successful with that letter.

22             THE WITNESS: [Interpretation] That letter was sent to all

23     municipalities; to the president of the HZ HB, Mr. Boban; the president

24     of the HVO, that is, the president of the HVO HZ HB, to be precise, and

25     after that things started improving.  Of course the municipalities always

Page 1873

 1     requested a transitional period of a month or two to pay for some

 2     liabilities they had incurred, but as of September or October, the

 3     situation had -- was significantly better.

 4             JUDGE TRECHSEL:  Thank you very much.  Excuse me, Mr. Karnavas.

 5             MR. KARNAVAS:  No problem.  And, Your Honours, just so you know,

 6     coming attractions, after this particular chapter which I'm about to

 7     finish, we're going to go back and look at some municipal decisions

 8     during this period when now they have the legislation, see how it's being

 9     actually implemented on the ground.  So hopefully that may generate more

10     questions, perhaps even provide an answer or two on occasion.

11        Q.   All right.  If you look at 1D 02131.  This is a decision on

12     granting funds for the needs of the subdepartment of education.  The

13     previous document was in December, I believe.  This is now January 17,

14     1993.  Could you please comment on this.

15        A.   This is also a decision on the allocation of funds, this time for

16     the needs of the education, culture, and sports department.

17             In late 1992 and early 1993, the HZ HB started accumulating some

18     funds which put us into the position to effect such payments.

19        Q.   All right.  We go to 1D 02133.  This is 17 January 1993.  This is

20     a decision on the allocation of funds to the HVO Kotar Varos.  Maybe you

21     could tell us what is this Kotar Varos, and what is this money or this

22     allocation all about?

23        A.   Kotar Varos is a municipality in Bosnia.  Today that area belongs

24     to the Republika Srpska entity.

25             Under the decision on the establishment of the HZ HB, taking into

Page 1874

 1     consideration that this area was populated by Croats and it was our duty

 2     to take care of all areas populated by Croats, since they were in an

 3     extremely difficult situation this aid was granted to that HVO.

 4        Q.   Okay.  And we're talking about an area within a municipality or

 5     are we talking about an entire municipality?  Which of the two, just to

 6     make sure I understand.

 7        A.   I think this is an area within the municipality of Kotar Varos.

 8        Q.   All right.  If we look at the next document, 1D 02114.  This is a

 9     decision on monetary assistance to be granted to the HVO municipality of

10     Sarajevo in the amount of it looks like 5 million Croatian dinar.  If you

11     could please explain this.

12        A.   This is practically the same approach as in the case of Kotar

13     Varos.  This is an allocation to the HVO that was operating in Sarajevo.

14     This is assistance to Croat -- the Croats in Sarajevo to procure food, et

15     cetera.

16        Q.   1D 02306.  We're now in April 1993, 9 April 1993.  This is a

17     decision on allocating funds for the needs of the subdepartment, it says

18     subdivision but I believe it should be subdepartment, for education,

19     culture and sports.  Could you please look at that and give us a quick

20     commentary on it.

21        A.   This decision was taken at a time when there was no budget for

22     the needs of the of institutions mentioned here.  I must say these are

23     some institutions that could not be funded because the budget of the

24     republic was not functional.  Normally the university would have gotten

25     money from the higher education fund, which is in Sarajevo.  The

Page 1875

 1     institute of education was a regional institution, but the regional sees

 2     had disappeared and these other cultural institutions were co-financed by

 3     the republic, but at this time they were left without money, and the

 4     people there had been without salaries for quite some time, and this is

 5     aid which was proposed by the subdepartment for education, culture, and

 6     sports.

 7        Q.   All right.  And if I understand you correctly, had this not been

 8     a war period, in other words, if we were normal times and things were

 9     functioning, many of these institutions would have been paid out of the

10     republican budget?

11        A.   Correct.

12        Q.   1D 021 --

13             JUDGE ANTONETTI: [Interpretation] Witness, I'm curious about one

14     minor thing.  I can see the symphony orchestra and the national theatre

15     that are going to receive 1 million Croatian dinars and 1.800.000

16     Croatian dinars respectively.  Did they both operate or was it only to

17     pay the wages?

18             THE WITNESS: [Interpretation] This is about the maintenance of

19     the institutions that had been in existence from former times.  The

20     building of the symphony orchestra was destroyed due to the shelling by

21     the JNA.  It was --  it burnt down.  And the national theatre was also

22     damaged.  There were no conditions for performances or concerts to be

23     held, but some people stayed and this was meant for their salaries.

24     Later, a string quartet was formed from what remained of the symphony

25     orchestra and other smaller ensembles, and the actors from the national

Page 1876

 1     theatre joined the HVO's war theatre, wartime theatre, after conflict

 2     broke out in Mostar.

 3             JUDGE ANTONETTI: [Interpretation] As a former Finance Minister,

 4     you know that certain amounts are earmarked for operational or

 5     maintenance purposes or at times for investment purposes.  Is any such

 6     distinction to be found here in these amounts or is everything put

 7     together, which is the amount that is going to be dedicated to rebuilding

 8     buildings, which is the amount earmarked for paying salaries, between the

 9     operational budget and the investment budget?  Is there any difference?

10             THE WITNESS: [Interpretation] I said that the budget was not

11     operational.  If there had been a budget it would have been clear what

12     was to go for salaries, what for other expenditures, and what for special

13     purposes such as reconstruction, et cetera.

14             This is the first money granted to these institutions and upon

15     the proposal of the subdepartment of education, culture and sports.  So

16     for -- this is -- the proposal contains individual items, but this is

17     only a summary in this decision.  The individual items are contained in

18     the proposal submitted to the HVO HZ HB.

19             As we did not have a budget with the relevant analyses, the

20     decision only mentions this lump sum.

21             JUDGE ANTONETTI: [Interpretation] I guess that in the symphony

22     orchestra there were Croats and Muslims as well as Serbs.  Is that

23     correct?

24             THE WITNESS: [Interpretation] Yes, and there were also Russians

25     and Romanians.

Page 1877

 1             JUDGE ANTONETTI: [Interpretation] Thank you.

 2             MR. KARNAVAS:  Thank you.

 3        Q.   All right.  If we look at the next document which is 1D 02165,

 4     1D 02165.  This is a decision, as we can see, approving to the social

 5     welfare centres of the municipal HVO, and we can see the various amounts,

 6     dated 29 July 1993.  Perhaps you can explain this decision for us?

 7        A.   Upon the proposal of the subdepartment of social welfare issues,

 8     this decision was adopted about a one-off aid to social welfare centres

 9     and the individual municipalities due to the new humanitarian situation.

10     This is a -- practically a one-off aid to these institutions that were

11     active in social welfare in the municipalities.

12        Q.   Thank you.  If we look at the --

13             JUDGE TRECHSEL:  Excuse me, Mr. Karnavas.  A simple question.

14             Mr. Tomic, we see these papers.  Can we assume -- can you say

15     that these sums were then actually paid to the recipients that we have

16     here, or is there a step in between where maybe the end is not quite like

17     the starting point?

18             THE WITNESS: [Interpretation] All decisions taken by the HVO

19     HZ HB about payment have been implemented.

20             JUDGE TRECHSEL:  Thank you.

21             MR. KARNAVAS:

22        Q.   Okay.  If we look at the next document, 1D 02134.  This is about

23     the allocation of funds to the HVO Sarajevo with its head office in

24     Kiseljak, and we can see the amount.  Could you please explain this

25     document.

Page 1878

 1        A.   The HVO office Sarajevo, which was relocated to Kiseljak due to

 2     the circumstances, applied for -- applied for aid because they were

 3     unable to organise activities that would generate revenue, and in that

 4     context this decision was taken.

 5        Q.   And finally by way of example if we look at 1D 02137, we see

 6     another conclusion.  This is now August 9, 1994.  And if we look at Roman

 7     numeral I, it's for the needs of the HVO of the Hrasnica, in the amount

 8     of a thousand Deutschmarks.  Do you know what this is about?

 9        A.   An HVO was established in Hrasnica too.  That is a place in the

10     outskirts of Sarajevo, and this is a decision to grant aid to that HVO.

11        Q.   Okay.  To that area where Croats are living outside of Sarajevo?

12        A.   [In English] Yes.  [Interpretation] Yes.

13        Q.   All right.  Thank you.  Now very quickly we'll go through those

14     other four documents.  We can conclude this chapter, and the first one is

15     1D 01896.  This is now 10 December 1993, and here we have a financial

16     plan for the judicial bodies for 1994.  We see that it's signed by the

17     Minister of Justice, the then Minister of Justice, Kresimir Zubak.  And

18     now if you could look -- if you could go through this very quickly with

19     us it might be -- it might be of some assistance to some of the previous

20     questions asked of you concerning budgetary matters.

21        A.   When the HR HB was established and its government, Mr. Martinovic

22     became minister and all departments were required to make budget

23     proposals for all of 1994.  It was considered that the conditions allow

24     the creation of a -- of an inclusive budget of Herceg-Bosna.  So this is

25     a -- this is in connection with the financial plan of the judiciary

Page 1879

 1     bodies and similar plans had been to be drafted by other ministries as

 2     well.

 3        Q.   And Mr. Martinovic was the minister of finance under the Croatian

 4     Republic of Herceg-Bosna?

 5        A.   [In English] yeah.

 6        Q.   And at that time what position did you hold?

 7        A.   I was his deputy.

 8        Q.   Okay.  So you were still within the -- now you went from being

 9     the head of the department of finance under the -- from the Croatian

10     Community of Herceg-Bosna to being the deputy minister within the

11     Croatian Republic of Herceg-Bosna.

12        A.   Correct.

13        Q.   All right.  Now, before we leave this document there maybe some

14     matters of interest.  On page 15, under items -- that would be in the

15     English, but it's item 67, 68, 69, 70.  If I could draw your attention

16     to -- to that segment of the document.  We see that it makes reference

17     under 67 to the District Prison in Mostar; 68, the District Prison in

18     Busovaca; 69, the District Prison in Gabela; and number 70, the District

19     Prison in Orasje.  Could you please explain to us what -- what prisons

20     are we referring to here, if you know, that is, and I assume you do

21     because of your position.

22        A.   As far as I know, this refers to civilian prisons, that is

23     prisons for criminals.  They are prisons that used to be called District

24     Prisons.

25        Q.   All right.  And at the very end of this document, right before we

Page 1880

 1     see Mr. Zubak's name, and he was at the time Minister of Justice.  Would

 2     you confirm that, that he was the Minister of Justice for the Croatian

 3     Republic of Herceg-Bosna?

 4        A.   Yes.

 5        Q.   All right.  We see here he says:  "Minimal assets are budgeted

 6     for the existing prisons, i.e., penal organs."  By any chance do you know

 7     what he means by that?

 8        A.   Probably greater funds had been requested, but the ministry had

 9     to abide by a certain frame -- framework amount, so they had to be

10     realistic with regard to the budget, and all ministries in their planning

11     documents would always state that the funds requested are minimal anyway

12     so as to avoid their demands being further reduced in the process of

13     decision-making.

14        Q.   All right.  1D 0 --

15             JUDGE ANTONETTI: [Interpretation] One moment, sir.  This is a

16     budget proposal for 1994 stemming from the Ministry of Justice.  I looked

17     at this project.  The -- this amounts in total to 3 million Deutschmark,

18     and this is addressed to the Ministry of Finance.

19             What happens after that?  What kind of procedure is applied?  Is

20     it the minister of defence who then adopts these projects -- this project

21     and determines which should be allocated where?  What happens after that?

22     Can you tell us?

23             THE WITNESS: [Interpretation] Once the ministries submit their

24     proposals, these proposals are further treated by the Ministry of

25     Finance.  Most often the ministry would establish that the costs are much

Page 1881

 1     greater than the revenue that can be provided by the Ministry of Finance.

 2     Then the Ministry of Finance returns the documents for corrections and

 3     adaptation to whatever is possible.

 4             It isn't up to the Ministry of Finance to decide what does not

 5     need to be funded or what -- what is to be reduced.  That's up to the

 6     line ministries to decide.

 7             The salaries were easily assessable because the sums were fixed,

 8     and other -- the other costs were then set in relation to the total --

 9     the sum total of the salaries.

10             What we could not easily assess were other expenses such as the

11     procurement of equipment, et cetera, but that was left to the line

12     ministries to adapt these items.

13             So the requested funds and the planned revenues for that year

14     were -- were balanced in a way, and a proposal was formulated which was

15     sent to the HVO.  This proposal would then be forwarded to the chamber of

16     representatives of the HR HB, and then -- only then can the budget become

17     a legally binding document.

18             JUDGE ANTONETTI: [Interpretation] In light of the events and the

19     war, you did not have imbalanced budgets, did you?

20             Let me repeat my question.  In light of the war and the events at

21     the time, weren't you tempted to have imbalances on the budget?

22             THE WITNESS: [Interpretation] That was the reason why the budget

23     for 1992 and 1993 was not adopted at all, because the demands of the

24     users were far greater than the realistically possible revenues that

25     could come into the budget.

Page 1882

 1             When the Croatian Community of Herceg-Bosna was established, when

 2     Mr. Martinovic came in, a procedure was initiated to get the budget and

 3     to get the revenues into the budget, the revenues that did not go through

 4     the budget of the Croatian Community of Herceg-Bosna.  So we're talking

 5     about the amounts that the Croatian emigre community from Bosnia and

 6     Herzegovina remitted back into the country.  This was now channeled into

 7     the budget, and in order to balance the 1994 budget a loan was obtained

 8     from the Hrvatska Banka bank in Mostar, because Mr. Martinovic had this

 9     idea, and he was willing -- he wanted the budget to become operational on

10     the 1st of January regardless of the price, because we had to pay

11     interest on this loan.  This was a commercial loan.  It was not financed

12     from the primary issue, which is an option for countries which do have a

13     central bank.  And in the planning of the budget we were able to remove

14     this deficit.

15             JUDGE ANTONETTI: [Interpretation] The Croatian bank in Mostar

16     gave you a loan for what amount?

17             THE WITNESS: [Interpretation] I think that -- well, I can't

18     really tell you.  I think it was 5 million German marks.  This item was

19     planned in the 1994 budget.

20             JUDGE ANTONETTI: [Interpretation] What was the interest rate?

21             THE WITNESS: [Interpretation] Well, I couldn't tell you off the

22     top of my head.

23             JUDGE ANTONETTI: [Interpretation] Mr. Karnavas.

24             MR. KARNAVAS:  Thank you.

25        Q.   And just for point of clarification, Mr. Martinovic came into the

Page 1883

 1     picture not with the Croatian Community of Herceg-Bosna as is reflected

 2     on line 8 of page 74 but the Croatian Republic of Herceg-Bosna.

 3        A.   That's correct.

 4        Q.   All right.  Now, if we look at the next document, and this may

 5     assist -- assist us with some of the previous questions, 1D 02740.  This

 6     is 10 February 1994, and if you could please tell us what this is, what

 7     this document is.

 8        A.   This is a document.  It is a report to the chamber of

 9     representatives about the revenues.  The intent was to report once a

10     month to the chamber of representatives, which is where the heads of the

11     municipal HVOs were now, about -- to inform them about the enforcement of

12     laws from the sphere of finance.  This is why there are two categories in

13     this report.

14             First of all is the classic report about the revenues that had

15     come in through the accounts, and then in the second part the report

16     deals with the territorial aspect, how the revenue was collected from

17     each municipality.  So the representatives, including the presidents of

18     the municipalities, were able to see that their municipalities paid

19     disproportionately less than the others although the economic situation

20     in their municipalities was better or the same as in others.

21        Q.   All right.  If we -- if we just stick with this document just for

22     a couple of minutes, and we can turn to page 8 on the English side,

23     English version, and I believe this would be the second part of the

24     document.  It says "Public revenue realised in the period of 1 January to

25     5 February 1994."  And we can see that some areas are -- they have an

Page 1884

 1     income.  There's a customs revenue column, and then there are some other

 2     columns.  And then if we go down, there are other areas that appear not

 3     to be making any sorts of contributions or there's no data for them.

 4             Do you see that?

 5        A.   In the category "Municipalities" you can see all the areas where

 6     Croats lived in accordance with the decision to establish the HZ HB, and

 7     this document was made like this on purpose, to show the representatives

 8     that precious few municipalities actually took part in financing a large

 9     number of people and needs that existed in the Croatian Republic of

10     Herceg-Bosna, and there are areas, municipalities that never actually

11     started functioning as municipalities or as locations that could

12     contribute some revenue to the budget of the Croatian Republic of

13     Herceg-Bosna.

14        Q.   All right.  Thank you.  And I trust this may have answered your

15     question, Judge Trechsel.  It must have been of some assistance.

16             1D 02741.  Very quickly, what is this?  This is dated 7 March

17     1994.  Again we see it's Jozo Martinovic as the Minister of Finance, and

18     could you please explain what this document is?

19        A.   This is the report for two months' period.  It is sent to the

20     same address, and you can see the progress report, an element -- well,

21     this report -- this monthly report was not required in accordance with

22     the law on budget.  It was submitted, in fact, in order to exert pressure

23     on the municipalities to enforce the laws.  It is also important to note

24     here that in this period the synthetic attacks and contribution rates

25     ceased to exist and the pension fund was re-established as was the health

Page 1885

 1     insurance fund.  So it is no longer a case where all the monies went into

 2     the same account in the budget but now they were allocated to specific

 3     purposes, health care, pension insurance, and so on.

 4        Q.   And that's how it existed prior to the break-up of the war.

 5        A.   That's correct.

 6        Q.   All right.  And finally 1D 02742.  Just very briefly.  We can see

 7     it's a similar document, but what is this document about?

 8        A.   It's the same thing.  It's for the first quarter of 1993.

 9        Q.   All right.  Thank you.  Now, we see a lot of -- a lot of legal

10     instruments being passed through in a very short period of time.  Can you

11     tell us whether you as finance -- the head of the finance department,

12     whether you were assisted by any other members of the HVO HZ HB in, for

13     lack of a better word, designing this system and drafting these -- these

14     instruments?

15        A.   Apart from a small team, there were at the beginning 4 or 5 of

16     us, and at the end I think there were 9 or 11 employees in the department

17     itself, the finance department.  For the most part I communicated -- I

18     was in contact with Mr. Prlic, who had experience working in the

19     republican government and various state organs, and he was really best

20     acquainted with how budget functioned.  He knew about public finances and

21     I could share with him some of my doubts about some solution and then

22     incorporate that into the proposals for various decisions.

23             Other colleagues also contributed in their various spheres of

24     expertise, whether the legal wording was correct, whether some other

25     elements should or should not be included depending on the actual sphere.

Page 1886

 1     And once the legislation office was set up, it actually did most of the

 2     work in that sphere.

 3             MR. SCOTT:  Excuse me, Mr. Karnavas, just before it leaves the

 4     page, just a correction I believe on page 77, line 15.  It says that it's

 5     for the first quarter of 1993, and I think the document indicates we're

 6     talking about the first quarter of 1994.  Thank you.

 7             MR. KARNAVAS:

 8        Q.   All right.  Now, were you acquainted with Dr. Prlic prior to

 9     getting involved in the Special Purpose Council, for instance?

10        A.   When I was the president of the youth organisation in Mostar,

11     Mr. Prlic was the secretary of the socialist league, one of the seven

12     institutions that were part of the political system, in the former

13     political system, and we worked together on many projects in this area

14     where we both worked at the time, and later on we worked together when he

15     was the president of the Executive Board in the town, and then when he

16     left for Sarajevo we again worked together to a smaller extent, but we

17     mostly worked together with some major projects that Sarajevo

18     co-financed, infrastructure, water supply.  At any rate, projects that

19     were co-financed by the state.

20        Q.   All right.  Do you recall by any chance in what field he did his

21     Ph.D. dissertation in economics, what specific topic?  If you recall.

22        A.   I think it was something about exchange rates.  I can't really

23     recall.  He is younger than I am, so ...

24        Q.   All right.  Now let's look at concretely what's happening at the

25     municipal level during this period, and by way of examples we'll start

Page 1887

 1     off with Livno.  And so I'm going to now turn your attention to 1D 00362,

 2     and we're going to go sort of -- these are in chronological order by way

 3     of municipality, so we can just look at one perhaps as a vignette and

 4     then if necessary we'll look at a couple others.

 5             This is 1 October 1992.  This is a decision on the temporary

 6     financing of the municipal HVO by the citizens receiving pensions.  If

 7     you look at Article 2, if you could please comment on this.

 8        A.   Livno is one of the municipalities where there were many old-age

 9     pensioners who had earned their pensions working abroad, in Germany,

10     Austria, and so on, and they received the salaries through the Privredna

11     Banka Sarajevo bank, through their main branch in Livno, and now an order

12     is issued that when those salaries are paid out a tax is levied, a 10

13     percent tax, for the purpose of financing the HVO of the Livno

14     municipality, and in Article 2 the bank is ordered that whenever those

15     monies come in every month the bank has to take 10 per cent of those

16     amounts and pay it into the account of the Livno municipality and then to

17     transfer the rest of the monies into the accounts of the citizens.

18             First of all, it is not within the jurisdiction of the municipal

19     HVO and it indeed cannot issue any such orders to the bank, and if any

20     kind of war tax is to be imposed then it must be paid by the end users

21     after they already receive the money.

22        Q.   Thank you.  And for the record, we can see it was sent to the HDZ

23     and SDA party -- political parties.  That's at the end of the document.

24             1D 00315.  This is a rather interesting decision on the

25     conditions for buying and selling foreign currency, and we see that this

Page 1888

 1     is by the Livno municipality, but then when we look at Article 2, it

 2     talks about Livno and Tomislavgrad municipal HVOs.  And then we can see

 3     Article 5 as well.  It talks about foreign currency or foreign exchange.

 4             Can you comment on this very briefly?

 5        A.   If I can go back to the previous decision for a moment.  You can

 6     see that this was sent to the main branch of Privredna Banka Sarajevo in

 7     Livno, the Splitska Banka bank, a Croatian bank that had its branch in

 8     Livno, and to the Privredna Banka Zagreb, its branch office in Livno.

 9     And now the Livno municipality in this decision authorises the Privredna

10     Banka Sarajevo to buy foreign exchange with Livno and Tomislavgrad

11     municipalities as the end beneficiaries, and this is not within its

12     purview at all, and this does not have any foundation in anything.  So

13     this is just an effort to make do in the chaotic situation that reigned,

14     but this is in violation of the regulations that were being passed by the

15     HZ HB, because at that time there was already an order in place

16     stipulating that the branch offices of the banks domiciled in

17     Bosnia-Herzegovina, in this case the Privredna Banka of Sarajevo, that a

18     bank should be established with a seat in HZ HB which could then perform

19     all the tasks that a bank usually deals with.

20        Q.   All right.  1D 0 --

21             THE INTERPRETER:  Microphone, please.

22             MR. KARNAVAS:

23        Q.   1D 00316.  This is a decision on municipal administrative charges

24     for the registration of motor vehicles and we can see this is October

25     1992.

Page 1889

 1        A.   At that time the decree and the tariff for turnover tax was

 2     already in place.  It stipulated how turnover tax and stamp duty is to be

 3     paid, the latter when vehicles are being registered.  But in Herzegovina

 4     cars are more than just a means of transport.  There is a large number of

 5     cars, and they are potentially a great source of revenue for the budget.

 6     And in this context the municipality, by imposing this administrative

 7     decision on imposing municipal stamp duty, in effect introduced a new

 8     form of tax valid only in the Livno municipality, which is in

 9     contravention of the regulations that the HZ HB had already passed.

10        Q.   1D 00 --

11             JUDGE ANTONETTI: [Interpretation] We will have to stop now

12     because it is just about a quarter to 2.00.  The registrar has told me

13     that you have had six hours and 22 minutes, to be precise.

14             MR. KARNAVAS:  Thank you, Your Honour.  I have, I think, some

15     time to go on this, but I hope to finish within 45 minutes more.

16             JUDGE ANTONETTI: [Interpretation] Mr. Scott.

17             MR. SCOTT:  Thank you, Your Honour.  That was the reason for

18     rising to my feet.  It would be helpful, I think perhaps for everyone,

19     certainly for the Prosecution, if there was some indication of where we

20     are in terms of scheduling.  I appreciate Mr. Karnavas has said

21     approximately another 45 minutes.  I wonder about the co-accused.  It

22     would just be helpful to know, Your Honour, if we might get some

23     estimates at this time.

24             JUDGE ANTONETTI: [Interpretation] Mrs. Nozica.

25             MS. NOZICA: [Interpretation] Thank you.  Good afternoon, Your

Page 1890

 1     Honours.  As far as I know, the Defence would use all the time allotted

 2     to it for the cross-examination.  Now, as to how we're going to allocate

 3     this time, we don't know.  We suppose that Praljak, Petkovic, and Stojic

 4     Defence would certainly cross-examine, and we will inform you tomorrow if

 5     any other Defence teams have any intention of cross-examining.

 6             JUDGE ANTONETTI: [Interpretation] Mrs. Nozica, how much time will

 7     you need?

 8             MS. NOZICA: [Interpretation] I said all the time that the Defence

 9     is allotted, and that would depend on the time taken by my learned friend

10     Mr. Karnavas.  As far as I know, it's supposed to be three hours or

11     perhaps a bit more, because he took more.  So this is the only thing, the

12     only reason why I can't tell you how much we intend to use until he has

13     completed his examination-in-chief.

14             JUDGE ANTONETTI: [Interpretation] Mr. Kovacic?

15             MS. PINTER: [Interpretation] Your Honours, as indicated by our

16     learned friend Mrs. Nozica, we have an internal arrangement about the

17     allocation of the time allotted to us, three hours, three hours 20 or 40

18     minutes, and then we will probably divide that time amongst us.

19             MS. ALABURIC: [Interpretation] Your Honours, I really don't have

20     anything to add to what my colleagues have said, but I can just conclude

21     that as things are now, the Prosecution would not get to cross-examine

22     the witness tomorrow.

23             MS. TOMASEGOVIC TOMIC: [Interpretation] Your Honours, the Coric

24     Defence has not yet decided to cross-examine or not, but we will consult

25     our colleagues and then we'll see.

Page 1891

 1             JUDGE ANTONETTI: [Interpretation] Mr. Ibrisimovic.

 2             MR. IBRISIMOVIC: [Interpretation] Mr. President, as things are we

 3     will not be cross-examining this witness.  Thank you.

 4             JUDGE ANTONETTI: [Interpretation] Very well.  Mr. Scott, you will

 5     undoubtedly not start tomorrow.  That seems pretty clear.

 6             I wish everyone a pleasant afternoon, and we shall meet again

 7     tomorrow morning at 9.00.

 8                           --- Whereupon the hearing adjourned at 1.46 p.m.,

 9                           to be reconvened on Wednesday, the 29th day of

10                           October, 2008, at 9.00 a.m.