Montenegro Opens Probe into Telekom Privatization

Published: 01 March 2012


A call for a probe into the privatization of Montenegro’s state-owned telecommunications provider was approved on Tuesday by the country’s parliament. The company has already faced an investigation by the United States Securities and Exchange Commission (SEC).

Montenegro Telekom was bought by Hungarian Magyar Telekom in 2005. Montenegrin authorities faced pressure to react after Magyar Telekom and its parent company Deutsche Telekom settled corruption charges with the SEC in December.

The Chief Prosecutor’s Office of Montenegro has asked the US authorities to provide them with the evidence they collected regarding the Montenegro Telekom privatization.

The government opposition’s initiative to launch an investigation into telecommunications privatization received the support of the Social Democratic Party (SDP), a coalition partner of the ruling Democratic Party of Socialists (DPS). This support was unexpected, as mere hours before the vote, the chairman of SDP Ranko Krivokapic told Radio Television of Montenegro that a parliamentary probe was a bad idea, and that prosecutors should handle the case.

SDP’s Parliamentary representative Rasko Konjevic said that his party supports the probe, but doesn’t want the investigation to be politicized. “We are in favor of an investigation into the privatization of Telekom, but no one should be accused in advance. We will not allow anyone to become a target without evidence, but we will also not turn a blind eye if evidence of illegal activities is found.” Konjevic said at the parliamentary meeting

During the meeting, the opposition stated that the privatization of Telekom must be thoroughly investigated, as this is a condition for Montenegro’s progress towards joining the European Union. They added that the Prosecutor’s Office lacks the will to see the investigation through.

In December 2011, the US Securities and Exchange Commission (SEC) issued a statement charging Magyar Telekom with corruption. “Magyar Telekom's subsidiaries in Macedonia made illegal payments of approximately US$6 million under the guise of bogus consulting and marketing contracts. The same executives orchestrated a second scheme in 2005 in Montenegro related to Magyar Telekom's acquisition of the state-owned telecommunications company there.”

According to the SEC, Magyar Telekom funneled around US$9 million to Montenegrin government officials through four sham contracts. In return for the bribe, the Montenegro officials allegedly facilitated the sale of Montengro Telekom to Magyar Telekom on terms favorable to the Hungarian company. The SEC also charged Magyar Telekom’s parent company Deutsche Telekom AG with “books and records and internal controls violations of the Foreign Corrupt Practices Act (FCPA).”

Subsequently, Magyar Telekom agreed to settle, paying over US$31.2 million in pre-judgment interest and profits earned from the deal. Magyar Telekom also agreed to pay a criminal penalty of US$59.6 million, as a part of a deferred prosecution agreement. In addition, Deutsche Telekom made a settlement as part of the non-prosecution agreement with the US Department of Justice, agreeing to pay US$4.36 million in penalties.

The former chair of Montenegro Telekom’s Board of Directors Oleg Obradovic said that he did not participate in the decision to sell Montenegro Telekom to Magyar Telekom, and the he did not receive any bribes.