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SUD BOSNE I HERCEGOVINE СУД БОСНЕ И ХЕРЦЕГОВИНЕ

THE COURT OF BOSNIA AND HERZEGOVINA

Number: X-Kž-06/193 Date: Delivered 26 January 2011 Sent 2 March 2011

The Panel: Judge Redžib Begić, presiding Judge Meddžida Kreso Judge Nedžad Popovac

PROSECUTOR'S OFFICE OF BOSNIA AND HERZEGOVINA

v.

Dragan Makivić et al.

SECOND INSTANCE VERDICT

Prosecutor of the Prosecutor's Office of Bosnia and Herzegovina: Saša Sarajlić Counsel for the Defendants: Miroslav Mikeš Mensur Hasagić Dževad Kadribašić Binasa Abaspahić Džavid Slamnik


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TABLE OF CONTENTS First Instance Verdict …………………………………………………………………….… 4 Appeals by the parties and defense counsel and responses thereto …………………….... 5

1. Appeal by the Prosecutor’s Office of BiH …………………………………….… 5 2. Appeal by Attorney Žarko Bulić, Counsel for the Defendant Makivić ………. 5 3. Appeal by Attorney Miroslav Mikeš, Counsel for Defendant Makivić ............. 7 4. Appeal by the Defendant Dragan Makivić …………………………………..…. 8 5. Appeal by Counsel for the Defendant Husein Glavaš …………………………. 8 6. Appeal by Counsel for the Defendant Smail Zubčević ……………………….... 9 7. Appeal by the Defendant Smail Zubčević ………………………………………. 9 8. Appeal by Counsel for the Defendant Asim Karić …………………………...… 9 9. Appeal by Counsel for the Defendant Osman Kantić ……………………..…. 10

Session of the Appellate Panel in terms of Article 304 of the CPC of BiH ……...…….. 11 Decision of the Appellate Panel in terms of Article 306 of the CPC of BiH …...…...…. 11 Appeal arguments relative to essential violations of criminal procedure provisions …. 11

1. Essential violations of the criminal procedure provisions under Article 297(1)(i) of the CPC of BiH ……………………………………………………..… 11 2. Essential violations of the criminal procedure provisions under Article 297(1)(b) of the CPC of BiH ………………………………………………………. 14 3. Essential violations of the criminal procedure provisions under Article 297(1)(g) of the CPC of BiH …………………………………...………………….. 15 4. Essential violations of the criminal procedure provisions under Article 297(1)(k) of the CPC of BiH …………………………………………...………….. 16 5. Essential violations of the criminal procedure provisions under Article 297(2) of the CPC of BiH ………………………………..………………………………… 17

Appeal arguments relative to erroneously and incompletely established facts ………...................................................................................................................................... 17 Appeal arguments relative to violations of the Criminal Code ……………………...…. …………………………………………………………………….21 Appeal arguments relative to the decision on the sentence ……………………………... ………………………………………………………………..22 Appeal arguments relative to the decision on costs of the criminal proceedings and forfeiture of property gain ………………………………………………………….... 25


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Number: X-Kž-06/193 Sarajevo, 26 January 2011

IN THE NAME OF BOSNIA AND HERZEGOVINA The Court of Bosnia and Herzegovina, Section II for Organized Crime, Economic Crime and Corruption, sitting as a Panel of the Appellate Division composed of Judge Redžib Begić as the presiding judge and Judges Meddžida Kreso and Nedžad Popovac as the Panel members, with the participation of legal adviser-assistant Lejla Garaplija as the minutes-taker, in the criminal case against the Defendants Dragan Makivić, Husein Glavaš, Smail Zubčević, Asim Karić and Osman Kantić charged with the criminal offense of Tax Evasion punishable under Article 287(1) of the Criminal Code of the Republika Srpska (RS CC), the criminal offense of Tax Evasion punishable under Article 210(3) and (2) of the Criminal Code of Bosnia and Herzegovina (CC of BiH), as read with Articles 31 and 54 of the CC of BiH, and the criminal offense of Tax Evasion punishable under Article 273(2) of the Criminal Code of the Federation of Bosnia and Herzegovina (FBiH CC) as read with Articles 33 and 55 of the FBiH CC, having deliberated on the appeals filed by, respectively, the Prosecutor’s Office of BiH, Attorneys Miroslav Mikeš and Žarko Bulić as Counsel for the First Defendant Dragan Makivić, the Defendant Dragan Makivić, Attorney Mensur Hasagić as Counsel for the Second Defendant Husein Glavaš, Attorney Dževad Kadribašić as Counsel for the Third Defendant Smail Zubčević, the Defendant Smail Zubčević, Attorney Binasa Abaspahić as Counsel for the Fourth Defendant Asim Karić and Attorney Džavid Slamnik as Counsel for the Fifth Defendant from the Verdict of the Court of BiH No. X-K-06/193 dated 23 June 2010, following an open session in the presence of Prosecutor Saša Sarajlić, the Prosecutor’s Office of BiH, the Defendant Dragan Makivić and his Counsel Miroslav Mikeš, the Defendant Husein Glavaš and his Counsel Mensur Hasagić, the Defendant Smail Zubčević and his Counsel Dževad Kadribašić, the Defendant Asim Karić and his Counsel Binasa Abaspahić, and the Defendant Osman Kantić and his Counsel Džavid Slamnik, on 26 January 2011 rendered the following

V E R D I C T

I The appeals filed by, respectively, the Prosecutor’s Office of BiH, the Defendant Smail Zubčević and his Counsel Dževad Kadribašić are hereby refused as unfounded, whereas the appeals filed by the Defendant Dragan Makivić and his Counsel Miroslav Mikeš and Žarko Bulić, Attorney Mensur Hasagić as Counsel for the Second Defendant Husein Glavaš, Attorney Binasa Abaspahić as Counsel for the Fourth Defendant Asim Karić and Attorney Džavid Slamnik as Counsel for the Fifth Defendant Osman Kantić are granted in part; consequently, with respect to those appeals and in relation to the Defendant Smail Zubčević, pursuant to Article 309 of the CPC of BiH, the First Instance Verdict of the Court of BiH No. X-K-06/193 dated 23 June 2011 is hereby revised so that:


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- in relation to the legal qualification, the Defendants Dragan Makivić, Husein Glavaš and Smail Zubčević, by perpetrating the acts referred to in the First Instance Verdict’s Operative Part, are found guilty of committing the following offenses:

1. Defendant Dragan Makivić, continued criminal offense of Tax Evasion under Article 210(3) as read with Article 54 of the CC of BiH; 2. Defendant Husein Glavaš, continued criminal offense of Tax Evasion under Article 210(2) as read with Article 54 of the CC of BiH; 3. Defendant Smail Zubčević, continued criminal offense of Tax Evasion under Article 210(2) as read with Article 54 of the CC of BiH and Article 31 of the CC of BiH (accessory);

- in the part of the decision on the principal punishments, the Defendants Dragan Makivić, Husein Glavaš, Asim Karić and Osman Kantić, in relation to the criminal offenses they have been found guilty of, are sentenced as follows: 1. Defendant Dragan Makivić, pursuant to the cited provisions as well as Articles 39, 42 and 48 as read with Article 54 of the CC of BiH, to imprisonment for a term of three (3) years ; 2. Defendant Husein Glavaš, pursuant to the cited provisions as well as Articles 39, 42 and 48 in conjunction with Article 54 of the CC of BiH, to imprisonment for a term of one (1) year; 3. Defendant Asim Karić, pursuant to Articles 39, 42, 48 and 49(a) of the CC of BiH, to imprisonment for a term of one (1) year and three (3) months; 4. Defendant Osman Kantić, pursuant to Articles 39, 42, 48 and 49(a) of the CC of BiH, to imprisonment for a term of ten (10) months. II The First Instance Verdict remains unchanged in other parts.

R E A S O N S

III – First Instance Verdict Under the First Instance Verdict of the Court of BiH No. X-K-06/193 dated 23 June 2010, the Defendant Dragan Makivić was found guilty of the criminal offense of Tax Evasion under Article 287(1) of the RS Criminal Code and the criminal offense of Tax Evasion under Article 210(3) as read with Article 54 of the Criminal Code of BiH, and was sentenced by the Trial Panel to a compound sentence of imprisonment for a term of three (3) years and six (6) months and ordered, pursuant to Article 41(2) and (4) of the CC of BiH, to pay a fine in the amount of KM 10,000.00 as an accessory punishment. Under the same Verdict, the financial gain in the amount of KM 629,742.80 acquired by the Defendant Dragan Makivić through perpetration of the offense shall be confiscated pursuant to Article 110(1) of the CPC of BiH. Under the referenced Verdict, the Defendant Husein Glavaš was found guilty of the criminal offense of Tax Evasion under Article 210(2) of the CC of BiH as read with Article 31 thereof (accessory) and the criminal offense of Tax Evasion under Article 273(2) as read with Article 55 of the FBiH Criminal Code, and was sentenced by the Trial Panel to a compound sentence of imprisonment for a term of one (1) year and three (3) months. Pursuant to Article 110(1) of


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the CPC of BiH, the financial gain in the amount of KM 129,700.00 acquired by the Defendant through perpetration of the offense shall be confiscated. Under the same Verdict, the Defendant Smail Zubčević was found guilty of the criminal offense of Tax Evasion under Article 210(2) of the CC of BiH as read with Article 31 thereof (accessory) and the criminal offense of Tax Evasion under Article 273(2) as read with Article 33 of the FBiH CC (accessory), and was sentenced by the Trial Panel to one (1) year imprisonment. According to the First Instance Verdict’s Operative Part, the Defendant Asim Karić was found guilty of the criminal offense of Tax Evasion under Article 210(3) as read with Article 31 of the CC of BiH (accessory), and the Trial Panel, pursuant to Articles 39, 42, 48 and 49 of the CC of BiH, sentenced him to imprisonment for a term of one (1) year and six (6) months With respect to the acts referred to in Section 6 of the First Instance Verdict’s Operative Part, the Defendant Osman Kantić was found guilty of aiding with intent in commission of the criminal offense of Tax Evasion under Article 210(2) of the CC of BiH as read with Article 31 thereof, and was sentenced by the Trial Panel to one year imprisonment. Pursuant to Article 188(1) of the CPC of BiH, under the First Instance Verdict the Defendants were ordered to reimburse costs of the proceedings, in the amount to be determined in a separate decision once necessary information is obtained. Under the impugned Verdict, the Defendants Mirjana Karić and Senija Kantić were acquitted of the charge that they intentionally helped in commission of the criminal offense of Tax Evasion under Article 210(3) as read with Article 31 of the CC of BiH. IV-Appeals by the parties and defense counsel Appeals from the First Instance Verdict were filed by: the Prosecutor’s Office of BiH, Attorneys Miroslav Mikeš and Žarko Bulić as Counsel for the Defendant Dragan Makivić, the Defendant Dragan Makivić, Attorney Mensur Hasagić as Counsel for the Second Defendant Husein Glavaš, Attorney Dževad Kadribašić as Counsel for the Third Defendant Smail Zubčević, the Defendant Smail Zubčević, Attorney Binasa Abaspahić as Counsel for the Fourth Defendant Asim Karić and Attorney Džavid Slamnik as Counsel for the Fifth Defendant Osman Kantić. 1. Appeal by the Prosecutor’s Office of BiH The Prosecutor’s Office of BiH appealed the decision on the sentence, moving this Panel to revise the First Instance Verdict by imposing harsher sentences on the Defendants Dragan Makivić, Husein Glavaš, Smail Zubčević, Asim Karić and Osman Kantić than the ones imposed under the First Instance Verdict.


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Attorney Mensur Hasagić, Counsel for the Defendant Husein Glavaš, and Attorneys Miroslav Mikeš and Žarko Bulić, Counsel for the Defendant Dragan Makivić, filed Responses to the Prosecution Appeal, moving the Panel to refuse the Appeal as unfounded. 2. Appeal by Attorney Žarko Bulić, Counsel for the Defendant Makivić Attorney Žarko Bulić, Counsel for the Defendant Makivić, filed his appeal on all grounds for appeal referred to in Article 296 of the CPC of BiH, moving therein that the impugned Decision be revoked, that a main trial be held before the Appellate Panel and that the Appellate Panel render a verdict acquitting the Defendant Makivić of the charges. With respect to essential violations of the criminal procedure provisions, the appeal arguments first of all relate to unlawfulness of evidence, namely statements by witnesses Osman Vlajčić and Džavid Mečević. According to the Appeal, the Prosecutor’s granting of immunity from criminal prosecution to Osman Vlajčić and Džavid Mečević (who were suspects) is not allowed under the applicable legislation and exceeds the scope and requirements laid down in the Law on Immunity for Office Holders. According to the appellant, granting immunity under Article 84 of the CPC of BiH applies exclusively to witnesses in criminal proceedings, not suspects. In the context of the argument relating to unlawful evidence on which the Verdict is based, the appellant also refers to the statement by Witness Vinko Savić and the convicting verdict delivered pursuant to a plea agreement and submits that the Trial Panel did not apply Article 268 of the CPC of BiH because the witness refused to testify without providing legitimate reasons in that regard and that Judge Nenad Šeleda was the judge who deliberated about the plea agreement in the proceedings against the then suspect and now witness Vinko Savić, and therefore, as the Appeal argues, there is a reasonable suspicion as to the judge’s impartiality, that is, there are circumstances suggesting a possible disqualification of the judge. The same arguments were raised in the appeal in relation to the Witness Mehmed Tuzlak, seeking Judge Izo Tankić’s disqualification. Appeal further challenged the contentions in the impugned Verdict noting that the legal entity Madaco was registered as a retail business because this contention is not supported by the presented evidence and it is not true. For that reason, grounds for the Verdict concerning decisive facts are in direct contravention with the evidence based on which the Verdict drew a conclusion on a decisive fact that Madaco Company was engaged in a retail business, which amounts to an essential violation of the criminal procedure provisions under Article 297(1)(k) of the CPC of BiH. In the appellant’s view, the Verdict does not offer an adequate evaluation of evidence, particularly the statements by witnesses and financial experts. In that regard, the appellant notes that the Verdict did not provide a substantial evaluation of the Prosecution expert witness report, Kerima Prašljivić, particularly in comparison to the report prepared by Defense expert witness Abid Hodžić. Regarding violations of the Criminal Code as a ground for appeal, the appellant stressed the fact that the Defendant Makivić, as a physical person in the incriminating activity of sale of goods, is not liable to pay sales tax on goods, which unequivocally ensues from the blanket provisions of the RS and BiH Law on Sales Tax. According to these laws, the legal entity Madaco is liable to pay the tax, but this legal entity is not charged under the Indictment based


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on which the First Instance verdict was delivered. Violation of the Criminal Code is also reflected in the application of Article 54 (Continued Criminal Offense) only for the acts pertaining to Tax Evasion under Article 210 of the CC of BiH, but not for the acts satisfying the criminal offense of Tax Evasion under Article 287(1) of the RS CC. As a result, the provision regarding concurrence of offenses was applied, which is contrary to Article 54 of the CC of BiH that excludes the applicability of those provisions. Finally, the Appeal challenges the decision on the sentence noting that the decision is harsh, whereas the accessory punishment/fine in the amount of KM 10,000.00 was imposed pursuant to Article 41(4) of the CC of BiH, meaning that the offense was motivated by greed. However, the reasons of the Verdict did not specify the elements of greed and, consequently, that section of the Verdict cannot be examined. According to the Appeal, the decision to forfeit the property gain is not based on the law and it is unfounded because the amount of gain to be forfeited corresponds to the amount of evaded tax referred to in all sections of the Verdict’s Operative Part and not the actual gain acquired through perpetration of the offense. 3. Appeal by Attorney Miroslav Mikeš, Counsel for the Defendant Makivić Attorney Miroslav Mikeš, Counsel for the Defendant Makivić, filed his appeal on the grounds of essential violations of the criminal procedure provisions, erroneously and incompletely established facts and violations of the Criminal Code, moving therein that the impugned Verdict be revised by acquitting the Defendant of the charges; alternatively, Counsel moved for revoking of the impugned Verdict and ordering of a retrial before the Appellate Panel. Counsel Mikeš’s Appeal challenged the jurisdiction for the acts perpetrated under Section 1 of the Verdict because they involve the criminal offense of Tax Evasion under the RS CC, whereas the Court of BiH may try such cases if BiH’s economy is endangered. The amount of KM 18,000 does not endanger a country’s economy. For that reason, the Court of BiH has no jurisdiction over the offense referred to in Section 1 of the Verdict’s Operative Part. Counsel Mikeš further argued in his Appeal that the Defendant Makivić, as a physical person, cannot be a taxpayer and that only legal entities are liable to pay the tax, adding that the present case involved revenues earned by a legal entity and not a physical person; for that reason, the Defendant could not have perpetrated the offense ha was convicted of. In addition, Counsel noted that the registered activity of the legal entity Madaco was a wholesale (which ensues from documentary evidence and decision(s) of the Basic Court of Banja Luka) and that at the relevant time Madaco Company (and the Defendant Makivić was its director) was not registered as retail business and, in accordance with the law, that legal entity was not liable to pay the tax on the goods sold. Legal entities involved in retail trade or selling goods to third parties were taxpayers. As argued by the appellant, the First Instance Verdict does not distinguish between the notions of turnover and tax; the tax was not paid by Madaco Company because that company was not registered as a retail business at the relevant time and therefore that legal entity was not a taxpayer; the buyers paid the tax in full or in part, being aware of the fact that they were taxpayers.


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The Verdict does not list evidence indicating the goods that were allegedly sold for cash, the place of sale, the identity of the buyer(s); as a result, such a claim is untenable. In particular, this applies to averments by Prosecution expert Prašljivić. Her report is superficial and cannot be regarded as being relevant primarily because the expert used only the documents presented by the Prosecutor, but that is not the entire documentation because some important documents are missing, including the supplier’s sub-ledgers showing clearly who the supplier was, who the goods were sold to, records of incoming and outgoing goods, actual turnover was recorded, all of which provides an entirely different picture from the one the expert had. Finally, according to Counsel Mikeš’s appeal, it is unclear why the Trial Panel did not examine motives for perpetration of the offense; in other words, why would the Defendant, who was registered to perform wholesale, who showed the overall turnover, had no retail outlet and who was not a taxpayer, act in the manner as charged. 4. Appeal by the Defendant Dragan Makivić Likewise, the Defendant Dragan Makivić alleged in his appeal that he, as a physical person, is not a taxpayer, and that the legal entity Madaco was registered as a wholesale business and not a retail business; for that reason, this legal entity is not liable to pay the tax. Appeal further argued that the present case does not involve tax evasion if there was fictitious sale/turnover of goods, adding that expert Hodžić’s evaluation of the purchase orders is relevant and that the purchase orders contain all the elements required under Article 9 of the Book of Rules on Application of the Law on Sales Tax on Goods and Services. 5. Appeal by Counsel for the Defendant Husein Glavaš Counsel for the Second Defendant Husein Glavaš filed the appeal on all grounds for appeal referred to in Article 296 of the CPC of BiH, moving the Panel to uphold the appeal and, following a proper evaluation of facts, revise the impugned Decision by acquitting the Defendant Glavaš of the charges; or revoke the impugned Decision and order a retrial; or revise the decision on the sentence by imposing a suspended sentence on the Defendant Glavaš or convict the Defendant by reducing the prescribed sentences to a maximum extent. Counsel also moved the Panel to revoke the decision to forfeit the material gain and relieve the Defendant of his duty to reimburse costs of the proceedings. First of all, the appeal noted a contradiction between the account of facts in Sections 2 and 4 of the impugned Verdict’s Operative Part and the account of facts in Sections 8 and 9 of the Verdict’s Operative Part, because if there was no turnover, than there was no profit showed in the fictitious documents pertaining to the turnover of goods between Madaco and Address Investment companies. Appeal further notes a contradiction between the operative part and the reasons for the Verdict due to the fact that witnesses Azra Mujačić and Meliha Zubčević confirmed that the orders to compile false documents came from the Defendant Smail Zubčević and not the Defendant Glavaš. In that regard, Appeal alleges that the Defendant Glavaš was only the formal director of the company, on paper, whereas the actual director was the Third Defendant Smail Zubčević and that all the company employees followed the instructions of the Defendant Zubčević and not the Defendant Glavaš.


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In his appeal, Counsel for the Defendant Glavaš also argued that the Criminal Code was violated because the Defendant was found guilty of a continued criminal offense under Article 210(2) of the CC of BiH in concurrence with the offense under Article 273(2) of the FBiH CC. According to the appellant, there is no concurrence of the offenses; instead, there is the same offense of Tax Evasion prescribed in two different Codes. Finally, Appeal challenged the decision on the sentence and costs of the criminal proceedings, underlining that the decision ordering the Defendant to reimburse costs of the proceedings is unfounded and unacceptable and that the imposed prison sentence is too harsh. In meting out the sentence, all the mitigating factors on the part of the Defendant were not adequately evaluated (his health condition, family situation, etc.) 6. Appeal by Counsel for the Defendant Smail Zubčević Counsel for the Defendant Zubčević filed his appeal on the grounds of erroneously established facts, erroneous application of the Criminal Code and the decision on the sentence, moving that the appeal be upheld and the impugned Verdict revised by acquitting the Defendant Zubčević of the charges. Appeal argued that there is no evidence of perpetration of the criminal offense of Tax Evasion. In particular, there is no evidence that Smail Zubčević gave instructions with a view to aiding the Defendants Makivić and Glavaš in committing the criminal offense of Tax Evasion. 7. Appeal by the Defendant Smail Zubčević The Defendant Zubčević indicated in his appeal that the Indictment and the Verdict are contradictory, that the sales tax has been considered in all the Counts of the Indictment (that is, Sections 1 through 6 of the Verdict’s Operative part), and that the sales tax is not the same as the corporation profit tax of Address Investment Company considered in Counts 7 and 8 of the Indictment (Sections 8 and 9 of the impugned Verdict’s Operative Part) and that it, as such, is in no way related to the operations between Madaco and Address Investment companies. The Defendant noted in his Appeal that he did not exercise his authority to effect payments from the account of Address Investment Company as of the moment he became director of MKO Bonus Zenica (that is, as of 31 May 2005), and that this fact is relevant to evaluation of intent on the part of the Third Defendant to aid in the perpetration of the offense. 8. Appeal by Counsel for the Defendant Asim Karić Counsel for the Defendant Karić filed his appeal on the grounds of erroneously established facts, the decision on the sentence and the decision on costs of the criminal proceedings,


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moving that the appeal be upheld, the impugned Verdict revoked and a retrial before the Appellate Panel ordered. Regarding erroneously and incompletely established facts, the appellant noted that the Prosecution expert’s report is incorrect and incomplete as it is based on incomplete financial documentation. The Trial Panel accepted the report in its entirety when finding that acts of the Defendant Karić satisfy elements of the criminal offense of aiding to perpetrate the criminal offense of Tax Evasion under Article 210(3) of the CC of BiH. The Appeal also challenged the decision on the sentence, noting that it was too harsh, whereas the Trial Panel failed to provide a comprehensive analysis of mitigating factors on the part of the Defendant, finding no aggravating factors. Regarding the decision on costs of the criminal proceedings, Counsel stressed that in rendering the decision the Court did not take into consideration the following facts: the Defendant is indigent, unemployed, has a family, owns no property, has no steady income, and payment of costs of the proceedings would endanger his subsistence and the subsistence of his family. 9. Appeal by Counsel for the Defendant Osman Kantić Counsel for the Defendant Kantić filed his appeal on the grounds of essential violations of the criminal procedure provisions, erroneously and incompletely established facts and erroneous application of the Criminal Code, moving that the impugned Verdict be revised by acquitting the Defendant of the charges or that the impugned Verdict be revoked and a retrial before the Appellate Panel ordered. Appeal argues that the Trial Panel did not list all the Defense evidence in the Reasons for the Verdict, albeit obliged to list witness testimony, in particular the testimony by Defense witnesses Senad Ibrahimkadić and Nafa Meša who testified about relevant facts, namely that they purchased some goods from the Defendant, thus proving that there was turnover between Madaco and Metal tex¸ as also testified by Senad Ibrahimkadić who kept the financial records in Metal tex. Furthermore, Appeal pointed to unlawfulness of evidence, more specifically, to the testimony by witnesses who were unlawfully granted immunity because they were interviewed as suspects during the investigation, but then testified as witnesses after being granted immunity, and they are Džavid Melečević, Osman Vlajčić and Kenan Tuzlak. Appeal challenges the conclusion from the Prosecution expert’s report, underlining that the only discrepancy between the Defense and Prosecution expert reports is the Prosecution expert’s contention that the Defendants’ documentation, among other things, do not contain legible signature and that that was the sole ground to infer that there was no turnover of goods. Regarding the decision on the sentence, the appellant argued that notwithstanding the fact that there were no aggravating factors on the part of the Defendant, the one year imprisonment imposed on him was too harsh.


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- Prosecution Responses to the Appeals The Prosecutor’s Office of BiH responded to the respective appeals by the Defense and their Counsel within the statutory time-frame, submitting therein that Defense allegations are unfounded and are not supported by evidence from the case file. For that reason, Prosecution moved the Appellate Panel of the Court of BiH to refuse the appeals as unfounded. III - Session of the Appellate Panel in terms to Article 304 of the CPC of BiH At an open session held in terms of Article 304 of the CPC of BiH, Counsel for the Defendants briefly presented their appeals, whereas Counsel for the Defendants Makivić and Glavaš additionally submitted responses to the Prosecution Appeal; the Defense maintained its written averments and motions from the appeals as well as averments and motions from the responses to the appeal. The Defendants concurred with those submissions in their entirety, noting that they had nothing to add. The Prosecutor, too, maintained the allegations and motions from his appeal as well as averments and motions from the responses to the Defense appeals. IV – Decision of the Appellate Panel in terms of Article 306 of the CPC of BiH Having examined the impugned Decision insofar as it is contested by the appeals, as prescribed by Article 306 of the CPC of BiH, and reviewed the case file, the Appellate Panel has ruled as set forth in the operative part for the following reasons: V – Appeal arguments relative to essential violations of criminal procedure provisions

1. Essential violations of the criminal procedure provisions under Article 297(1)(i) of the CPC of BiH

The Appeals filed by, respectively, Attorney Žarko Bulić as Counsel for the Defendant Dragan Makivić and Attorney Džavid Slamnik as Counsel for the Defendant Osman Kantić indicate that the impugned Verdict is based on evidence that pursuant to the CPC of BiH may not be used as the basis of a verdict, amounting to an essential violation of the criminal procedure provisions under Article 297(1)(i) of the CPC of BiH. Counsel stressed in their respective Appeals that the testimony by witnesses Osman Vlajčić and Džavid Mečević constitute unlawful evidence because the Prosecutor’s granting of immunity from criminal prosecution to suspects Osman Vlajčić and Džavid Mečević is not allowed under the applicable legislation and exceeds the scope and the requirements laid down in the Law on Immunity for Office Holders, adding that granting of immunity, pursuant to Article 84 of the CPC of BiH, applies exclusively to the witnesses, but not the suspects. In evaluating the referenced argument, this Panel proceeded from Article 17 of the CPC of BiH defining the principle of legality of criminal prosecution; according to this principle, the


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Prosecutor shall initiate prosecution if there is evidence that a criminal offense has been committed unless otherwise prescribed by law. In that regard, there are prerequisites relating to exceptions from the principle of legality of criminal prosecution and application of the principle of opportunity of criminal prosecution, and those exceptions are prescribed in the Criminal Procedure Code. Among others, the relevant exception in this case is the one set forth in Article 84 the CPC of BiH defining abandonment of criminal prosecution for offenses covered by the immunity to be granted by the Prosecutor, that is, the right to refuse to answer such questions with respect to which a truthful reply would result in the danger of bringing prosecution upon himself. The contested testimony by witnesses Osman Vlajčić and Dževad Mečević are in fact testimony that are a product and result of the cited exception to the principle of legality, which has been, in accordance with Article 35(2)(c) of the CPC of BiH, legitimately and properly used by the Prosecutor seized of the case. Bearing in mind the aforesaid and correlating the cited statutory provisions with the appeal arguments contesting the immunity decision, one may infer that Defense essentially challenges the purpose and goal of the decision granting immunity because, using the logic of the Defense that contested the decision, any person that may give self-incriminating evidence must be regarded as a suspect and not as a witness; in that case, they would be all the time the suspects (and never witnesses) that could be protected against criminal prosecution by being granted immunity. It is therefore quite clear that the Prosecutor seized of the case exercised his rights and duties during the investigation and, by granting immunity to witnesses Osman Vlajčić and Dževad Mečević, obtained lawful evidence of subjective nature; the witnesses testified at the main trial and the Prosecutor tendered into evidence the records of interview of those witnesses (Record of Interview of Witness Osman Vlajčić No. KT 376/06 dated 4 June 2008 and Record of Interview of Witness Džavid Mečević No. KT 376/06 dated 15 May 2008). The documentary evidence showed that the contested investigative statements were witness statements and not suspects’ statements, as unjustifiably claimed in the Appeals by Counsel for the Defendants Makivić and Kantić. Consequently, the appeal arguments relating to unlawful statements of the mentioned witnesses are unfounded in their entirety and, as such, are refused. Appeals further contested the testimony by witnesses Vinko Savić, Mehmed Tuzlak and Kenan Tuzlak as unlawful evidence, including the convicting verdicts delivered against those individuals pursuant to plea agreements. In the context of the argument raised, Counsel for the Defendants Makivić and Kantić challenged the credibility of the mentioned witnesses, stressing that they were charged with the criminal offense of Money Laundering and that their testimony was a result of plea agreements. Those witnesses’ motives for concluding the plea agreements included evading of their criminal liability for a much more serious offense of tax evasion, as well as the fact that the sole reason behind their testimony is to receive lighter penalties in their proceedings. In its analysis of the cited argument, the Panel first of all examined if the evidence referred to in the Appeals is unlawful evidence that affected or may have affected the lawful rendering of the First Instance Verdict. In light of the principle of free evaluation of evidence laid down in Article 15 of the CPC of BiH (the right of the court to evaluate the existence or nonexistence of facts shall not be related or limited to special formal evidentiary rules) as read with the restrictions imposed


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under Article 281 of the CPC of BiH1, this Panel finds that the Trial Panel equally evaluated the cited witness statements and convicting verdicts as any other piece of evidence in the proceedings and, having evaluated that evidence in accordance with Article 281 of the CPC of BiH, provided reasons required under Article 290(7) of the CPC of BiH, determining in the process decisive facts in the case in question. The Court of BiH took a stand on the issue of unlawful evidence in a number of its decisions, including the manner in which the evidence can be used in criminal proceedings in accordance with the law and the manner of evaluation of evidence by the court. In taking a stand on these issues, the Court cited positions taken by other courts, including the position of the Constitutional Court of BiH quoted below. According to the view of the Constitutional Court of BiH, in the process of evaluation, equal criteria apply to all the evidence so the testimony by witnesses who concluded plea agreements, thus pleading guilty to the offenses charged or testimony by witnesses who were granted immunity, constitute evidence that have equal weight as any other evidence, and assumptions of (un)reliability do not apply. The Constitutional Court expressly rejected the possibility of regarding that evidence as unreliable and as such not considered or, due to the manner in which they were obtained, subjected to a more detailed analysis and evaluation than the other evidence. When considering each testimony, including the testimony of witnesses who concluded plea agreements or were granted immunity, the Panel has a duty to be mindful and consider all facts affecting the reliability of such testimony.2 The Constitutional Court noted the following in one of its Decisions3: “Even though such witnesses may often be unreliable, it in itself is not a reason not to have faith in the statement of such witness.” The Constitutional Court concluded the following in the cited decision: “there has been a violation of the right to a fair trial since the convicting judgment, in its major part, is based on the statement of the witness who concluded a plea agreement with the prosecutor. The court did not give logical and convincing reasons for evaluation of that and other presented evidence but it seems such evaluation was arbitrary.” In the case in question, it is the view of this Panel that the major part of the First Instance Verdict is not based on such evidence, nor is the finding on the criminal responsibility of the Defendants based on arbitrary evaluation of that and other evidence presented during the proceedings. Consequently, the appeal arguments are refused as unfounded. Appeal by the Defense for Makivić further discredited the testimony of Witness Vinko Savić by arguing that the presiding judge of the first-instance failed to exercise his authority under Article 268 of the CPC of BiH (Sanctions for Refusing to Testify) because the witness refused to give evidence at the main trial. The argument is unfounded for several reasons. First of all, a review of the main trial transcript dated 4 February 20104 when Vinko Savić was summoned to appear as a witness in the criminal proceedings has showed that the presiding judge advised the witness at the beginning of his testimony (as any other witness) of his rights and duties,

1 Article 281(2) of the CPC of BiH: The Court is obligated to conscientiously evaluate each item of evidence and its correspondence with the rest of the evidence and, based on such evaluation, to conclude whether the fact(s) have been proved. 2 See Second Instance Verdict of the Court of BiH, KPŽ-44/05 (Maktouf), dated 4 April 2006. 3 Decision of the Constitutional Court of BiH, M.Š., para. 38. 4 Audio recording of the main trial in Case No. X-K-06/193 dated 4 February 2010 (4 min. and 30 sec., advising the witness of his rights and duties)


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including a possibility of imposition of a fine should the witness refuse to testify. In the course of his examination, the witness refused to answer a question put by the Prosecutor seized of the case, whereafter the presiding judge intervened and again advised the witness of his duty to answer all questions put. The witness partly answered the question by saying that he did business with some people, but he could not recall their names, adding that he did not know the Defendant Makivić. It is therefore clear that Counsel for the Defendant Makivić unjustifiably claimed that the judge did not caution the witness or that the witness was not advised of a possibility of a fine for refusing to testify, but it is also clear that the witness evaded answering the questions to diminish or exclude the criminal responsibility of the Defendant Makivić. For that reason, the Prosecutor abandoned further examination, tendering into evidence the final Verdict of the Court of BiH No. K-07/335 dated 20 June 2008 (the Verdict confirmed that Witness Vinko Savić was found guilty of the criminal offense of Money Laundering under Article 209(2) of the CC of BiH and sentenced to two years imprisonment). The impugned Verdict provided an adequate explanation in that regard, reasoning that Witness Vinko Savić confirmed that he had signed a plea agreement and accepted everything contained in the Prosecution Indictment, specifically, that he issued fictitious purchase orders and certified the dispatch notes sent to Madaco, transferring the received money to that company. All this unequivocally ensues from the verdict, expert Prašljivić’s report and the documentary evidence tendered in support of acts referred to in Section 5 of the impugned Verdict’s Operative Part. Therefore, there has been no omission on the part of the judge seized of the case, as unjustifiably claimed in the Appeal by the Defense for Makivić, and the testimony by Witness Vinko Savić is not unlawful evidence, particularly if one bears in mind that the Defense for Makivić had an opportunity to cross examine the witness; the Defense did not use that opportunity, rendering the arguments questioning the lawfulness of this witness’s testimony void of factual or logical basis. Consequently, the arguments are refused in their entirety. In the context of arguments regarding unlawfulness of evidence, the Appellate Panel also considered the statement by Witness Mehmed Tuzlak and the final verdict imposed on Kenan Tuzlak and Mehmed Tuzlak under a concluded plea agreement for the criminal offense of Money Laundering under Article 209 of the CC of BiH (Mehmed Tuzlak was sentenced to imprisonment for a term of one year and six months, whereas Kenan Tuzlak received a suspended sentence). As the statements of those witnesses are corroborated by other evidence presented and as the Trial Panel considered the convicting verdict solely in terms of the veracity of the witness statements (as correctly noted in the impugned Verdict), meaning that the Panel did not base its decision on the contents of the convicting verdict, which was correctly noted by the contested Verdict, the Defense arguments in that respect are refused as unfounded.

2. Essential violations of the criminal procedure provisions under Article 297(1)(b) of the CPC of BiH

Appeal by the Defense for Makivić argued that there are essential violations of the criminal procedure provisions under Article 297(1)(b) of the CPC of BiH. According to the appellant, there are circumstances justifying disqualification of the judges seized of the cases in which convicting verdicts were imposed on Vinko Savić, Mehmed Tuzlak and Kenan Tuzlak.


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In the view of this Panel, those arguments are unfounded as there is no relevant evidence (nor was such evidence offered by the appellant) reasonably indicating that the judges seized of the case were partial when taking the impugned decision, namely that they prejudged essential facts from the impugned Verdict regarding alleged fictitious turnover and money laundering for Madaco Company. More specifically, the judges who deliberated on the agreements in the cases of Vinko Savić, Mehmed Tuzlak and Kenan Tuzlak were determining if there was evidence indicating the defendants’ guilt in that case and they could not be “contaminated” in relation to the defendants in this case, particularly bearing in mind that the Trial Panel (as noted above) did not base its decision exclusively on the testimony by witnesses Vinko Savić, Mehmed Tuzlak and Kenan Tuzlak or the convicting verdicts against them. According to this Panel, the testimonies and the verdicts served as controlling evidence to confirm the findings of decisive facts inferred on the basis of other evidence. This finding is supported by the Decision of the Constitutional Court of BiH5 No. AP 1394/07. Paragraph 65 of the Decision explains the Defense argument contesting actions of the judges in the cases in which some of them were members of panels that deliberated on plea agreements in other cases in which the defendants appeared as witnesses: “Bearing in mind the aforesaid, the Constitutional Court emphasizes that the fact that some judges were members of the panel that deliberated on plea agreements in other cases in which the defendants appeared as witnesses does not in itself amount to a violation of the right to a fair trial in accordance with the standards defined under Article 6(1) of the ECHR. Moreover, there is no relevant evidence reasonably indicating that the judges were not impartial when rendering the impugned decision, to violate the appellant’s right to a fair trial”. Consequently, the said decision equally noted that there are no grounds for disqualification of the judges in the context of the right to defense or in the context of essential violations of the criminal procedure provisions under Article 297(1)(b) of the CPC of BiH as read with Article 29(f) thereof.

3. Essential violations of the criminal procedure provisions under Article 297(1)(g) of the CPC of BiH

Appeal by Counsel Mikeš challenged the jurisdiction of the Court of BiH in relation to the acts referred to in Section 1 of the impugned Verdict’s Operative Part on the grounds that they satisfied elements of the criminal offense of Tax Evasion punishable under Article 287 of the RS CC, adding that the Court of BiH does not have jurisdiction over the criminal offenses under the jurisdiction of the Entities, particularly if the case involves evaded tax in the amount of KM 18,000.00 (hence, an amount that cannot endanger a country’s economy). Article 7(2) of the Law on the Court of BiH provides that the Court of BiH has jurisdiction over criminal offences prescribed in the Laws of the Federation of Bosnia and Herzegovina, the Republika Srpska and the Brcko District of Bosnia and Herzegovina when such criminal offences: endanger the sovereignty, territorial integrity, political independence, national security or international personality of Bosnia and Herzegovina, or may have serious repercussions or detrimental consequences to the economy of Bosnia and Herzegovina or may have other detrimental consequences to Bosnia and Herzegovina or may cause serious economic damage or other detrimental consequences beyond the territory of an Entity or the Brcko District of Bosnia and Herzegovina.

5 Decision of the Constitutional Court of BiH. Case No. AP 1394/07, Appeal by Ferid Okić, para. 65.


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In light of and correlating the cited provision with the factual account of the Defendant Makivić’s acts, it is clear that the acts were undertaken in a manner that the Defendant had business dealings with companies throughout BiH, crossing an Entity’s borderline, whereby, notwithstanding the amount of evaded tax referred to in Section 1 of the impugned Verdict’s Operative Part, the Defendant Makivić through his acts constituting the criminal offense of Tax Evasion brought about detrimental consequences outside the territory of the Entity. For that reason, by applying Article 7(2) of the Law on the Court of BiH, the present case (as opposed to Defense arguments) involves a criminal offense defined under the Republika Srpska Criminal Code and the Court of BiH has jurisdiction over that offense. Consequently, the amount of evaded tax in the instant case does not constitute a ground for establishing jurisdiction; rather, that ground comprises acts undertaken outside the territory of an Entity with detrimental consequences to the RS Entity and the territory outside that Entity.

4. Essential violations of the criminal procedure provisions under Article 297(1)(k) of the CPC of BiH

Appeal by the Defense for Glavaš challenged the impugned Verdict for the reason that the impugned Verdict’s Operative Part is internally contradictory and contradictory to the grounds of the verdict, with repeated contradictions in the reasons for the verdict so that it is possible to argue that the verdict in part does not cite reasons concerning decisive facts. First of all, this Panel finds that arguments alleging that Sections 2 and 4 of the Verdict’s Operative Part contradict Sections 8 and 9 of the Operative Part are unfounded. Specifically, the factual account in Sections 2 and 4 of the impugned Verdict’s Operative Part does not contradict Sections 8 and 9 of the Verdict’s Operative Part since the First Instance Verdict makes a clear distinction between the acts of the Defendant Glavaš as an accessory to the criminal offense of Tax Evasion under Article 210(2) of the CC of BiH (Sections 2 and 4 of the Verdict’s Operative Part), undertaken by supplying the perpetrator with tools for perpetrating the criminal offence, and the acts satisfying the criminal offense of Tax Evasion under Article 273(2) of the FBiH CC (Sections 8 and 9 of the Verdict’s Operative Part), evading payment of KM 129,700.00 prescribed under the tax legislation in the Federation of BiH committed by providing false information about the taxable income earned (more specifically, he evaded calculation and payment of profit tax amounting to KM 113,700.00 as well as calculation and payment of tax amounting to KM 16,000.00 pursuant to Article 7 and Article 11(3) of the Payroll Tax Law). Consequently, the earned taxable income pertaining to Sections 8 and 9 of the Verdict’s Operative Part is not income from the fictitious turnover of goods referred to in Sections 2 and 4 of the Operative Part, as unreasonably claimed in the Appeal by the Defense for Glavaš and the income as such has nothing to do with the business operations between Madaco and Address Investment companies, as indicated in the Defendant Zubčević’s Appeal. For this reason, the appeal arguments indicating a contradiction between the cited sections of the impugned Verdict’s Operative Part are hereby refused as unfounded in their entirety. The appeal arguments by the Defense for Glavaš that the impugned Verdict’s Operative Part is internally contradictory and that the verdict does not cite reasons concerning decisive facts are unfounded. In the view of this Panel, there is no contradiction between the impugned Verdict’s Operative Part and the reasons for the verdict, particularly in relation to the


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testimony by witnesses Azra Mujarić and Meliha Zubčević, as unreasonably referred to in the Appeal (arguing that they were erroneously evaluated). In this Panel’s view, in the impugned Verdict the Trial Panel adduced specific and full reasons for holding that the decisive facts have been proved. In that regard, the Panel evaluated among others the testimony by witnesses Azra Mujarić and Meliha Zubčević. It followed from those testimonies that the witnesses received instructions from the Defendant Zubčević, that the Defendants Glavaš and Zubčević brought invoices, order forms and statements to be entered in books, the Defendants Glavaš and Zubčević signed the orders and took them to a bank – which unequivocally ensues from the Defendants’ criminal acts described in more detail in Sections 8 and 9 of the Verdict’s Operative Part. Consequently, the arguments that the cited witness testimonies contradict the Verdict’s Operative Part are devoid of logical or factual basis, and are accordingly refused in their entirety.

5. Essential violations of the criminal procedure provisions under Article 297(2) of the CPC of BiH

Attorney Žarko Bulić, Counsel for the Defendant Dragan Makivić, argued that there is an essential violation of the criminal procedure provisions under Article 297(2) of the CPC of BiH as read with Article 281(2) thereof; the violation was essential for it directly reflected on the establishment of decisive facts and ultimately affected the rendering of a lawful verdict. Regarding this appeal argument, the Defense indicated that the Trial Panel’s evidence evaluation was fragmentary and thereby in violation of the principle of evaluation of evidence laid down in Article 281 of the CPC of BiH. The appellant indicated that the omissions in evidence evaluation included the evaluation of testimony of both Prosecution and Defense witnesses, and particularly concerned the evaluation of the report by Prosecution expert Prašljivić that was not read in combination with the report by Defense expert Abid Hodžić. This Panel finds that the Defense arguments are void of grounds and that the Trial Panel in the reasoning for the impugned Verdict adduced concrete and proper reasons concerning all decisive facts and adequately considered the probative values and admissibility of each individual document in light of all the evidence presented (both documentary evidence and challenged statements by witnesses and experts), and that the Trial Panel, only following such assessment, made a conclusion as to whether a fact has been proved or not, fully complying with Article 281(2) of the CPC of BiH and the principle of legality of evidence. Therefore, the appeal arguments that the impugned Verdict contained omissions that may influence the lawful and proper rendering of the first instance verdict (in the context of erroneous evidence evaluation) are hereby refused as unfounded in their entirety. VI - Appeal arguments relative to erroneously and incompletely established facts Regarding erroneously and incompletely established facts as a ground for appeal, neither Counsel for the Defendants nor the Defendants Makivić and Zubčević presented any new arguments that had not been evaluated and analyzed by the Trial Panel; rather, this Panel is of the view that the Defense is a mere polemics with the reasons for the impugned Verdict and subjectively interprets the results of the presented evidence, noting that the First Instance


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Verdict did not offer an evidence evaluation that unequivocally determined that the Defendants committed the offenses charged. The Appeals by the Defense for Makivić first of all indicated that the Defendant Makivić, as a physical person, could not be a taxpayer in the referenced activity of sale of goods; as such, he cannot be held liable for the offense in question. As the legal entity Madaco was registered exclusively for wholesale in the relevant time period (2004-2006), it cannot be regarded as a taxpayer for the goods sold and, subsequently, it cannot be criminally liable, particularly bearing in mind that it was not covered by the Indictment. The respective Appeals by the Defense for Makivić are correct in arguing that a physical person is not a taxpayer in the instant case. However, the First Instance Verdict properly interpreted relevant substantive law, finding that the Defendant Makivić may appear as a perpetrator of the criminal offense of Tax Evasion under Article 287 of the RS CC, Article 273 of the FBiH CC and Article 210 of the CC of BiH, and that his criminal liability is based on his failure to calculate, report and pay taxes on behalf of or to the benefit of a legal entity. When the aforementioned averments are put in context with the factual account of the Defendant’s criminal acts described in detail in the impugned Verdict’s Operative Part, it is clear that the Defendant, as an authorized person to represent his company in legal transactions, personally submitted/ordered and allowed submitting false information on facts relevant to determine the amount of tax liability for the turnover in question; his acts satisfy elements of the criminal offenses at issue and there is no doubt that the Defendant perpetrated those acts on behalf of and to the benefit of the legal entity. In the context of the foregoing, one should also bear in mind Article 125(2) of the CC of BiH defining that liability of the legal person shall not exclude criminal liability of physical or responsible persons for the perpetrated criminal offense, which, contrary to appeal arguments, undoubtedly suggests that the Defendant, as a responsible person in a legal entity, is independently and autonomously responsible for the offenses that he committed on behalf of and to the benefit of the legal entity. Consequently, the respective Appeals by the Defense for Makivić indicating the opposite are refused as unfounded. The Appeals by the Defense for Makivić further challenged the Trial Panel’s finding determining that the legal entity Madaco is registered as a retail business, noting that the documentary suggests otherwise, namely that the registered activity of the legal entity Madaco is wholesale trade and that pursuant to the law no tax should have been paid for the turnover (that is, the goods sold by the legal entity). Having reviewed the contents of the tendered evidence as well as the contents of the impugned Verdict, this Panel has found that the appeal arguments are void of merits. It has been proved beyond doubt that Madaco d.o.o. Banja Luka is a registered taxpayer and that, among other things, it deals with retail and wholesale trade in various goods, as unequivocally corroborated by the Prosecution documentary evidence tendered and marked as DT 26: Decision of the Basic Court of Banja Luka, file no. 1-6670-00, register no. U/I-1644/97 dated 27 March 2000; Republika Srpska Ministry of Finance Certificate of Registration No. 02/01-0801/457-7219/02 dated 27 February 2002; Certificate of the Republika Srpska Ministry of Finance/Tax Administration-Banja Luka Regional Center No. 06/2.02/455-2-0702-4612/2005 dated 22 December 2005; Notification of Classification of Activities in Retail and Wholesale

6 Prosecution Exhibit (binder 1).


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Trade for Madaco d.o.o. Banja Luka No. 6284 dated 22 January 2001; and the Decision of the Administration and Legal Affairs Service of the Banja Luka Municipality, Secretariat for Commerce No. 03-173-130/94 dated 6 July 1994. Therefore, the reasons for the impugned Verdict clearly show the evidence relied on by the Panel to accept that at the relevant time the legal entity Madaco was also registered for retail trade and that, as such, it was liable to pay tax on the income earned. For that reason, the arbitrary allegations by the Defense for Makivić that he was exempted from that liability and that there was a transfer of liability to another taxpayer because Madaco Company was registered exclusively as a wholesale business, are refused as unfounded. This finding is not challenged by the Decision of the Basic Court of Banja Luka dated 29 October 2007 granting the motion to enter in the Court Register a change pertaining to the activity of Madaco d.o.o. Banja Luka. company for services and retail and wholesale trade import-export, because this decision is not of decisive importance to the ruling in this case, both in terms of its contents and the fact that it was not adopted at the time relevant to charges. Regarding erroneously and incompletely established facts as a ground for appeal, all Defense teams challenged the Trial Panel’s findings inferred from the report by Prosecution expert Kerima Prašljivić. The Defense argued that the report is superficial and arbitrary, obviously following leading demands from the Prosecutor’s Order for Expert Evaluation, adding that the expert only took into consideration the documents presented by the Prosecutor, but that was not the entire documentation. The Defense submitted that the conclusion of the Prosecution expert’s report is based solely on the fact that the relevant documentation was not signed in legible signatures, leading the expert to conclude that there was no actual turnover of goods. The challenged report by expert Kerima Prašljivić included a financial evaluation of the financial documentation of the legal entity Madaco, as well as the legal entities Eder Moda d.o.o. Maglaj, Metaltex-Ad d.o.o. Jelah, Bos Trade d.o.o. Žepče, Address Investment d.o.o. Zenica and KM Emona d.o.o. Zenica, Vikoprodukt d.o.o. Laktaši who had business transactions with the legal entity Madaco. As correctly concluded in the impugned Verdict, it ensues from the expert evaluation that the mode of operations between the legal entity Madaco d.o.o. Banja Luka/the Defendant Makivić and the said business partners was almost identical in terms of fictitious presentation of the turnover of goods, fictitious producing and verification of supporting documents, purchase orders with statements, invoices, dispatch notes, as well as financial transactions, that is, false presentation of the origin of cash and bank operations by using fictitious invoices. As correctly concluded in the impugned Verdict, the aforesaid ensues from the challenged report by the financial expert and the documentary evidence (financial and bookkeeping records of the legal entities referenced in the indictment). To determine the (non)existence of actual turnover of goods as a decisive fact relative to the criminal offense of Tax Evasion, the Trial Panel conducted a detailed and comprehensive analysis of all the evidence presented by both the Prosecution (that had the burden of proof) and the Defense as the other party to the proceedings. First of all, it has been determined beyond doubt that the authorized persons in the companies covered by the Indictment received cash from the Defendant Makivić, deposited it onto the respective accounts of their companies and then, using transfer orders, transferred it to the account of the Madaco d.o.o. Banja Luka, allegedly to pay for the goods that were only


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fictitiously ordered but never delivered to the buyers. In doing so, the Defendant Makivić evaded payment of sales tax on goods, putting again into the cash payment operations the money earned through sale to the end consumers for cash. Contrary to the appeal arguments, this finding follows not only from the financial expert’s report but also from testimony by Prosecution witnesses (who confirmed at the main trial that they, as authorized persons in their respective companies, deposited cash and subsequently transferred it to an alleged seller of the goods that their companies never actually purchased or taken over), and that, to that end, they used false purchase orders with statements that the goods were intended for further sale, as well as the statements by witnesses/official persons who carried out investigative actions or inspection. In the context of the aforesaid, the evaluated financial records as well as other documentary evidence unequivocally show that relevant documents were made available to the legal entity Madaco by the Defendant Kantić for the Metaltex-AD Company and by the Defendant Karić for the KM Emona Company (the latter company did not have a registered seat). In this manner, the referenced persons aided in the perpetration of the criminal offense of Tax Evasion. Furthermore, as correctly noted in the First Instance Verdict, financial documents may formally be regular, but in cases of tax evasion committed by using the services of the companies which “laundered money”, such documents cannot be considered as evidence of proper and lawful operations7. However, in the instant case, relevant financial records contain certain deficiencies determined during the first-instance proceedings and as such were analyzed by the Trial Panel. The determined irregularities and shortcomings in the financial records do not pertain solely to the illegible signatures on the invoices and purchase orders, as unreasonably argued by the Defense in minimizing the financial evaluation, since it has been found that the relevant records do not include information about the ordering party, purchase orders were not attached to the invoices, there are no tax exemption statements and the like. Correlating the indicated irregularities and shortcomings in the financial records with the witness testimonies and the testimony by expert Prašljivić (which clearly show the companies the defendants operated with and the manner of their operations) unequivocally confirms the First Instance Verdict’s finding that there was no actual turnover of goods. Furthermore, regarding the complaints relative to evaluation of testimony of particular Defense witnesses, it is necessary to point out that a trial panel is not under obligation to give an evaluation of each and every piece of evidence in the verdict. On the contrary, the trial panel has an obligation to thoroughly evaluate all the presented evidence, individually and in correspondence with the other evidence, including in the verdict the evaluation of evidence it deemed relevant and decisive. The Trial Panel acted in that manner, reflecting on pages 69-73 of the impugned Verdict on the testimonies of the Defense witnesses, the Defendants and the Defense expert Hodžić and noting that those testimonies did not constitute decisive evidence, that is, they were not consistent with the presented evidence. This particularly applies to the testimonies of the Defendants as witnesses, correctly assessed by the Trial Panel as evidence given with a view to diminishing their criminal liability. The referenced testimonies are essentially different from the testimonies of witnesses who had first-hand information about the acts charged (some of the witnesses even rendered services of returning the unlawfully obtained money into regular business transactions, whereas some of them have been found guilty of perpetrating those acts under the final verdicts. They are essentially different from

7 First Instance Verdict No. X-K-06/193 dated 23 June 2010, p. 68.


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the other evidence presented, as the examination by financial expert Prašljivić whose testimony was reasonably accepted by the Trial Panel as being objective and accurate and based on documentary evidence presented during the evidentiary proceedings. Therefore, the Appellate Panel and the Trial Panel have both found that the testimonies of the Defense witnesses and the Defendants are not relevant, that is, they are not corroborated by other evidence. Consequently, the appeal arguments indicating an erroneous evaluation of the said testimonies are hereby refused as unfounded. In addition to the aforesaid, with respect to the operations of the legal entity Address Investment d.o.o. Zenica, the examined witnesses (in particular, Azra Mujarić and Meliha Zubčević) confirmed that with a view to evading payment of profit tax the company’s operational costs were fictitiously debited for the purpose of reducing the profit, coupled with unauthorized cash disbursements without proper documents. In doing so, the Defendant Glavaš committed the offense charged, and he was aided by the Defendant Zubčević. Bearing in mind all the circumstances surrounding the case and the facts established by the Trial Panel, the Trial Panel’s finding that the acts of the Defendants Makivić, Glavaš, Zubčević, Karić and Kantić satisfy essential elements of the offenses charged appears to be justified and correct. In that respect, the Appellate Panel notes that the Trial Panel adduced logical, complete and valid reasons in support of its factual and legal findings, and this Panel accepts them in their entirety. The Appeals, at least not in the manner presented therein, have not challenged the First Instance Verdict’s factual findings. Consequently, the other averments that the facts have been established erroneously and incompletely appear to be unfounded. VII – Appeal arguments relative to violations of the Criminal Code Regarding violation of the Criminal Code as a ground for appeal, the Defense for Makivić argues that the Trial Panel erroneously applied the blanket norms that compose the criminal norm under Article 210 of the CC of BiH because in the relevant sale of goods the Defendant, as a physical person, is not and cannot be liable to pay sales tax on the goods. Rather, the legal entity Madaco would be under the obligation to pay tax, but this legal entity is not charged under the Indictment based on which the First Instance Verdict was rendered. The Panel addressed this argument within the appellate ground of erroneously established facts (that is, erroneously established decisive facts), indicating relevant provisions of the substantive law prescribing the Defendant Makivić’s criminal liability for committing the criminal offense of Tax Evasion; the Trial Panel correctly applied those provisions in the instant criminal matter as can be seen from the contents of the impugned Verdict8. For these reasons, the appeal arguments by the Defense for Makivić are hereby refused as unfounded. According to the Defense for Makivić and Glavaš, violation of the Criminal Code is also reflected in an erroneous application of Article 54 of the CC of BiH (Continued Criminal Offense) only with respect to the acts pertaining to Tax Evasion under Article 210 of the CC of BiH, but not to the acts satisfying elements of the criminal offense of Tax Evasion under

8 First Instance Verdict of the Court of BiH No. X-K-06/193 dated 23 June 2010, p. 75.


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Article 287(1) of the RS CC and the criminal offense of Tax Evasion under Article 273 of FBiH CC, thus by the erroneous application of the provision concerning occurrence of offense, the punishment was meted out on the aspiration principle and a compound sentence for the referenced criminal offences has been imposed. This Panel finds that the appeal arguments raised in this regard are well-founded. Article 54 of the CC of BiH prescribes a continued criminal offense, and paragraph 2 thereof defines the manner of perpetration of this offense. In the view of this Panel, the application of the continued criminal offense in the instant case, notwithstanding the fact the case involves the criminal offense of Tax Evasion prescribed in different criminal legislation systems in BiH, is well-founded because that, coupled with existence of other unifying elements required, is justified in the context of evaluation of overall activities of the Defendants. The fact that various subjects have been damaged as a result of perpetration of the criminal offenses of Tax Evasion, and bearing in mind the defectiveness and complexity of the criminal legislation in BiH reflected in the fact that the criminal offense of Tax Evasion is equally prescribed at the Entity and State levels9, should not call into question the existence/purpose of existence of the continued criminal offense requiring, according to its statutory definition, requisite and alternative or variable elements; the element that is relevant to this case – the same aggrieved party (damage to State- and Entity level budgets) is not a requisite but an alternative or variable element. Therefore, in the view of this Panel, it is possible to accept existence of a continued criminal offense of Tax Evasion in the present legal matter regardless of the detrimental consequences to the budgets because it is evident that there are other required unifying elements of a continued criminal offense as defined under Article 54 of the CC of BiH: the present case includes temporal and spatial connection, with the Defendants sharing the same motives and using the same mode of perpetration of the criminal offenses. Bearing in mind the aforesaid as well as the merits of the appeal arguments by the Defense for Makivić and Glavaš, by applying Article 309 of the CPC of BiH also in relation to the Defendant Zubčević because his appeal did not invoke the cited violation but remedying that violation would benefit him, this Panel revised the legal qualification of the Defendants’ acts from the Trial Panel’s Verdict and applied Article 54 of the CC of BiH, and subsequently revised the First Instance Verdict in the part pertaining to the sentences imposed on the Defendants Makivić and Glavaš. More specifically, by applying Article 54 of the CC of BiH, this Panel finds that individual acts of the Defendants in this criminal matter are defined as a single continued criminal offense of Tax Evasion under Article 210 of the CC of BiH. Consequently, the First Instance Verdict is hereby revised in relation to the Defendant Makivić by qualifying the Defendant’s acts as a continued criminal offense of Tax Evasion under Article 210(3) of the CC of BiH as read with Article 54 thereof because the Defendant, through his acts, committed several similar criminal offenses of Tax Evasion (more specifically, its underlying and grave form); for that reason, a continued criminal offense in 9 Criminal offense of Tax Evasion prescribed under Article 210 of the CC of BiH, Article 273 of the FBiH CC and Article 287 of the RS CC.


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the Defendant’s case is qualified as the most serious of offenses, that is, the offense under Article 210(3) of the CC of BiH. In relation to the Defendant Glavaš, this Panel found the perpetration of a continued criminal offense of Tax Evasion under Article 210(2) of the CC of BiH as read with Article 54 thereof, because the Defendant’s acts satisfy all the elements of the criminal offense of Tax Evasion (he perpetrated two acts as an accessory and two as a perpetrator), and, taking into consideration the acts referred to in Section 8 of the Verdict’s Operative part and the evaded tax amounting to KM 113,700.00, he satisfied elements of a continued criminal offense of Tax Evasion under Article 210(2) of the CC of BiH, whereas the Defendant Zubčević, by his acts as an accessory, committed a continued criminal offense of Tax Evasion under Article 210(2) as read with Article 31 of the CC of BiH. VIII – Appeal arguments relative to the decision on the sentence In view of the aforesaid, the decision on the sentences imposed on the Defendants Makivić and Glavaš is also revised. Article 54(3) of the CC of BiH reads as follows: When a criminal offence arising of the same transaction comprises offences of the same legal description, the court shall choose the type and the range of the punishment prescribed for such a criminal offence. If criminal offences of the same type are at issue, the court shall choose the type and the range of punishment prescribed for the most serious of these offences. Bearing in mind this provision, and taking into consideration the general principles concerning the choice of type and length of punishment stipulated under Article 48 of the CC of BiH s well as the purpose of punishment, this Panel is of the view that the sentences meted out in this case optimally meet general and specific deterrence requirements. A decision on the sentence must invariably reflect an individualized social condemnation of the specific offense provided for by law. In meting out the type and length of the punishment to be applied to the Defendants in the present case, the Appellate Panel took into account the circumstances bearing on the magnitude of punishment (extenuating and aggravating factors), and, in particular: the degree of criminal liability, the motives for perpetrating the offense, the degree of danger or injury to the protected object, the circumstances surrounding the perpetration of the offense, the personality of the perpetrator and the totality/number of acts undertaken by the Defendants to perpetrate the criminal offense of Tax evasion or contribute to the perpetration thereof. The prison sentences imposed on the Defendants Makivić and Glavaš are revised as follows: the Defendants Makivić is sentenced to three (3) year-imprisonment, whereas the Defendant Glavaš is sentenced to one (1) year-imprisonment. The sentences have been meted out in light of the aforementioned circumstances, the number of acts perpetrated by the Defendant Makivić as part of a continued criminal offense. In relation to the Defendant Glavaš, the fact that he perpetrated two acts as accessory was considered as a mitigating factor. In relation to both defendants, the considerable lapse of time since the perpetration of the offense was evaluated as a mitigating factor.


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Regarding the appeal arguments by the Defense for Makivić contesting the accessory fine, this Panel finds that such arguments are unfounded. To wit, the Appeal implies that as the First Instance Verdict did not explain the element of gain in relation to the Defendant Makivić, there were no grounds to impose the fine. Having evaluated the appeal argument, this Panel finds that it clearly and decisively ensues from the Reasons for the First Instance Verdict that the Defendant Makivić perpetrated criminal acts out of greed, that is, he committed the criminal offense with a view to obtaining financial gain. For that reason, the Trial Panel, pursuant to Article 41(4) of the CC of BiH and contrary to the appeal arguments, was correct in imposing an accessory fine amounting to KM 10,000.00, taking into consideration and correctly evaluating the Defendant’s financial situation. The Appellate Panel did not find it necessary to reduce the one (1) year-imprisonment sentence imposed on the Defendant Zubčević, notwithstanding the fact that the revised verdict found him guilty of a continued criminal offense of Tax Evasion (accessory), because the First Instance Verdict did not apply the provisions concerning concurrence of offenses either. Additionally, since the First Instance Verdict evaluated all the circumstances on the part of the Defendant (in particular, the number of the acts and the Defendant’s role and contribution to the offense), this Panel is of the view that one year-imprisonment adequately reflects the gravity of the offense the Defendant was found guilty of as well as the degree of the Defendant’s guilt. Finally, in relation to the Defendants Karić and Kantić, this Panel revised the decision on the sentence and, pursuant to Article 49(a) of the CC of BiH, meted out their sentences below the statutory minimum, finding that the circumstances on the part of the Defendants – particularly mitigating circumstances – justified reduction of the sentences below the statutory minimum. The Defendant Karić was found guilty of aiding in commission of a grave form of the criminal offense of Tax Evasion and, in such cases, Article 31(1) of the CC of BiH allows reduction of the punishment; more specifically, for the criminal offense of Tax Evasion under Article 210(3) as read with Article 31 thereof punishable by imprisonment for a term not less than three years, the punishment may be reduced pursuant to Article 50(1)(b) of the CC of BiH, to one year-imprisonment. Thus, taking into consideration the aforesaid and in the context of the amount of evaded tax and the fact that the Defendant Karić undertook actions on behalf of the legal entity KM Emona that did not have a registered seat or kept the financial records, which acts in the Panel’s view carry a greater degree of criminal liability than the acts of the other Defendants (also charged with aiding in the perpetration of the criminal offense),the Panel holds that the sentence of imprisonment for a term of one (1) year and three (3) months is completely adequate and may achieve the purpose of punishment of the Defendant Karić. Finally, in the opinion of this Panel, the ten month-imprisonment imposed on the Defendant Kantić (found guilty of aiding) is proportionate to the personality of the perpetrator, the gravity of the offense, the circumstances surrounding the perpetration of the offense and any other circumstance referred to in Article 48 of the CC of BiH, relevant to the meting out of the sentence. The sentence imposed on the Defendant Kantić meets the purpose of punishment.


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According to the Appellate Panel, the imposed sentences clearly reflect the social condemnation of the committed offense, deter the perpetrators from perpetrating criminal offenses in the future and deter others from perpetrating criminal offenses, and increase the awareness of citizens of the danger of criminal offenses and of the fairness of punishing perpetrators. Consequently, the imposed sentences achieved the general and specific deterrence goals under Articles 6 and 39 of the CC of BiH. Taking into consideration the manner in which the sentences are revised, the appeal arguments by the Prosecutor’s Office of BiH from the Trial Panel’s decision that the Defendants Makivić, Glavaš, Karić and Kantić received too lenient sentences are rendered irrelevant and accordingly refused as unfounded in their entirety. As the decision on the sentence imposed on the Defendant Zubčević was not revised, this Panel has entertained Prosecution arguments in relation to the Defendant Zubčević and found that the arguments that the Defendant Zubčević received too lenient sentence are unfounded. When explaining the sentence imposed on the Defendant Zubčević, the Panel listed the factors evaluated in meting out of the sentence and finds, having evaluated all the aggravating and mitigating factors on the part of the Defendant, that the one year imprisonment sentence is commensurate to the gravity of the offense and the degree of criminal liability, and that the sentence is sufficient and necessary to achieve the purpose of punishment referred to in Article 39 of the CC of BiH. For these reasons, the Prosecution appeal arguments advocating for imposition of a heavier penalty than the one imposed are hereby refused as unfounded. IX - Appeal arguments relative to the decision on costs of the criminal proceedings and confiscation of material gain According to the Appellate Panel, the appeal arguments challenging the Trial Panel’s decision ordering the Defendants to reimburse costs of the criminal proceedings and to confiscate the illegal gain are unfounded. Article 188(4) of the CPC of BiH stipulates a possibility that the defendants may be relieved of the duty to reimburse all or part of the costs of criminal proceedings, provided that prescribed conditions have been met. As this Panel did not find that payment of costs of the criminal proceedings would jeopardize the support of the Defendants or of persons whom the Defendants are required to support economically and the Defense did not supply evidence suggesting otherwise, the Trial Panel’s decision obliging the Defendants to reimburse costs of the criminal proceedings, contrary to appeal arguments, is a correct decision and it is in line with Article 188(1) of the CPC of BiH. In relation to the appeal arguments by the Defense for Glavaš challenging the decision on the costs on the grounds that it conflicts with the Court’s decision to appoint an ex officio counsel for the Defendant Glavaš, this Panel finds that such submissions are unfounded and cannot be accepted in the absence of proper arguments. Namely, the decision to appoint an ex officio counsel was adopted on the basis of statement by the Defendant Glavaš that he was indigent


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and could not cover the costs of his defense, and it is not in conflict with the Trial Panel’s decision obliging the Defendant pursuant to Article 188(1) to reimburse costs of the proceedings. The Defendant’s averments about his financial situation when an appointment of ex officio counsel is in question on one hand, and reimbursement of costs of the proceedings on the other, are viewed separately by the Court. Namely, it is clear that the financial situation of a defendant may change pending completion of proceedings. Furthermore, the Court has a duty to render the decision on costs of proceedings and this decision is subject to a scrutiny of all factors pertaining to the defendant’s financial situation, and the defendant, in addition to making a statement about his indigent financial situation, has a duty to submit documentary evidence to the Court corroborating such a statement to be possibly relieved of the duty to reimburse all or part of costs of the proceedings in accordance with Article 188(4). As relevant documents were not attached to the Defendant Glavaš’s Appeal, the decisions on mandatory reimbursement of costs of proceedings has not been challenged and it shall be enforced in accordance with Article 180 of the CPC of BiH, the latter providing that with respect to the costs of criminal proceedings the verdict shall be executed under the provisions that apply to judicial enforcement procedure. Bearing in mind the aforesaid, the Appeal by the Defense for Glavaš challenging the decision on the costs of criminal proceedings is unfounded and cannot be accepted in the absence of proper evidence and arguments. As it has been found that there are no deficiencies in the established facts in the present case, it may be reasonably inferred that the Defendants Makivić and Glavaš acquired financial gain in the amount determined in the First Instance Verdict, and they are under obligation to pay that amount into the BiH Budget. Pursuant to the principle laid down in Article 110 of the CPC of BiH that nobody is allowed to retain material gain acquired by the perpetration of a criminal offense, the Appellate Panel, contrary to appeal arguments, has concluded that the decision to confiscate the gain acquired by the Defendants Makivić and Glavaš in the amount determined in the impugned Verdict’s Operative Part is valid and based on law. For all the reasons mentioned above, the Verdict has been rendered as in the Operative part above, pursuant to Articles 313 and 314 of the CPC of BiH. /signed/ Lejla Garaplija Legal adviser/assistant RECORD-TAKER

/signed/ Redžib Begić

PRESIDING JUDGE

/Round stamp of the Court of BiH duly affixed/

LEGAL REMEDY: No appeal lies from the present Decision. ___________________________________________________________________________ I hereby confirm that this document is a true translation of the original written in Bosnian/Serbian/Croatian language. Sarajevo, 27 September 2011. Elmedin Šupić Certified Court Interpreter for the English Language

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