Agrokor’s Downfall: Independent Expert’s Report on Todorić is Damning

Lauren Simmonds

The life and times of the now somewhat infamous Ivica Todorić and family aren’t as public as they once were. The Agrokor affair has died down, and the company itself is now Fortenova. An era has ended and a new chapter has begun, but that doesn’t mean that the secrecy surrounding the Todorić dynasty is any less interesting.

As Novac/Zeljko Petrusic writes on the 30th of June, 2019, just what was discovered in the independent findings in the Agrokor case? The evidence of Todorić’s enormous misuse of funds is damning.

”I’m Ismet Kamal, a member of the Institute of Certified Accountants of England and Wales… The County State Attorney’s Office in Zagreb, the plaintiff, ordered me to report as an independent expert in the report on the prosecution of Ivica Todoric and others in Case No. K-DO-161/17. This case concerns Agrokor d.d.’s activities and other affiliated companies and individuals over a longer period, which ended when an extraordinary administration [procedure] was launched in Agrokor on April the 7th, 2017.

In reviewing the material and preparing this report, I was helped by the team from KPMG, who I supervised and led, and who reported to me about the work, which I’d reviewed. Members of my team are native Croatian speakers and speak fluent English, and some even German. The views expressed in this report are mine,” stated expert Ismet Kamal from the Polish affiliate of the renowned audit firm KPMG at the beginning of the report of his expert accounting and financial findings in the Agrokor case.

The finding, or report, as he calls it, was concluded on the 19th of June, 2019 and consists of 390 pages. In another document, consisting of 126 pages, there are also other additions which make up the integral part of his findings. Otherwise, Ismet Kamal once worked with both KPMG Croatia and KPMG Bosnia and Herzegovina.

In his findings, this expert largely confirms PricewaterhouseCoopers (PwC) auditor’s findings in the audit findings for the financial year 2016, made at the order of Agrokor’s extraordinary administration team. In this way KPMG’ Poland’s findings support all of the key charges of which Ivica Todorić and others have been accused, which involves a figure of more than one billion kuna.

To recall, at the end of 2017, the Zagreb prosecution initiated an investigation against Ivica Todorić, his sons Ante and Ivan, Hrvoje Balent, and their former associates at the very top of Agrokor’s management.

They are charged with the criminal acts of abuse of trust in economic business and the counterfeiting of official documents, as well as violations of the obligation to conduct in keeping the books.

The focal point of the investigation concerns the lacunae of Agrokor’s financial statements from 2006 to 2015 and the unfounded dividend payment to Ivica Todorić and his Dutch company Adria Group Holding BV. The expertise in this section is quite clear – Agrokor, in fact, had been operating at a loss throughout that entire period, so there was no place for dividend payments to owner Ivica Todorić. This is totals a massive 710 million kuna.

If Agrokor correctly applied international accounting standards in its financial statements, the annual financial statements would not be positive, but “cumulative accumulated losses on the day of the 31st of December, 2015, amounting to 3.4 billion kuna.”

”Although Ivica Todorić was the ultimate owner of Agrokor, the irregularities I discovered in Agrokor’s transactions with him, as well as in other circumstances, negatively affect the interests of other interest groups primarily made by creditors (and financial creditors and suppliers), as well as minority shareholders and other interest groups, such as employees. Some of my findings are that certain transactions have resulted in Ivica Todorić’s benefit, to the detriment of the company, and in that regard I note that Agrokor as a joint stock company and its directors were subject to corporate legislation which, inter alia, requires directors to act in the best interest of the company.

The use of an inadequate accounting policy, which did not comply with International Financial Reporting Standards, resulted in misstatement in the financial statements. In this way, the liquidity and profitability of Agrokor were presented in a better light than they really were in and hence served as a shield to conceal the actual size of financial problems.” stated the expert.

One of the most interesting parts of his expertise relates to Agrokor’s subsidiary company in Switzerland, Agrokor AG, or, better to say, about the relationship between Ivica Todorić and his family with that particular company. The prosecution accuses Todorić of using Agrokor AG’s funds for years for his private purposes, and having withdrawn at least 64 million kuna.

Agrokor AG was a company for centralised procurement for the entire Agrokor Group, in order to achieve better contractual terms when purchasing various commodities, as well as the possibility of using the more favourable credit lines offered by Swiss banks.

The flow of funds through that particular account was therefore large. Ivica Todorić, as well as members of his family, had been using this often, and partially using the means as if they were their personal cash, and in more way than one.

From 2009 to 2016, Ivica Todorić also received 9.2 million Swiss francs in cash from Agrokor AG AG, this is equal to about 55.6 million kuna.

As much as 8.8 million francs or 50 million kuna was spent on credit cards belonging to Ivica Todorić’s family members, which was paid off by Agrokor AG, during the period from 2007 to 2016.

There were also 2.8 million francs, or about 19 million kuna of other private costs racked up by the Todorić family, an amount which was settled by Agrokor AG as a claim against the Croatian Agrokor.

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