Download BLOOMBERG Slovenian Market Regulator Plans to Fight `Shell

BLOOMBERG
Slovenian Market Regulator Plans to Fight `Shell Companies'
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By Boris Cerni
July 14 (Bloomberg) -- Slovenia's securities regulator is pledging to take on any executives
suspected of creating ``shell companies'' to illegally conceal their wealth in this formerly
communist country.
``I will fight the illegal temporary `parking of shares' as we have to ensure legality,'' agency
director Damjan Zugelj said in an interview from the capital Ljubljana. ``The agency lacked
authority in the past and we now see it's just the tip of the iceberg.''
Janez Jansa, fighting to stay on as prime minister of Slovenia in the Sept. 21 general election,
has clashed with Slovenian firms over the ``shell company'' issue in which some executives
are suspected of having built personal fortunes at the expense of small shareholders and
taxpayers.
``This is about a conflict between the political and business elites,'' Ali Zerdin, a political
commentator and editor at Dnevnik newspaper, said in a telephone interview. The issue is
going to be one of the main election themes along with high inflation and continued sales of
state assets, Zerdin said.
The ``parking of shares'' or having ``mailbox'' or ``shell'' companies that are incorporated but
have no significant assets or operations are not themselves illegal in Slovenia. The companies
usually agree to hold the stock for a certain period, then sell them back to the originator, who
usually pays a lower amount than the market price and avoids regulators, said Igor Masten, an
economics professor at Ljubljana University.
An estimated 1.5 billion euros ($2.4 billion) or 5 percent of the gross domestic product of the
former Yugoslav republic of Slovenia, a land of 2 million residents that gained independence
in 1991, may be involved in irregular dealings, Masten said.
`Previous System'
Slovenian officials have criticized the past work of regulators.
``Their functioning in the past until recent management changes was part of the previous
system. And this was reflected not only in biased decisions but in no decisions at all,''
Economy Minister Andrej Vizjak said in a June interview.
Last week, the securities agency removed voting rights from major shareholders of Istrabenz
d.d., including Maksima Holding d.d. and NFD Holding d.d., since they should have
announced a takeover bid as holders of a 49.4 percent stake in the Koper-based company with
interests in energy, food and tourism.
``We are not here to lock up people. It's more efficient if you take away their voting rights,''
Zugelj, 36, said in the July 9 interview. He became head of the agency in April.
To contact the reporter on this story: Boris Cerni in Ljubljana at [email protected].
Last Updated: July 14, 2008 11:08 EDT