For Parties It Pays To Break the Law

Violating the law pays off for BiH’s leading political parties even when they are caught at it. Fines are so small, violations usually get repeated.

Irena Hadžiabdić, president of the Central Election Commission said they can’t sanction political parties which are using rent-free premises because they can’t collect all the needed evidence. Photo by CIN

It pays off for political parties in Bosnia and Herzegovina (BiH) to accept illicit donations and earn in other illegal ways because some of them made as much as 50 times more than what they paid in fines for their offenses.

The parties have made at least 1 million KM violating the Law on Financing of Political Parties between 2004 and 2008. In contrast, the Central Election Commission (CIK) fined them for violations only 170,000 KM combined.

Ivana Korajlić, Transparency International BiH

Apart from the fines being far less than the ill-gotten gains, CIK waits a long time to levy even mild punishment. It can take up to three years after an offense before any action is taken. Thus, the punishments for offenses committed in 2008 were only meted out at the end of last year. New offenses revealed by a 2009 audit have yet o be penalized.

CIK says it doesn’t have enough auditors and that five people must monitor the business activities of more than 90 parties.

The parties are prohibited by law from accepting contributions from public companies and public agencies. For violation of this clause, as well as for accepting a contribution over the ceiling a fine of up to three times the received amount may be levied. For all other infringements, the law limits fines to 10,000 KM.

However, CIK has mainly meted out minimal fines – between 200 and several thousand KM.

CIK’s president Irena Hadžiabdić said CIK does not want to ‘destroy’ a party with harsher penalties.

Ivana Korajlić, spokesperson of the Transparency International BiH,–which investigated the financing of political parties in 2010—said that parties benefit more by violating than by obeying the law.

The biggest benefactor of mild fines from CIK has been the Party of Democratic Action (SDA), which according to CIK’s reports, made illicit revenue of at least 170,000 KM, while it was punished with the 48 times lesser amount – 3,500 KM.

Among other things SDA received contributions from six companies exceeding the limit by more than 68,000 KM.

By using municipal-owned premises free of charge in Mostar, Sarajevo, Prozor, Široki Brijeg and Tuzla, the Croatian Democratic Union (HDZ) benefited by at least 114,500 KM, while it was punished with a fine of only 3,200 KM.

Amir Zukić, SDA Secretary General
Photo by CIN

The Social Democratic Party (SDP) profited by at least 106,500 KM for which it was punished by 8,000 KM in fines. Among other things, the party made 76,000 KM by renting out premises it did not own.

The Serb Democratic Party (SDS) took in 60,000 KM by using free municipal premises and renting out other property it didn’t own. It had to pay just 1,100 KM in sanctions.

The Party for BiH took in 80,000 KM by using rent-free municipal premises and getting contributions from public agencies. It was punished with sanctions that amounted to 5,700 KM.

The Unsolvable Issues with Business Premises

The most frequent violation that the parties committed was using rent-free municipal offices.

The Center for Investigative Reporting in Sarajevo (CIN) has published articles showing that parties made at least 1 million KM between 2004 and 2009 by using 246 such offices over the past. For this article CIN examined statistics for 2004 through 2008.

Over the past five years only HDZ has been punished for this offense because in 2007 the Municipal Board of Prozor-Rama used the offices of the former Herceg-Bosna power company. According to a contract, the annual lease of these premises would amount to 3,159 KM, while the sanctions CIK applied amounted to 3,200 KM.

Hadžiabdić said that in individual cases violations cannot be proved because CIK cannot get cadastre documents or information about the price of lease. Thus, it does not mete out fines even in cases where wrong-doing can be proved, because they said, that would be discriminatory.

According to auditors’ reports, such violations occur one year after another, In 2009, SDA rented space it didn’t own while also using town offices for free, for a net gain of at least 56,000 KM.

‘I don’t consider this to be a violation’ said Amir Zukić, SDA secretary general. According to him, despite what the law says it should be the municipalities’ duty to provide parties with conditions to work.

CIN found that renting out property they didn’t have the right to rent was a common party violation. Sometimes the practice is punished, and sometimes not. People’s Party Work for Betterment was fined 3,000 KM because it was renting business premises in Sarajevo in 2007 not in its ownership. But its profits from the illegal rent amount to 43,000 KM.

Hasida Gušić, head of CIK’s Auditing Office
Photo by CIN

An auditor’s report the following year noted that the party earned another 14,000 KM in the same way. It was not fined at all this time. Party officials explained that they earned money by renting computers and other equipment to some associations, and not by renting offices.

Hasida Gušić, the head of CIK’s Auditing Office, said ‘We could not establish the real facts – what is equipment and what is space’ so no additional sanction was levied. But, she added, ‘They could not use a computer without entering the space.’

In 2007 and 2008, SDP rented out offices in Zenica it did not own, according to CIK’s auditors, and earned more than 76,000 KM. The first year it was punished with a 5,000 KM fine, while the second year, there was no fine.

Ferid Buljubašić, SDP’s business director, said the party received that space and had it registered in the land books, but the municipality appealed and the case has been ongoing. Meanwhile, the party has rented the premises for five years.

Even though the Auditing Office established this as a case of illicit proceeds, officials said there was not enough hard evidence to say that the party did not own the premises, which is why they did not want to punish them. They could not explain how they managed to prove a violation and sanction it one year, and not the other.

Sanctions for Violating Election Law

Apart from the Law on Financing of Political Parties, CIK also implements the Election Law which, among other things, caps party spending on campaigns.

Lazar Prodanović, SNSD’s Board member
Photo by CIN

Only two parties have ever been sanctioned for such overspending.

The Alliance of Independent Social Democrats (SNSD) in 2008 exceeded the ceiling by more than a half million KM for which it was punished with the maximum fine allowed by law — 10,000 KM.

‘The party did not complain because it paid off for it to exceed the limit. It could have exceeded it by 3 million, and we would still mete out only 10,000 KM’, said Hadžiabdić.

Even though most of the people CIN interviewed mentioned this as an example of an inadequate fine, a member of the SNSD’s Main Board, Lazar Prodanović, said that it was a proper fine because the party had not gone that far over the limit and it was hard to campaign on the money allowed by the law.

Allowed to up to 938.000 KM, the party actually spent 50 percent more or almost 1.5 million KM for the 2008 elections.

The Party for BiH exceeded a limit for more than 9,000 KM during a 20007 campaign for the head of Donji Vakuf municipality. It also was fined 1,000 KM.

Over the past several years, CIK officials have proposed an increase in the amount of allowable fines for Election Law and Law on financing violations, but these proposals have been rejected at the BiH Parliament.