Rockets Launched Against The Property Of The Special-Purpose Industry

After the failed million-dollar project, the Management of Tehnički remontni zavod Hadžići [the Hadžići Technical Overhaul Institute], a company majority-owned by the FBiH Government, sold three properties to private individuals at a price lower than estimated.

The production of rocket-propelled grenades (RPG) for export was supposed to be a job that would save Tehnički remontni zavod Hadžići (TRZ), but these hopes quickly faded.  Although the 2018 project planned a million-dollar income, having sold only 20 rocket launcher systems in five years the company’s ROI was 23 times lesser than planned.

Under the pretext of repairing the damage, the Management began selling the company’s assets. CIN journalists discovered that since 2020, they have sold three halls, land, and an auxiliary facility on a total of 16,000 square meters within the company lot. Three of the five properties were sold at prices below their estimated value.

Two properties were bought by lawyer Kadrija Kolić, while the remaining three properties were sold to the companies Liten and KM Trade, both (co)owned by the Kolić family. The sales procedures favored the private companies, while TRZ Hadžići lost nearly BAM 170 thousand. The Management justified the property devaluation by previous unsuccessful sales and the crisis caused by the pandemic.

TRZ sold these assets for a total of BAM 2.2 million to pay the tax debts. Despite the promises, the workers did not receive a single penny, which is why they went on strike.

A Doomed Project

TRZ Hadžići, a company for the production, maintenance, and overhaul of military equipment, was devastated in the war of the 1990s, but it did not see the security and development in the post-war period either. To survive, the company’s management for years accepted any deals, and thus the former director Zijad Fazlagić began to develop a program for the production of rocket-propelled grenades.

“I needed something to get a pass in the market, the development of which would not take too long”, says Fazlagić.

The following year, he left the company and was replaced by former police officer Meho Rekić who followed the same idea.  He named the project after the river from his hometown “Una”.

The director immediately faced the main problem – the FBiH government gave BAM 300,000 for the project in 2017, but the company management needed to find another million. Rekić hence announced a public invitation for an investor with whom the company would share the earnings 50:50. Only Huseyin Gul, the owner of the pharmaceutical company from Austria, responded.  

Meho Rekić undertook to repay the tax debts in 2021, which is why he decided to sell the property (Photo: Facebook)

In early 2018, Gul asked for a guarantee for his investment, and director Rekić pledged the vehicle service hall, the value of which is estimated at more than two million marks. They signed a contract committing that this property could not be sold in the next 12 years without Gul’s consent and that the collateral would be deleted as soon as TRZ paid Gul BAM 2.5 million from the sale – two and a half times the investment. 

Gul did not want to talk to CIN journalists.

It was agreed that the invested million will be used exclusively to finance the “Una” project, but the executive director of TRZ Halid Škrijelj says that the money was mostly spent on workers’ salaries: “They lived on that million while they had the funds, then again (in 2020, author’s note) came the crisis.”

In addition, TRZ has committed to producing 10 pieces of the pilot series in 15 months at the latest, or pay Gul two million BAM if that does not happen.

Time passed and production did not go according to plan. Costs rose, and the FBiH Government came to the rescue again, injecting additional BAM of 330 thousand in April 2019 for the production of RPGs.

It did not solve the problems with serial production and delivery to the Slovak company Compel Industries, which had already been delayed for a month.

Although all RPGs had to pass a pressure load test, two of the 20 tubes tested burst during the test. In the same week, the head of the team for the development of this weapon, Muris Palo, performed the final test in front of the customers, not knowing about the testing incident.

Palo later told the prosecutors of the Sarajevo Canton Prosecutor’s Office that he risked his life by firing a projectile from his hands.

Due to the bad relationship with the director and the director’s disregard regarding the need to urgently react to these shortcomings in production, Palo shortly left TRZ, and the company subsequently did a quality control to find the reason for the tube burst. According to one of the team members, Esnef Begović, the material was not thick enough to withstand the pressure during testing.

RPG technologist and designer Meho Škrijelj says that the project was doomed from the beginning due to the questionable quality of weapons production. He claims the project leadership has reduced the criteria for the production of weapons he specified in the design without reflecting it in the documentation.  

“Hence, it deviated from the [design] documentation. If someone felt that the specified quality is not required, they should have said so and change the documentation and do things otherwise, and sign such an order”, says Škrijelj.

He was engaged in TRZ Hadžići based on a service contract for a fixed period. Due to constant objections to the quality of the RPGs, the Management first removed him from the project and then did not extend his contract, so he lost his job. “I ended up seeing a psychiatrist. I am still in therapy” says Škrijelj.

Serial production was soon stopped. In 2019, TRZ sold 20 RPGs to a Slovak buyer for about BAM 70,000, part of which was paid to Gul.

The remainder of 180 pieces were neither produced nor delivered, although the Slovak company made an advance payment of about BAM 40 thousand. TRZ blames it on the coronavirus pandemic, and the Slovak company did not respond to inquiries and calls from CIN journalists.

Nermin Džindić, the FBiH Minister of Energy, Mining, and Industry, says that he “does not care at all about the disproportionate profit-investment ratio: “It is important that the project presented to the FBiH Government is justified. The funds we allocate must be justified in accordance with the program adopted by the FBiH Government.”

On the other hand, Halid Škrijelj, the current executive director of TRZ, believes that these contracts were bad because the product was sold cheaply: “If they paid BAM 500 for pilot production, in the serial production the price would go up to BAM 940, VAT inclusive, and I found it strange that this contract was not valid and that it should be revised.”

The events in TRZ Hadžići attracted the attention of the Canton Sarajevo Prosecutor’s Office, which in May 2020 ordered the arrest of director Rekić. During the search, a Management decision declaring the hall given as a pledge to Gul unnecessary for weapons and military equipment was found. 

The Prosecutor’s Office is investigating whether the TRZ Management could have rendered this decision autonomously. According to Article 6 of the Law on Production and Trade of Weapons and Military Equipment in FBiH, production capacities can be placed on the market only with the consent of the Ministry of Energy, Mining, and Industry of FBiH.

The line ministry claimed the TRZ Management needed no consent because the property involved is not part of the production capacity.

The decline in Prices and Valuations

Following the failed production and sales of RPGs, director Rekić embarked on a journey of no return putting the company’s assets up for sale through the FBiH Privatization Agency. The management promised the workers that this move would solve the difficult situation in the company. At that time, TRZ already owed them eight salaries from 2016, and due to the lack of new deals, the workers suspected that their salaries could be late again.

The TRZ Management sold the company’s property for an average of BAM 137 per square meter (Photo: CIN)

The first property, a hall with a total land area of 1,463 square meters, was bought by Sarajevo lawyer Kadrija Kolić at an auction in early 2020 for BAM 230,000. He did not want to speak to CIN about his business.

Half a year later, Kolić also bought a small electric power facility next to the hall for a little less than BAM 6,000. His wife Samira competed against him at the auction. She did not place any bids, but her participation made the auction successful because the auction required a minimum of two bidders.

On the same day and in a very similar way, the company Liten, owned by his cousin Ramiz Kolić, bought a hall and land of nine dunums. At the auction, Ramiz Kolić registered as a natural person, thus seemingly competing against his own company, in order to meet the requirement for a successful auction. His competitor was his son Belmin Kolić, a representative of Liten company.

“I now have six machines here. I had no place to dispose of these six machines. I had to take them. It was a hurry, and I had to take them”, said Ramiz Kolić.

Although the appraiser estimated that these two properties are worth BAM 1,264,450, the Management decided to offer them at a 10 percent lower price. Thus, Liten bought these properties for BAM 1,138,005. This decision saved money for Kolić while depriving TRZ of nearly BAM 130,000.

Despite all, Rekić claims that all properties were sold for 20-30 percent more than the price offered.

New property owners: lawyer Kadrija Kolić, his company KM Trade and the company of his cousin Liten competed at auctions against family members and their own companies (Photo: CIN)

But since the term of the Supervisory Board expired three months before approving the sale of the power facility, hall, and land, the FBiH Securities Commission held that this decision is not legitimate. The then Chair of the Supervisory Board, Sanin Prašović, says that it is a procedural matter.

“Both laws and bylaws say that you cannot leave the office until you are relieved by the Government, i.e. until another person is appointed. Otherwise, the company would be left without the Supervisory Board. (…) I cannot but sign something that is actually in accordance with the law if the company is in a difficult situation and if some running things have to continue. The company was in the red”, said Prašović.

Almost a year later, in May 2021, the last property was sold – a warehouse for materials and packaging, better known as a “wire warehouse”. The company  KM Trade, which is co-owned by lawyer Kadrija Kolić, bought it for BAM 845 thousand.

“It is a notorious fact that all auctioned buildings of TRZ Hadžići were devastated during the war,” says KM Trade director Jasmin Kujović, noting that they bought the property after the third public announcement of the auction.

Although the appraised value of the property was BAM 888,300, the Management has decided to offer it at an auction for an almost 30% percent lower price due to the Covid-19 crisis and previously failed attempts to sell. The companies competing in the auction for this property were KM Trade and 1 Tron. Eventually, KM Trade bought it for BAM 845 thousand.

Before the sale, the management formed a commission that decided that the warehouse was not necessary for production, therefore the company sought no consent from the Ministry for the sale of this property.

Minister Džindić claims that the Ministry was not obliged to give their consent because this property has been declared “property with no prospects”, hence this law does not apply to it. In an additional explanation, the Ministry stated that decisions on production capacities are made by the company’s management bodies. On the other hand, Džindić’s predecessor, Erdal Trhulj, says that during his term such decisions could not have been made without the consent of the government.

Sarajevo lawyer Sanel Nezirić holds that the law would be meaningless if the Management or the Supervisory Board could decide on their own that the property is not needed for production, noting that the sale of such property requires the consent of the Ministry.

TRZ earned BAM 2.2 million from the sale of five properties, which have been used to settle the tax debt. Although promised, the outstanding salaries have not been paid.

Rekić explained to CIN that by taking the office of the director of TRZ, he made an agreement with the FBiH Tax Administration on settling 5 million marks of debt within five years, i.e., by the end of 2021.

“It was only when I got there that things started being addressed. (…) In 2016, an agreement was signed, and in 2021 (…) the deadline expires. We had to settle it in the eleventh month. And we settled it before the deadline, five or six months before”, said Rekić, “otherwise it would be enforced”.

One of the 37 workers who remained in the company, security guard Vahid Šabanović, says this was the worst situation in his 16-year work in this company. He commutes 50 km to work and it costs him nearly 400 BAM a month.  

“Now, if they pay me three salaries, I could do nothing but pay the debt”, said Šabanovic in mid-February 2022.

CIN journalists interviewed some 15 TRZ workers, but they were not willing to speak about their problems in public.

“People are ashamed to come out in front of the camera. Take my word for it, they are all in the same or similar situation like me”, concluded Šabanović.

Unlike the employees of TRZ interviewed by CIN journalists, the former director Rekić has a different take on the events in the company: “Thank God, I left some legacy that will serve as a foundation for future development i.e., the recovery of Remontni zavod.”

In early February 2022, the FBiH government appointed a new acting director, Ismo Hebibović. He claims to have contracted the production of packaging with Pretis from Sarajevo and Igman from Konjic, the company resumed its work on RPGs, and the workers have been paid a part of their outstanding salaries.  He didn’t want to talk about the details.

“All the identified shortcomings (of RPGs, author’s note) have been eliminated and we are back to complying with the terms of previously entered contracts. Of course, we are entering new contracts”, says Hebibović.

However, TRZ is still burdened with millions of outstanding debts to Huseyin Gul, who has not yet ordered his lawyers to start the enforcement process.