Mystery of Serbia's missing millions

Secret flights to Lebanon, and banking links with Cyprus, offer clue to deposed leader's cash conduit out of Yugoslavia

Late in the evening of 28 August, a Yugoslav government Falcon DH-50 jet touched down at Beirut International airport with a Serb "economic" delegation on board. The Lebanese airport authorities knew the plane and its pilot, Captain Srjan Ilic, well. It was at least the fifth time in as many years that Belgrade had asked for clearance to land - and the executive jet taxied, as usual, to the apron of the local handling agent, "GR", just opposite the Lebanese army base west of the airport terminal.

Late in the evening of 28 August, a Yugoslav government Falcon DH-50 jet touched down at Beirut International airport with a Serb "economic" delegation on board. The Lebanese airport authorities knew the plane and its pilot, Captain Srjan Ilic, well. It was at least the fifth time in as many years that Belgrade had asked for clearance to land - and the executive jet taxied, as usual, to the apron of the local handling agent, "GR", just opposite the Lebanese army base west of the airport terminal.

The only passenger to walk off the aircraft - which had been routed from Belgrade over Bulgaria and Turkey - was Dusan Matkovic, one of Slobodan Milosevic's most trusted acolytes, general manager of the Sartid iron company in the Serbian town of Smederevo, the giant metal conglomerate that is one of former Yugoslavia's biggest steel producers and exporters.

Mr Matkovic was officially stamped into Lebanon but he did not have to pass through the usual airport formalities; he was driven at once to the newly reopened and luxurious Phoenicia hotel in central Beirut.

As the world asks how Slobodan Milosevic used the millions of dollars his regime sucked out of the Yugoslav economy over 10 years, his business dealings in the Middle East - as well as Russia and China - suggest that a handful of trusted comrades handled his country's money, moving effortlessly between Belgrade, Beirut and Nicosia.

Mr Matkovic is one of the highest officials in Mr Milosevic's Socialist Party of Serbia (SPS), an economics graduate whose Sartid company was rumoured during the years of Yugoslav sanctions to have used its warehouses for smuggled cigarettes. According to Beirut aviation sources, every Yugoslav government flight into Beirut carried just one name on the passenger list: Dusan Matkovic.

The Lebanese are still asking themselves what Mr Matkovic - who is banned from EU nations as one of Mr Milosevic's top cronies - was doing in Lebanon. Was he, less than a month before the downfall of the Serbian leader, trying to smuggle some of the Milosevic family's millions of dollars out of Yugoslavia? Was the money destined for an account in one of the many Beirut banks that maintain close links with Cyprus offshore financial institutions, in which Mr Milosevic is known to have secret accounts? Or was he merely keeping contact with the Lebanese steel company, Tannous, with which Sartid has been dealing legally for years?

It was, after all, scarcely a month since another important Milosevic comrade, Borka Vucic, arrived in Beirut on an identical aircraft with up to $5m (£3.5m) of Yugoslav government money to deposit in the Saradar Bank in the north Beirut suburb of Rabieh. Mrs Vucic, the Yugoslav Minister for Co-operation with Financial Institutions, has made at least five trips here in four years. She is a tough, shrewd economics adviser, aged 74, with a reputation in Yugoslavia - astonishing for such a regime - of financial probity. She arrived on 29 June with at least four other officials, including Mr Matkovic, on a flight from Cyprus.

Another of her fellow passengers was Slobodan Acimovic, her Serb assistant from Cyprus. Again, the purpose of the money brought out of Belgrade remains a mystery. Bankers here speculate that it was cash to pay China or Russia for oil supplied to Yugoslavia during Nato's bombardment of Serbia last year. During and after the war, China gave Serbia $300m of financial aid in cash. Mr Milosevic's wife, Mira, has maintained close personal links with China for more than a decade, and thousands of Chinese workers now live in Belgrade to realise her dream of a Chinatown in the Serbian capital.

As a director of Beogradska Banka, Mrs Vucic knows all too well how exchange controls - and US pressure - have throttled Yugoslavia's foreign payments channels, even in Lebanon. Here, banks are no longer permitted to accept cash deposits of more than $10,000 per day for a single account. The Saradar bank - with modern premises on the hills of Rabieh - has head offices in Nicosia. The Milosevic regime has maintained accounts in Saradar's Cyprus bank, and several other banks, on the island. There is no suggestion that the bank acted improperly.

Another Serb who visited Beirut regularly was a personal friend of Mr Matkovic who once represented Sartid in Lebanon. He is now believed to live in Cyprus but is said by banking sources in Lebanon to have handled another account in the Federal Bank in Jounieh, north of Beirut. Run by the Lebanese brothers Ayoub and Fadi Saab, the Federal Bank's offices in Jounieh, in the Mina business centre, stand adjacent to the office of Sartid and the bureau of SDPR, the Yugoslav government's arms exportation company, registered here as the "Mega Company". Again there is no suggestion the bank acted improperly.

Mega, according to Lebanese financial officials, has done little trading over the past five years. One of the last Beirut-based Yugoslav attempts to trade with the Arab world was a shipment of aircraft tyres for Libya; but the plane carrying the tyres crashed at Srcin airport in Belgrade. Sartid itself, according to other traders, has a reputation for dividing its income, asking clients to deposit their payments in two separate accounts.

"Sartid would ask you for $250 for every ton of steel they exported," a Lebanese businessman told The Independent. "Then, after the deal was done, Sartid would ask its client to put $150 of the amount per ton in one account, the remaining $100 in another. I don't know whether this was to avoid tax in Belgrade or a way of keeping money out of Yugoslavia for personal use. Over the years, it involved hundreds of thousands of dollars."

But the visits to Beirut of Dusan Matkovic remain the most intriguing. Mr Matkovicwas badly wounded during a Nato air raid last year, losing an arm and an eye. Needless to say, he has no reason to love the West. Banking sources here say Mr Matkovic sometimes used money in Sartid's Lebanese accounts to take his family for holidays in Tahiti, Rio de Janeiro and the Balearic islands. But they also believehe carried millions of dollars into Lebanon in the years before Beirut imposed stricter control regulations on the lodging of cash.

Yet on one of his previous visits, bankers say Mr Matkovic appealed to the Saradar bank for a loan of $1m - a request that was turned down. Had his credit run out?

Mr Matkovic was Serbia's Industry Minister in 1991 but is notorious among opponents of the regime for a speech he made the same year urging SPS party organisers to"teach a lesson" to rebellious students protesting against Mr Milosevic in Belgrade. He isrumoured to have been involved in pyramid banking schemes that sucked money from Serbia's more naive investors and yielded $10m for Mr Milosevic in 1993.

In any event, it seems that Mr Matkovic, Mrs Vucic and their friends could always be assured of a welcome in Beirut.