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Police question 6 in sell-off of Serbia's largest steelmaker to U.S. Steel

| Wednesday, June 2, 2004

BELGRADE, Serbia-Montenegro -- Police questioned six people Tuesday, including former government officials, over alleged irregularities in last year's sell-off of Serbia's largest steelmaker to U.S. Steel Corp.

In a statement faxed to The Associated Press, police said they launched an investigation at the request of the Belgrade district prosecutor "over suspicion of possible wrongdoing" in the privatization process of Sartid Co. and its six subsidiaries.

Sartid was purchased last year by Pittsburgh-based U.S. Steel for approximately $23 million.

"We have been assured by investigators that U.S. Steel is not the target of any of these allegations," said John Armstrong, a spokesman for the Pittsburgh-based steelmaker. "We're an ethical company, and we've been an ethical company for 103 years. Everything we did over there has been above board and in compliance with Serbian laws."

The deal envisaged that U.S. Steel invest $150 million to improve Sartid's operating processes and $5 million for environmental and community development projects. But the deal did not include Sartid's debts, estimated at $1.7 billion.

Sartid, located in Smederevo, about 30 miles southeast of Belgrade, has annual raw steel capacity of 2.4 million net tons and is the largest steelmaker in the country. Sartid had been operating with losses and had declared bankruptcy before it was sold to U.S. Steel.

No details were immediately available on the alleged irregularities in Sartid's bankruptcy process and subsequent sell-off, and officials did not say whether the investigation could result in formal charges or a revision of the privatization deal.

Among those who were interrogated yesterday was Aleksandar Vlahovic, a former privatization minister, and Nemanja Kolesar, the late Serbian Prime Minister Zoran Djindjic's former Cabinet chief. Other officials who handled the bankruptcy and privatization procedure also were questioned.

Djindjic, who was instrumental in toppling former President Slobodan Milosevic in 2000 and his extradition to the U.N. war crimes tribunal in The Hague, Netherlands, had launched market reforms in Serbia before he was assassinated in March.

Serbia's new nationalist government, which succeeded Djindjic's reformist Cabinet, has pledged to investigate how privatization of major companies was carried out, claiming corruption and irregularities in the process.

The Associated Press and Tribune-Review reporter David Copeland contributed to this story.

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