Mystery of The Moneybags

By John Greenwald

Back when he was running one of the hottest banks in Belgrade, before its * spectacular collapse last month, Jezdimir Vasiljevic was known for his financial bravado, his wild ties and his even wilder statements. But last week the stocky and shadowy man known as "Jezda the Boss" was holed up in Israel, condemning Serbian aggression in the Balkan war and hatching plans to preside over a government-in-exile. Such grandiose schemes come naturally to Vasiljevic, 45, the maverick entrepreneur who sponsored last year's Bobby Fischer-Boris Spassky chess match in Yugoslavia and has variously been suspected of everything from gun- running to illegal currency trading.

Shock waves from the failure of Vasiljevic's Jugoskandik Bank continue to rumble in Belgrade. Thousands of furious depositors took to the streets to demand their money back and stirred panicky runs on other banks, leaving Belgrade as frenzied over finance as over the latest Western sanctions. When Vasiljevic fled to Israel at the height of the Jugoskandik scandal, the departure only fueled his ever growing legend. No sooner had he left town than local papers breathlessly reported rumors that a Tel Aviv-bound Sabena Airlines flight had made an unscheduled stop in Belgrade and taken off with bags bulging with cash, presumably taken directly from the vaults of Jugoskandik. Sabena said the plane landed in response to a hijacking threat and denied picking up any money.

The very size of the Jugoskandik failure remains a mystery. While some news reports said the bank held $2 billion in deposits, Vasiljevic has scoffed at that figure. "Do you know how much volume $2 billion would have?" Vasiljevic demanded during a TIME interview in the Israeli town of Herzlia. "It's about 86 cubic meters. We had $68 million in the bank."

Whatever the loss turns out to be, the collapse of the bank exposed the financial chaos that has engulfed what remains of Yugoslavia (Serbia and Montenegro) as the Serbian war machine rolls on in Bosnia. Ravaged by 20,000% hyperinflation whipped up by United Nations sanctions, the desperate Serbs on the home front have turned to shady banks like Jugoskandik to help put food on the table. In return for deposits of hard currencies such as U.S. dollars and German marks, Jugoskandik paid up to 15% in monthly interest. Customers could thus earn $150 a month on a $1,000 deposit, or about four times the wages of an average worker.

Vasiljevic had little trouble meeting the interest payments at first. Western experts say his bank ran a classic Ponzi scheme, using new deposits to pay the interest on old ones. At the same time, diplomats say, Vasiljevic used his customers' hard currency to buy sanctioned goods like oil on the black market and sell it for a handsome profit. Vasiljevic denies all the charges. "The wonderful thing about sanctions is that they create real profit opportunities," says a State Department official. "When you have these rates of inflation, anytime you can use someone else's money for a short time you can get rich on it."

Some Western observers also suspect that Vasiljevic helped purchase arms for the Serbian war effort. "Everyone here would say he's up to his neck in arms deals, though it's hard to prove," says a diplomat in Belgrade. Vasiljevic denies that charge too, and he has found some support among Westerners who note that the Serbs spent 40 years building their arsenals. "Most of what has been used in the field is stocks they had previously," says a Western diplomat who served in Belgrade. "I would classify Vasiljevic as a sanctions buster, but I can't say he was an arms importer."

Nonetheless, the banker's deals have helped prop up Serbian President Slobodan Milosevic. When heating-oil supplies fell dangerously low last October, the banker loaned Belgrade $2.5 million to bolster the city's depleted reserves before winter. He now wants the loan repaid directly to Jugoskandik depositors.

Vasiljevic says he fled Yugoslavia to escape extortion threats from what he calls the "communist mafia regime" in Belgrade. He says the government demanded more than $1 million in taxes that he had already paid, and has since seized $31 million worth of gasoline that he owned. "I left the country to avoid paying blackmail to the communist country for use for war purposes," he says. Moreover, he adds, he wanted to blow the whistle on government demands that he purchase nearly $1 billion worth of missiles and other arms. "I don't want to take part in something that is very dirty," he says. "It's genocide, it's extermination of innocent people just to make money."

Stopping first in Budapest, Vasiljevic claims, he picked up $1 million of his own cash from a safe-deposit box and brought it in a suitcase to Israel. He went there, he says, to meet with lawyers and visit a Jerusalem youth village that has taken in Serbian refugees. He accuses the Milosevic government of looting $4.5 billion from Yugoslav depositors.

In Serbia, some jilted Jugoskandik customers have shown surprising sympathy + for the absent banker. "Jezda did not flee because of bankruptcy but for political reasons," says a member of the creditors' committee. "A lot of our money was given to the city of Belgrade and to Serbia. They should all return what they have."

For his part, Vasiljevic says, he looks back on his old life in Yugoslavia with few regrets. "I was on top of the pyramid there," he declares, "and I didn't want to be part of the pyramid anymore because I saw its purpose. It's not a war against Muslims. It's not a war against Croats. It's just a criminal war, a war of corruption." On that point at least, much of the rest of the world could agree.

With reporting by Ann Blackman/Washington, James L. Graff/Vienna and Robert Slater/Herzlia