Šolak’s main business credo has always been: Circumventing the law, usurping public & private resources, and evading obligations to the state and creditors

The development path of Dragan Šolak, from a small entrepreneur from Kragujevac to a monopolist and billionaire, reveals all the weaknesses of the system at the time – but also the insatiable desire of an individual to exploit it solely for personal enrichment, without the slightest restraint. Such ruthlessness towards laws and regulations became Šolak’s business credo even after he had built an empire and amassed unimaginable profits from his monopolistic position. In short, Šolak always sought, whenever possible, to destroy competition, circumvent regulations, usurp public and private resources, and avoid paying what he owed to the state and his creditors.

Above all, he had a free initial advantage in the form of seizing state infrastructure and investing zero dinars in the laying of the cable network – as Kurir has previously reported. Equally unsavoury in his business conduct was the purchase of influence within key institutions and rival companies, through which he dictated decisions that cleared his path for further unrestrained enrichment. In addition to that came the circulation of vast amounts of money from other sources.

In all Šolak’s previous market games, one thing is indisputable – many of the key decisions made by relevant institutions, regulatory bodies, or rival firms seemed written specifically for him. This was most evident in the passive stance of the Regulatory Authority for Electronic Media (REM) regarding the illegal registration of Šolak’s media outlets abroad and the discrimination against other domestic channels. In our earlier investigations, we pointed to justified suspicion that Šolak’s influence had infiltrated REM, since people closely linked to the insatiable businessman sat within that body.

One of them was then Deputy Chairman of the REM Council, Goran Petrović, founder of Radio-Television Kragujevac – the local TV station that, in the late 1990s, provided Šolak with 25 per cent of the capital for the development of his then-company KDS, the forerunner of SBB. We also explained why it was essential to investigate Šolak’s influence over the Government’s Anti-Corruption Council. All activities of Šolak and his media pointed to suspicion that he sought to misuse this body and pressure it to issue a negative report on Telekom – his SBB’s main competitor.

The rise of SBB resembled a Wild West scenario, as Šolak’s company expanded its network without any permits – stringing cables from building to building, unlawfully using streetlight and power poles, and exploiting every available conduit of public enterprises through which cables could be drawn. Apart from a general telecommunications licence to conduct business, throughout its operations SBB failed to obtain almost a single permit for network expansion.

Another major factor in SBB’s growth was Šolak’s scheme of simulating formal SBB sales in order to conceal the true ownership changes in his main Serbian company. The real reason for this becomes clear only when one traces the money flows that financed these operations. Kurir obtained documentation clearly showing that all these fake acquisitions were financed with SBB’s own money, thus creating – through the abuse of numerous regulations – a mechanism for siphoning money out of Serbia under the guise of fictitious expenses. This significantly reduced the taxable base on which Šolak’s company was obliged to pay tax to the state.

We listed all the transactions one by one and explained how SBB effectively financed its own “purchase”. During the first such transaction alone, SBB paid a total of 11.6 million euros to acquire its own shares held by third parties registered abroad, while a total debt of 108.3 million euros was converted into company capital – recorded in the company’s accounts as an expense. What Šolak succeeded in doing in 2007, he repeated twice more – in 2012 and 2014. In all three transactions, during which fictitious ownership changes took place, SBB practically financed the purchase of its own shares. Thus, following the pattern established in 2007, each time after the completion of a transaction, the buyer company was merged into SBB. Šolak’s scheme was designed so that each of the purchasing companies transferred the payment obligation or debt repayment to SBB, which was then obliged to finance its own purchase – that is, to buy back its own shares from third parties.

Across all three transactions, the total amount of debt converted into capital reached 475.3 million euros – 108.3 million in 2007, 226.1 million in 2012, and 140.9 million in 2014. These conversions inflated SBB’s reported expenses, which in turn reduced its taxable profit base – the corporation income tax that SBB was supposed to pay to the Republic of Serbia.

Through these transactions, Šolak apparently avoided paying capital gains tax in Serbia by exploiting the double taxation avoidance treaty that the Republic of Serbia had concluded with the Netherlands. Furthermore, in this way he skillfully evaded withholding tax on interest paid to fictitious foreign lenders.

Kurir also revealed that this tax evasion continued further down the line, as the Netherlands exempted from taxation the onward transfer of profit in the form of dividends to Luxembourg. Šolak took full advantage of these arrangements and managed not only to avoid paying corporate income tax in his own country, but also to facilitate the further transfer of those profits to his offshore companies. Thus, the entire proceeds from the sale of SBB could flow into offshore zones either tax-free or with minimal taxation.

Kurir Editorial Team