BELGRADE, Yugoslavia -- One person was arrested and 17 others were under investigation Friday in the biggest economic scandal to hit Yugoslavia since communists took power in 1945, officials said.
The 18 are all connected to Agrokomerc, a huge agricultural conglomerate that reportedly distributed $350 million worth of promisory notes without cash to back them.
Police arrested Alija Alesevic, the manager of the Agrokomerc company bank, and officials asked the courts to prosecute at least 17 company employees for civil and criminal violations of the law.
Agrokomerc, started in 1967 with 17 workers, had grown to one of the country's largest firms, often displayed to foreign visitors as a prime expample of Yugoslavia's unique system of worker management.
Now, Agrokomerc is the center of a growing scandal.
Yugoslav newspapers have reported its general manager Fikret Abdic, 48, spends four months of the year at a seaside resort with his secretary, traveling in a van equipped with a poker table.
The reports say Abdic is a member of the Communist Party central committee of Bosnia-Herzegovina, where his firm is headquartered, and a close friend of Yugoslav Vice President Hamdija Pozderac, leading to speculation high party officials are involved in the scandal.
Rumors of shady dealing by Agrokomerc began spreading in February, but accusations surfaced only this month when trading partners tried to redeem the promisory notes.
Belgrade officials label it the worst economic scandal and financial fraud in the history of post-war Yugoslavia.
Authorities said Agrokomerc may have to sell its assets and go bankrupt to repay the 63 Yugoslav banks and companies that bought the notes.
The firm and some authorities have suggested the government offer a huge loan to help out the company, which employs 13,500 workers.
Government officials in Bosnia-Herzegovina said earlier this week the firm should be bailed out with funds earmarked for underdeveloped regions.
But Prime Minister Branko Mikulic said Thursday there would be no aid for the troubled firm. 'Nobody can go beyond the limit of the existing credit-monetary policy,' Mikulic said in a statement.
Western diplomats have suggested Agrokomerc could not have conducted its financial deals without the knowledge of officials at all levels of government. One diplomat said the scandal may be traced all the way to Mikulic, who is from Bosnia.