Boss Of Bosnia bank that swallowed US funds held

SARAJEVO, Aug 6, 2000 -- (Reuters) Bosnian police have arrested one of the owners of a bankrupt bank which the U.S. Congress has alleged was involved in corruption and swallowed nearly a million dollars of U.S. deposits.

Western officials confirmed a report in the Oslobodjenje newspaper which said Sarajevo cantonal police had arrested Alija Delimustafic, businessman, former government minister and joint owner of BH Banka, on Friday night.

The newspaper said the police, acting on an order by the cantonal court, had invited a UN policeman to be present at the arrest, which took place at Delimustafic's Cenex retailing company. It made clear its reporter was also present.

A UN source said the arrest had proceeded without problems.

The report did not specify the charges against Delimustafic, who with his brother is a major shareholder in the bank.

A report in July by the General Accounting Office (GAO) of the U.S. Congress said the United States had yet to recover about $900,000 in U.S. embassy operating funds and loan payments deposited in BH Banka, which it said was involved in corruption.

The report by the watchdog agency said widespread crime and corruption were thwarting implementation of the 1995 Dayton peace agreement in Bosnia, and that the White House should consider suspending U.S. aid until steps were taken to curb it.

A spokesman for Wolfgang Petritsch, the top international envoy in Bosnia, said Delimustafic's arrest was a positive sign for the country.

"The office of the High Representative is very glad to see the judges and prosecutors doing that job," spokesman Chris Bird told Reuters.

"It is good to see judicial officers fighting corruption and fraud here in Bosnia and Herzegovina," he added. "The pre-trial detention of Mr Delimustafic is a positive sign."

Delimustafic, a former vegetable trader and policeman, became interior minister after Bosnia's first multi-party elections in 1990.

He was appointed foreign trade minister during the 1992-95 war but later left politics and became a successful businessman and owner of a large retailing company and the bank in Sarajevo.

No police or court official was available for immediate official comment on Saturday.

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