Case of jailed businessman raises questions over Montenegro's EU hopes

A businessman jailed in Montenegro is being used as a "pawn" by the authorities in an attempt to dig up dirt on the country's ex-president, his British lawyer has claimed.

Duško Knežević, 65, once one of Montenegro's richest men and a former close ally of ex-President Milo Đukanović, has been in prison since he was extradited from the UK in April.

The dual British-Montenegrin national, some of whose assets have been seized, still awaits trial for alleged fraud, money laundering and misuse of authority in a business.

He denies all the charges, saying they are politically motivated.

The authorities in the capital Podgorica, however, believe he has questions to answer in court about his business dealings during the Đukanović years.

Toby Cadman, the British criminal barrister who represents Knežević, said that the Montenegrin authorities want to coerce his client into sharing evidence against his former friend Đukanović.

Đukanović, formerly known as the country's "eternal" leader, first became Montenegro’s prime minister in 1991. He held positions of power over the next three decades before being ousted as president in 2023.

"Knežević has made it very clear that he has evidence against the former government in relation to matters of corruption. Particularly against the former President Milo Đukanović," said Cadman, who hinted that the material relates to "two or three specific incidents".

"The Montenegrin authorities are effectively pressuring him to disclose details and cooperate with them," Cadman said, before adding that his client will only cooperate if released.

Cadman expressed his concern for Knežević's safety, hinting that he had powerful enemies.

He added that Knežević's health had briefly deteriorated in December after suffering a fall in custody in the Spuž Prison near Podgorica, prompting further consternation. His head injury later became infected, but he subsequently recovered.

Cadman is also worried by the Montenegrin legal system, which he argues is unlikely to give Knežević a fair trial. Unless things change, Montenegro should not be allowed to join the EU, something it hopes to do this decade, Cadman said.

“For me, one of the most startling things is the discussions now about Montenegro joining the EU. This is not a country ready for that unless they seriously address the endemic problems within their judicial and prison systems,” he said.

The Montenegrin government, relevant ministries and the prison authorities in Spuž did not respond to multiple requests for comment on these allegations.

Friends in tough times

Knežević, the founder of the Atlas Group, a Montenegro-based financial corporation, was long part of Đukanović’s inner circle.

When Đukanović rose to power in the 1990s, he quickly surrounded himself with people like Knežević, who lent him their political support as he gradually sought independence from Belgrade, then embroiled in a series of wars across the former Yugoslavia.

As the country began transitioning from a socialist system to an open market economy, Đukanović slowly introduced new laws allowing massive-scale privatisation of state-owned businesses and infrastructure.

Jelena Džankić, a political scientist at the European University Institute, said those close to Đukanović profited from such legislation in the 1990s, which allowed them to gain influence in sectors such as real estate and banking.

“What happened in Montenegro wasn't that different from what had happened in east European countries. Those close to the regime got preferential access to all these important resources,” she explained.

“Obviously, they served a particular purpose, reinforcing in one way or another Đukanović’s rule. I think Knežević was also an important player in this … as a friend and then as a foe.”

Knežević amassed significant wealth and influence as the owner of Atlasmont Bank, which was part of his Atlas Group. The corporation also consisted of dozens of other companies, in sectors ranging from media to real estate and from healthcare to tourism. He also owned Mediteran University, an institution he founded in Podgorica.

Over time, the relationship between Knežević and the president soured. The first cracks appeared in 2014, when Đukanović's government refused to accept proposed changes to the privatisation agreement it had with Knežević, concerning the prized Meljine hospital compound near the Adriatic town of Herceg Novi.

Then, three years later, several of his bank's employees were arrested on a warrant from the Special Prosecutor's Office over alleged money laundering.

The authorities alleged that, through a suspicious conversion of dollars into euros, a criminal network of 79 individuals and scores of companies from Montenegro and abroad laundered €500 million. By the end of 2018, the investigation led Atlasmont into administration and his other bank, Invest Bank Montenegro, to bankruptcy.

Matters came to a head in 2019, when Knežević — now publicly accusing the president of attempting a hostile takeover of his businesses and wealth — released a video with the intention of exposing corruption within Đukanović’s Democratic Party of Socialists (DPS).

The footage, from 2016, shows Knežević himself handing an envelope to Slavoljub Stijepović, the then-mayor of Podgorica. Inside was almost €100,000, money that was later spent by the DPS on campaigning, Knežević alleged.

The DPS denies claims of wrongdoing in the financing of its campaigns.

The 'envelope scandal'

What became known as the “envelope scandal” brought high-level corruption in Montenegro — something commonly gossiped about but never seriously debated — to the front pages of local newspapers.

However, the protests it sparked were not critical to the DPS’ parliamentary defeat in 2020 and Đukanović’s presidential defeat in 2023, according to Džankić. More important was the anger generated by the 2019 Law on Religious Freedoms, which the Serbian Orthodox Church said threatened its land holdings in Montenegro, she added.

Referring to corruption under Đukanović’s rule, Džankić said the envelope scandal was “a tiny spot on the tip of the iceberg.”

“The scandal was mostly symbolic because most people in Montenegro were aware that the DPS' rule was corrupt ... It wasn't anything exceptionally revealing.”

Kenneth Morrison, a historian at De Montfort University who specialises in the Western Balkans, said Knežević, as a former “insider”, was “very much part of the DPS system of clientelism and patronage that was so despised by those parties and individuals that are now in government.”

“Opponents of the DPS remember Knežević as a person who funded DPS electoral campaigns, though some civil society groups are more sympathetic and see him as a crucial part of the evidence gathering process that they hope will lead to the arrest of Đukanović on corruption charges,” he said.

To this end, some would like to see Knežević granted the status of a cooperating witness. However, this is not possible under Montenegrin law, as he remains a suspect in a criminal enterprise case, Morrison noted.

Doubts remain about Knežević’s motivation for exposing DPS' wrongdoing. He is not the only former Đukanović ally to have turned away from him in recent years.

Morrison said there is “significant scepticism in the claim that Knežević became somehow enlightened and decided, for moral reasons, to expose corrupt practices.”

In response to criticism about his client's formerly close relationship with Đukanović, Cadman said it was impossible to do business in Montenegro without ties to the then-leader. The country was “a closed shop” under his rule, Cadman suggested.

On the decision to publish the video online, Cadman said Knežević wanted to act in both his and the public’s interest.

“He felt this was the only course of action he could take to protect himself and to ensure that the public were made aware as to the level of corruption under the governor at that time.”

EU dreams in peril?

Although Đukanović is no longer in power, Montenegro still faces significant challenges in its quest to join the EU.

Speaking of his client’s incarceration and long wait for trial, Cadman said the current Montenegrin government has not made sufficient improvements. “What we can see is that — in terms of the judicial system — there has been very little change.”

The Western Balkan country officially applied to be a member of the bloc in 2008, two years after it gained independence from Serbia.

Its current President Jakov Milatović has expressed hope that it could have its membership ratified in 2027 and could accede to the union in 2028.

The most recent progress report from Brussels, however, suggests that this might be difficult to achieve. Although it was praised for being a “leader” in the region, the country was told it must improve in areas such as governance, the judiciary and the fight against high-level corruption and organised crime.

Morrison said Montenegro was making “steady progress” towards EU accession but emphasised that it still has “a lot of work to do”.

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Morrison explained that the country’s prospects are not helped by ongoing tensions between Milatović and Prime Minister Milojko Spajić — both of the Europe Now party — nor by the government’s failure to change how the state functions.

The leaders that came after Đukanović “have, in many ways, continued the system of clientelism that characterised the 'ancien regime,'” he said.

Džankić agreed that plenty of reform is needed, including the strengthening of Montenegro’s judicial system and the rule of law. “For me personally, 2027 might be a bit ambitious. But I stand to be corrected,” she said.

She stressed that corruption — symbolised by the envelopes in which bribes are concealed — must be tackled.

“The envelope is in a way the symbol of getting things done in Montenegro … I think the envelope culture is something that needs to change,” Džankić said.