Former Croatian minister sentenced for paying her restaurant bills with EU money

Former Croatian Minister of Regional Development and European Funds Gabrijela Žalac was sentenced on 2 September by the Zagreb District Court to seven months in prison for abuse of office and power, the European Public Prosecutor’s Office announced in a press release.

Between May 2017 and July 2019, Žalac partially paid for restaurant expenses at least nine times from the official budget of her office, which is intended solely for official representation purposes. Local media reported that some of the money was used to cover the costs of celebrating her 40th birthday.

According to the evidence collected, these expenses were partially included in public procurement costs under the EU Operational Programme “Competitiveness and Cohesion”, managed by the Directorate for Strategic Planning and Coordination of EU Funds.

In total, the former minister illegally acquired material benefits in the amount of 9,732 euros, to the detriment of the financial interests of the EU (85%) and the Republic of Croatia (15%), the statement said.

The sentence is the result of a plea agreement, as she pleaded guilty to the charges. During the investigation, she also repaid the full amount of 9,732 euros in damages, the European Public Prosecutor’s Office announced.

Žalac, who was first arrested in 2021, pleaded guilty and reimbursed the full amount of money she had unlawfully spent.

This marks her second conviction for corruption. In June, she also admitted to abuse of power and influence peddling related to the procurement of a new IT system for the ministry. During that case, she received a two-year prison sentence for her involvement in a fraud exceeding 1.3 million euros and agreed to pay 200,000 euros in partial restitution.

This case is part of a broader series of corruption scandals involving Prime Minister Andrej Plenković’s Croatian Democratic Union (HDZ), which have led to the resignation of several ministers since 2016. Žalac is a member of Prime Minister party.

A complex fraud scheme

The EPPO’s investigation revealed a sophisticated scheme involving abuse of office, trading in influence, and fraudulent procurement practices that caused significant financial damage to both the EU and Croatian state budgets.

The core of the case revolves around a 2017 public procurement procedure for an information system designed for strategic planning and development management. As Minister of Regional Development and President of the Central Finance and Contracting Agency’s (SAFU) Governing Board, Žalac allegedly manipulated the process to favor companies linked to her associates.

The EPPO found that Žalac artificially inflated the project’s estimated value to HRK 9.86 million (approximately €1.31 million), far exceeding market rates for comparable IT systems. She opted for a negotiated procurement procedure without public notice, limiting competition and tailoring technical requirements to match software already developed by the preselected companies. Despite SAFU’s ex-ante control, the agency – under Žalac’s influence – failed to challenge the irregularities, allegedly following her informal instructions.

In October 2017, Croatia’s State Commission for the Supervision of Public Procurement Procedures annulled the process due to legal violations. Undeterred, Žalac and her associates continued their efforts in 2018, ultimately awarding the contract to a company connected to a close associate of the original beneficiary. The contract, valued at HRK 12.99 million (approximately €1.73 million), was significantly overpriced, with the system’s realistic cost estimated at HRK 2 million (approximately €265,000).

Funds from the EU’s Operational Programme Competitiveness and Cohesion, which covered 85% of the contract, were disbursed, with significant portions diverted to the suspects’ accounts or withdrawn in cash. The EPPO estimates the financial damage at €1 million to the EU budget and €300,000 to Croatia’s state budget.

Sources: BGNES, European Public Prosecutor’s Office announcements

Caption: File photo. On 5 September 2018, Corina Creţu, Member of the EC in charge of Regional Policy, received the visit of Gabrijela Žalac, Croatian Minister for Regional Development and EU Funds. [Europe by Satellite]