By Zoran Radosavljevic
ZAGREB (Reuters) - Croatia's former prime minister Ivo Sanader went on trial on Monday on charges that he and senior officials abused state funds and rigged public tenders in a case that could bankrupt the biggest party, the HDZ.
"The whole indictment is fabricated and we shall prove it," Sanader told the court.
The trial is the first against a political party since independence in 1991 and part of an anti-corruption drive to boost Croatia's attempt to join the European Union in July 2013.
Sanader was expelled from the HDZ six months after he quit the government in July 2009. Also on trial are the HDZ's former treasurer, accountant and spokesman, and the party itself.
If convicted, the HDZ could be ordered to pay back about 33 million kuna ($5.78 million), which could effectively send it into bankruptcy, the Jutarnji List daily reported on its website.
The centre-right HDZ, which lost power in December after eight years, has denied the charges. Several lower-ranking former party officials have plea-bargained and received short jail terms.
The indictment says Sanader and six other people conspired to secure illegal funding for the HDZ from public firms from 2003 to 2009, when Sanader quit without explanation.
During that time, the HDZ is accused of having illegally acquired 31.6 million kuna ($5.54 million) and Sanader of personally receiving 15 million kuna, the indictment said.
Three other suspects and their two companies acquired altogether another 18 million kuna.
Before the trial, Sanader said the party leadership had known of, and approved, all the decisions, while the party accused him of creating a secret, parallel structure that engineered the financial schemes without telling them.
The HDZ has ruled Croatia for 16 of the 20 years of its independence. It is the first party indicted for corruption, which is perceived as widespread at the top levels of politics and at state-run companies.
"For Croatia's political scene, this will have a positive effect because it is unlikely that anyone will ever again dare to divert public companies' money into party coffers," said political analyst Davor Gjenero.
"It is not clear at the moment what possible bankruptcy would effectively mean ... whether the party would be dissolved," he said. "I think a more likely outcome is some kind of settlement which would leave the HDZ alive."
Jadranka Kosor, Sanader's hand-picked successor who was prime minister for 30 months until the election in December, launched the anti-graft campaign in 2009 to help Zagreb's EU bid. Croatia signed the accession treaty last December but its anti-corruption efforts will remain under scrutiny from Brussels.
Sanader is also on trial on two separate graft charges involving a loan from Austria's Hypo Bank and alleged secret deals with Hungarian oil concern MOL related to managing Croatia's oil group INA.
(Reporting by Zoran Radosavljevic and Igor Ilic; Editing by Janet Lawrence)