Reljic, who was appointed assistant interior minister in September 1991, said that he and his deputy Marijan Benko had sent reports to the interior minister, the prime minister and the president of the republic about suspicious and illegal events on the front line, in which Mercep was "an unavoidable topic".
The witness said he had discussed those events with President Franjo Tudjman, Prime Ministers Franjo Greguric and Nikica Valentic, and the head of the Office for the Protection of the Constitutional Order, Josip Manolic, adding that they knew more than was stated in the reports.
Greguric told the court on Monday that he and his inner Cabinet had known nothing about Mercep's military activities and that his government had not received any reports.
Reljic said that they had received contradicting reports from the field, because some people were reported missing, only to show up elsewhere later on. He said that Tudjman had not demanded that the proceedings against the people suspected of war crimes in Pakracka Poljana be suspended.
According to Reljic, the reports mentioned Mercep in connection with a police reserve unit that was based at the Trade Fair Centre in Zagreb and later in Pakracka Poljana. The unit, which according to the indictment was under Mercep's command, was 200-strong and was established after Mercep's return from the Gospic front.
The witness said that they were gathering information in an attempt to shed light on rumours about Pakracka Poljana, but that their efforts were hampered by the war. He said that the turning point was the murder of the Zec family in Zagreb in late 1991, after which they arrested the suspects and confirmed their suspicions about Pakracka Poljana.
During those arrests, Mercep was in the United States, and early in 1992 the Zagreb police pressed charges against him, Reljic said, adding that he did not know if any action was taken to follow up on those charges.
Reljic said that the police had started dealing with the suspicious events in late 1991, but "rather delicately" because Mercep was an adviser at the Ministry of the Interior, had his own men on the front line and gained "the aura of a hero" after being wounded.
Reljic said that Mercep figured as a person who deserved credit for the defence of Croatia. He said that he had talked to Mercep several times about the circumstantial evidence they had, and that Mercep told him that the matter should be investigated and those responsible brought to justice.
"He was aware of those things, he tried to vindicate the perpetrators mentioning their family situations in Vukovar, but he did not approve of what had happened," the witness said.
Reljic said he knew of the prison in Pakracka Poljana where people had been taken to, adding that some bodies had apparently been found there after the unit had left.
Wartime interior ministers Ivan Vekic and Ivan Jarnjak are due to be heard again on Wednesday.