CorpBank – pyramid in Kostov’s privatisation process

The lender was conceived as a piggy-bank for the oligarchy and political engineering by the Commander from the very beginning

In the heart of Washington, less than a mile from the White House, is the headquarters of one of the world’s most reputable arbitration institutions. Its members are almost all UN countries and its rulings are as good as written in stone.

Just two weeks ago, that same institution, the International Centre for Settlement of Investment Disputes (ICSID), put an end to an almost 4-year saga. Three arbitration judges from three different nationalities and with extensive experience in arbitrating trade disputes closed case №ARB/15/43, ruling in favour of Bulgaria in relation to a €80m claim filed against the country by the State General Reserve Fund of the Sultanate of Oman in its capacity as a minority shareholder in CorpBank.

The fund launched the legal proceeding, arguing that the actions of the state and the Bulgarian National Bank (BNB) regarding placing the lender under special supervision and the ensuing decision to request that bankruptcy proceedings be launched were in breach of the Agreement on the Promotion and Reciprocal Protection of Investments struck between the Republic of Bulgaria and the Sultanate of Oman, resulting in damages for the fund as a shareholder in the bank. Following two presentations of the Bulgarian side’s case in writing, accompanied by expert opinions and evidence, in December 2018, the fund dropped its claim. Filing the claim a second time was not possible. “In line with the dropped claim, the International Centre for Settlement of Investment Disputes made its ruling on the case,” the Ministry of Finance commented succinctly, adding that no additional agreements were signed between the claimant and the defendant as part of the case. The response was succinct because the case documentation is confidential based on a procedural decision made by the arbitration judges back in 2016. However, several key things are more than clear – with its ruling, the US arbitration institution denied the Omani fund’s claim and sentenced it to cover Bulgaria’s legal costs. Why? The claim filed by the fund was deemed groundless as it was established that CoprBank could not have been saved due to the giant capital and liquidity gap to the tune of billions of levs that its majority owner Tsvetan Vassilev had created.

Sounds familiar? That same stance had already been taken by the creator of the currency board in Bulgaria Steve Hanke (back in August 2014) and the international consulting firm specialising in tracking stolen assets AlixPartners (in October 2016). Now that a third authority on the matter, the ICSID, has declared the same, there should be no room for manipulations on the subject in a country with democratic principles like Bulgaria, right? Unfortunately, that is not the case, as media outlets funded by Tsvetan Vassilev continue to spread his fake theses – his and his family’s – about suffering a fictitious corporate raid. They have also inundated US institutions with claims against his main enemy – lawmaker and Telegraph Media publisher Delyan Peevski – on the grounds of those same fake theses, first using the Global Magnitsky Act and, once that failed, the Racketeer Influenced and Corrupt Organizations Act.

The publications of oligarchs Ivo Prokopiev, Ognyan Donev and Sasho Donchev are accommodatingly creating a media blackout as relates to the ICSID ruling by largely glossing over the news with tiny articles and without explaining what the Omani fund dropping its claim and the ICSID decision really mean. The truth is that it all shatters Vassilev’s defensive strategy about being a victim of a corporate raid, with which he is trying to escape justice. Neither the fugitive banker nor his oligarchic partners would want the Bulgarian public to know that fact so they are trying to hide it – some by making their media outlets keep silent and others by having them spew fake news. It is a veritable behind-the-scenes omerta that has been manipulating the Bulgarian public’s opinion for two decades and that was created and solidified by one person and during a particular period – in the dark years of the most criminal privatisation in any of the former Eastern Bloc countries, during the government of former PM Ivan Kostov.

It is during the days of the right-wing in power, under the dictatorship of the Commander (as Kostov is referred to), that the CorpBank affair started. The groundwork for the pyramid that eventually stung thousands of depositors and cost the state BGN 3.7bn (a loan given to the Bulgarian Deposit Insurance Fund by the state, which means the money came out of the pockets of all of us, the taxpayers) was laid. Shortly before the end of his term in office, and having already gifted his favourite protégés Sasho Donchev, Ognyan Donev and Ivo Prokopiev big shares of the national economy’s pie, tasking them with taking up political engineering through the establishment and funding of media outlets and NGOs, Kostov made the first steps towards creating the CorpBank pyramid. He put Tsvetan Vassilev at the helm of the lender and helped him gain control over it. So, in 2000 the future financial schemer was registered as executive director and board member of CorpBank. Around that time, the lender saw changes to its shareholding structure, moving from being 61% owned by Bulbank (the minority share was held by the former USSR state development corporation Vnesheconombank) to being owned by 10 foreign companies, most of them shell companies. In 2001 Kostov was no longer in power, but by that time, like the rest of his retirement plan instruments – the shares of Bulgaria’s economy he gifted his oligarchic protégés – this one was already yielding fruit for him and his protégés. The roles were clearly defined – and while Donchev, Donev and Prokopiev put their hands on entire sectors of the economy like energy and pharmaceutics and used the stolen money to fund media, NGO and political projects in service of them and their mentor, Vassilev concentrated on the banking industry.

The goal was clear – to defraud people, businesses and even the state of their deposits and money and turn CorpBank into a piggy-bank for the oligarchy, providing a constant financial flow for the fugitive banker, his close circle and his mentor’s projects. It was a huge financial pyramid similar to the one built by Bernard Madoff in the US. Unlike the American case, however, CorpBank was used not only for personal gain but an attempt to replace an entire political system with a sham of a democracy. It was done by weaving a huge network of behind-the-scenes connections and financial flows directed towards politicians, businessmen, journalists and NGOs affiliated with the oligarchy in the form of consultancy contracts, unsecured loans and preferential interest rates on VIP loans. That ugly reality was exposed in the aftermath of the CorpBank collapse and scandal.        

What do the numbers say?

After the lender was placed under the BNB’s special supervision it was revealed that of the BGN 5.6bn extended in loans BGN 4.05bn, or more than two-thirds, of the loans’ value had to be shaved off because of lack of adequate security. In other words, no assets that could actually be monetised to make up for the yawning liquidity gap were pledged in exchange for the borrowed money (which is exactly why the state gave up trying to bail out CorpBank and decided to request a bankruptcy proceeding). Over BGN 3.5bn of said loans were syphoned off personally by the fugitive banker and his cronies in the form of unsecured loans extended to companies affiliated with Vassilev. As you can guess, during that entire time money flowed to the family of Ivan Kosotv too. According to the CorpBank bankruptcy administrators’ lists of VIP depositors, Ivan Kostov and his wife Elena had BGN 729,640 in CorpBank deposits at preferential interest rates – an enormous sum, of which the Commander stubbornly claims that it comes from savings and lucrative investments. The lie in this is betrayed by another fact, revealed during the CorpBank case against Tsvetan Vassilev and 17 other defendants that was launched in the Specialised Criminal Court in February 2018.

In his testimony, the lead witness in the trial Biser Lazov revealed that the fugitive banker arranged for his mentor Ivan Kostov and his family a monthly payment of BGN 25,000. The Commander’s daughter, Mina Kostova, received BGN 30,000 a month under the terms of a consultancy contract for months. Of course, all the other people who Vassilev and his mentor believed can be useful in publicly lobbying for them also got monthly payments. That includes a whole horde of journalists, who continue to disseminate the manipulations of the fugitive banker to this day. One of the names is Ognyan Stefanov, owner of the website serving as Vassilev’s personal press office Frognews, who was given a BGN 300,000 loan by CorpBank under the orders of the fugitive banker himself. According to Lazov, until 2014 Stefanov was also given cash from the safe of “The Firm” – a parallel structure of dozens of companies affiliated with the Bulgarian Bernard Madoff, which took out unsecured loans and thus syphoned off CorpBank. Money was also given to Sonya Koltuklieva, who nowadays is a main cog in the oligarchy’s Fake News Factory made up of the media outlets of Prokopiev, Vassilev, Donev and Donchev and their satellite websites. Other names in that category are Lyuba Kulezich and Miroslav Ivanov. The list of people who were paid fees in that way is probably as long as the huge indictment against Vassilev and his cronies filed by the Specialised Prosecutor’s Office in court.          

What is tragic for us as a society and the state as a whole is that the payments did not stop after the CorpBank scandal broke and Tsvetan Vassilev fled Bulgaria. The only thing that has changed is the location form which the money is ordered – from Sofia to Belgrade, where the fugitive banker has been getting money from the secondary plundering of CorpBank for years now. That shady plan was put in motion by Vassilev back in July 2014, when his whereabouts were still unknown, and carried out by his accomplices in Bulgaria with the help of his Russian protectors, including the Kremlin-tied oligarch Konstantin Malofeev. Even though the attempts of Vassilev and Malofeev to put a hand on a number of the golden geese funded by CorpBank failed and despite the amendments to the Bank Insolvency Act initiated by MRF lawmakers Delyan Peevski, Yordan Tsonev and Hamid Hamid and designed to prevent the secondary plundering of CorpBank (it is because of these legislative changes that Peevski has become the main target of Vassilev’s attacks in Bulgaria and abroad – editor’s note), the fugitive banker continues to receive new financial flows from assets sponsored with CorpBank money. This mainly concerns the military plant Dunarit and the hotel chain Sana Space. The result is that five years after the scandal with the lender, no one has been punished for the engineered failure of CorpBank. Something more, the money from the bank is still being used to fund campaigns and lawsuits in service of Tsvetan Vassilev and defaming not only the people trying to bring justice for the committed wrongdoings and restore what was stolen, but the state as well.

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