ACF Rings the Alarm About Irregularities in Preventive Disinfection Along the Bulgarian-Turkish Border
At the end of October, the Anti-Corruption Fund (ACF) notified the Specialized Prosecution and the Public Financial Inspection Agency (PFIA) of infringements relating to the unlawful award of a contract for the provision of services, strictly within the remit of competence of a public body, to a private company.
On 12 March 2013, the Bulgarian Food Safety Agency (BFSA) signed a contract for the performance of veterinary controls along the Bulgarian-Turkish border with P.F.C. EOOD. By the end of 2018, the profit generated by the private company under the contract stood at BGN 27 million. The information has been obtained from the annual financial statements of P.F.C. EOOD, which are publicly available.
The case publicized by the media as the Golden Puddle captured strong public interest when it became known that P.F.C. EOOD had been awarded the contract for preventive disinfection of means of transport entering Bulgaria from Turkey without having any relevant prior experience. In fact, the company to which responsibility was delegated to protect Bulgaria from the risks arising from the complicated epizootic situation in Turkey at the time, was registered on 22 February 2013, only several days before it landed the contract for preventive disinfection.
The process that led to the award of the contract in question to a newly registered company is shrouded in mystery. There is no record of a notice of tender ever being published on the website of the agency, inviting applicants to submit tenders under the Public Procurement Act or another special law.
It is also curious that the owner of the selected contractor — Lidia Valentinova Lyubenova — has been identified in the media as a relative of Krasimir Kamenov (a.k.a. Karo), a prominent figure in criminal circles. Since the date of contract signature, the ownership of P.F.C. EOOD has changed hands twice. On 8 August 2019, a new owner of record was entered into the Company Register — Atanas Veselinov Edrev — formerly the owner of a security company that doubled as a detective agency. Borislav Georgiev Karev, the current Managing Director, used to sell gaming equipment and is a former business associate of Dimitar Todorov Badzhakov who has been arrested for trafficking cigarettes and appears in several media reports in connection with other criminal activities.
According to current legislation conducting preventive disinfection of the means of transport entering Bulgaria is performed by official veterinarians who are BFSA employees. The law does not provide a possibility for the outsourcing of disinfection to external contractors.
The contract concluded envisaged that the contractor would not only perform preventive disinfection (an activity within the exclusive remit of competence of the Bulgarian Food Safety Agency — a body governed by public law) but also collect stamp duty and other charges and pay these into the State budget. Neither the Stamp Duty Act nor the Bulgarian Food Safety Agency Act envisages a possibility for stamp duty to be collected by private companies. Stamp duty is exclusively collected by judicial authorities or public sector organisations in an amount set by tariffs approved by the Council of Ministers. The fees in question are paid into the State budget, unless otherwise expressly provided by law. In the case at hand, all requirements laid down in the Stamp Duty Act have been breached because the relevant fees are collected by a private company and make up a significant share of its earnings. It is further unclear what share of the charges collected has been paid into the State budget nor is there any clarity as to the method used to calculate the fees, other than this is purportedly done on the basis of a contract, which the BFSA has refused to make public. Furthermore, there are no apparent legal grounds for remitting the fees collected to the Food Safety Agency given that the services for which they are charged are provided by a different legal entity.
Our attempts to obtain information about the contract concluded between the BFSA and the private company have not met with success. On 5 May 2019, the ACF won a lawsuit under the Access to Public Information Act. By its final judgment, which became effective in May 2019, the Court ruled that the Agency’s refusal to provide information about the contract concluded with P.F.C. EOOD, the award procedure, collected fees and the remittances into the State budget was unlawful and should be revoked. The court instructed the BFSA to provide access to the information sought. Despite several insistent reminders, the BFSA refused to comply with the instructions of the court for six months. It was only in mid-November this year that we learned that the BFSA has launched a procedure to ensure compliance with the instructions set out in the court judgment.
“Despite the manifest refusal of the BFSA to ensure that its actions conform to the requirements for transparency, the results of our monitoring of publicly available information, including the answers to questions asked in Parliament, warrant the conclusion that the multiple infringements of the requirements and procedure stipulated in the Public Procurement Act, the Veterinary Act and the Stamp Duty Act suspected by the ACF were justified,” said Boyko Stankushev, ACF Director.
“Our conclusion is that preventive disinfection and the collection of stamp duty and other charges have been outsourced to P.F.C. EOOD unlawfully. Furthermore, the procedure conducted by the BFSA failed to ensure an objective and independent appraisal on the part of the contracting authority nor did it provide guarantees that the contractor had the necessary capacity to deliver the services envisaged in the contract,” he said.
Media publications warrant the conclusion that the fees collected in respect of preventive disinfection exceeded the cost of service delivery multiple times. Only part of the amounts collected were paid into the State budget, the remainder making up most of the earnings of the company. The analysis of publicly available information indicates that the mark-up charged by the service provider was between 20 % and 50 % of the fee determined by law.
According to the annual financial statements of P.F.C. EOOD for the period 2013—2018 filed on record with the Company Register a significant increase was registered in both the income and profit generated by the company. In 2016, the net profit from operation (after tax) stood at BGN 6.56 million, increasing to BGN 7 million in 2017 and BGN 8.7 million in 2018. By way of comparison, the profit generated in previous years was significantly lower, respectively BGN 3.3 million in 2015 and BGN 1.3 million in 2014. In 2013, the company reported a profit of BGN 55,000 generated in less than a month. To date, the company has not published its annual financial statements for 2014. Instead a blank form has been uploaded onto the website of the Company Registry. The position of the ACF is that this demonstrates blatant disregard for statutory requirements and constitutes an attempt to conceal financial data subject to public disclosure.
The highly lucrative nature of the service provided warrants the question of why disinfection is not performed by the public body, particularly in light of the express provisions of the law according to which the BFSA has exclusive competence to do so.
The facts established give rise to reasonable doubts that statutory powers are unlawfully exercised and that the outsourced activity is performed in breach of applicable law.
The ACF calls on the Specialised Prosecution Service and the PFIA to conduct a check in order to establish whether the circumstances described above constitute an infringement of applicable law.
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