The Anti-Corruption Fund Comments on CAFIAP’s Decision to End Investigation into the Luxury Properties of High-Level Public Officials and Members of Parliament
The Commission for Anti-Corruption and the Forfeiture of Illegally Acquired Property (CAFIAP) has decided to end conflict of interest proceedings, investigating luxury property transactions involving influential public officials.
CAFIAP opened the investigation in March 2019 because of reports by media and non-governmental organizations, including the Anti-Corruption Fund (ACF). The investigations focused on the following public officials:
– Tzvetan Tzvetanov, member of parliament, deputy chairman of GERB, and chairman of the GERB parliamentary group
– Tzetzka Tzacheva, Minister of Justice
– Vezhdi Rashidov, former Minister of Culture and Member of Parliament
– Vania Koleva, Deputy Minister of Youth and Sport
– Krasimir Parvanov, Deputy Minister of Energy
– Nikolina Angelkova, Minister of Tourism
– Lozan Panov, chairman of the Supreme Cassation Court (ACF maintains that the investigation against Panov was not based on solid legal ground and could be politically motivated, hence Panov should not be grouped together with the other investigated officials).
Tzvetanov, Tzacheva, Parvanov, and Koleva have since resigned from their posts.
Less than three months later, no conflict of interest violations have been established by the investigation. No charges have been pressed against the above-mentioned officials, nor were other public institutions (e.g. the Public Prosecution) notified regarding possible wrongdoing.
The decision falls in line with a pre-existing trend of formalistic and superficial investigations by the Commission and deepens suspicions of political dependency of this public body, which is supposed to be independent but is appointed by Parliament with a simple majority vote.
ACF analyzed CAFIAP’s decisions and discovered a number of shortcomings, namely:
• The investigation did not examine the suspicions of disproportionate material benefit for the officials who were parties to the property transactions. A probe into the real market values (as opposed to the declared values) of the transactions was not carried out. As ACF announced in March, some of the involved officials obtained luxury apartments at rates up to 350% lower than the market ones (based on information obtained by the sales department of the concerned property developer, Sofia-based Artex Engineering).
• CAFIAP investigated Tzvetan Tzvetanov only as member of parliament, ignoring his positions as deputy chairman of the ruling party, GERB, and chairman of the GERB parliamentary group. Such an omission signifies a formalistic approach or serious inconsistency in how the law is applied.
• CAFIAP’s approach with regards to the known facts is also quite telling – the Commission reviews each piece of information separately, ignoring the causal links between the facts, so as to arrive at the conclusions that there were no related-parties transactions and no material benefits enjoyed by the officials. The amendment to Art. 153 (2) of the Spatial Planning Act was the only possible line examined by the investigation. The possible effect of the amendment on the construction of a controversial skyscraper by developer Artex was the only factor which, according to the Commission, could have proven dependency, material benefit, and related parties transactions. Since it was decided that such an effect did not exist, CAFIAP concluded no violations had occurred. In fact, the above-mentioned legislative amendment is only one possible reason why the officials could have been offered such attractive rates by Artex. CAFIAP should have investigated the actual terms of the deals and the potential to create dependencies and accrue material benefits for the officials, both before and after the conclusion of the property deals.
• In all decisions, the Commission ruled there was “lack of private interest”. The issue is discussed at length in the decision concerning Tzvetan Tzvetanov. CAFIAP concluded that Tzvetanov and the developer, Artex Engineering, were not related parties. Such links were not established between Tzvetanov and the private persons, partners in Artex. Since there were no related parties, there was no private interest – a prerequisite to prove the presence of conflict of interest. CAFIAP also ruled out the suspicions regarding Tzvetanov’s ability to influence other persons and institutions, saying no hierarchical chain of command existed. These conclusions are rather questionable, considering the legal definition of the term “related parties” – private persons and/or organizations and public officials, between which relationships of economic or political dependency exist, which cast reasonable doubt over the officials’ objectivity and impartiality. Apparently, CAFIAP does not regard property purchases at prices several times below market rates as a factor, which could put the buyer into a position of dependency, calling into question their objectivity and impartiality.
• None of the decisions comment on the sources of funding for the transactions. In this regard, CAFIAP’s investigation only relied on statements by the implicated officials. The decisions show that CAFIAP did not apply any other methods to verify the testimony and check the sources of funding.
• In most of the decisions, CAFIAP did not comment on the transaction values, which were significantly below market rates and in some cases – even below the property tax valuation (the most conservative estimate). The mechanism of payment was also not checked and discussed. Only in the case of Tzetzka Tzacheva comments were made regarding the transaction value. The decision referred to a preliminary contract, presented by the former Minister of Justice, according to which the apartment had been bought off-plan with the price not including finishing works. This fact, according to CAFIAP, determined the lower price paid. However, the preliminary contract clearly indicated that the price of EUR 600 per sq. m., mentioned in the notary deed, did include all the finishing works, required by law in order for the building to be considered habitable.
• CAFIAP did determine that the amendment to the Spatial Planning Act did contain provisions beneficial to Artex. However, the Commission did not find it problematic that a member of parliament had voted in favor of the amendment as there was lack of “private interest” (determined by the decided absence of related-parties transactions and the decided lack of connection between the investigated persons, on the one hand, and the owners and managers of the developer, on the other).
The CAFIAP chairman – until recently on leave due to investigations because of discrepancies in his asset and property declaration – has been selected with the approval of the GERB parliamentary majority and depends on them to keep the position. This questions his and his Commission’s ability to effectively and impartially counter high-level corruption.
ACF has sent a report regarding possible tax evasion and failure to report all sources of income on behalf of most of the above-mentioned officials to the National Revenue Agency. We look forward to the results of their investigation and we call for independent and impartial analysis of the case.