Property Swaps Between Construction Firm and High-Ranking Politician Raise Suspicions about Fictitious Prices

19.03.2019 The Chairman of the parliamentary group of ruling party GERB, Tzvetan Tzvetanov, and the Sofia-based construction firm Arteks have executed property swap transactions involving unrealistically low prices – this is the conclusion of an analysis of the transaction documentation, performed by experts from the Anti-Corruption Fund (ACF) in cooperation with Radio Free Europe.

As a result of raised suspicions regarding the real transaction values, ACF will request an inspection from the relevant authorities for potential violations of ethical standards, false statements, and possible tax evasion.

In June 2018, Tzvetan Tzvetanov and his wife, Desislava, signed a swap agreement with the firm Arteks Engineering 2000-5 OOD[1], transferring their possession of two apartments and two parking spaces, located at Elemag Street in Sofia. An additional payment of BGN 100,000 to the construction firm has also been noted in the property deed. In exchange for the specified properties and the additional payment, Tzvetanov and his wife acquired an apartment of 240 sq. m., located on the 6th (last) floor of the building, together with an anteroom, a personal VIP elevator of 33.40 sq. m., and a double garage in one of the most luxurious residence buildings in Sofia – the newly-constructed Letera Building located on Latinka Street in the Iztok neighborhood. The apartment occupies the entire sixth floor of the building and includes the adjacent shaft of the VIP elevator. The tax assessment of all the acquired properties was BGN 386,654.40.

The tax assessment of the two exchanged apartments (with a total surface area of 192.76 sq. m. and situated on the 5th floor of an old building, and the two parking spaces with a total surface area of 33.32 sq. m.) amounts to BGN 287,438. Thus, the difference between the two tax assessments is around BGN 100,000 – as much as the additional payment made by the Tzvetanovs according to the deed. All taxes and fees on the transaction were calculated based on the tax assessment of the more expensive property – BGN 386,654.40.

However, the tax assessment differs considerably from the market prices of similar high-end properties in Sofia. This has been established from media statements by the manager of Arteks who has repeatedly stated that the firm’s properties are sold at prices reaching EUR 3,000 per sq. m. The stark discrepancy has also been confirmed in conversations with Arteks’ sales team, who said that the apartments located on the high floors of the same building on Latinka St were sold at about EUR 2,200 per .sq. m. without VAT, or EUR 2,640 per sq. m. with VAT. Given the rates provided by the construction firm itself, and considering that the apartments at Elemag St were sold for EUR 2,000 per sq. m., it can be concluded that the realistic additional payment should have been around EUR 360,000 (BGN 700,000). Moreover, the latter amount does not take into account the unique characteristics of the acquired property (private VIP elevator, private connection between the garage and the apartment), which means that the real additional payment should exceed multiple times the EUR 50,000 noted in the deed.

When contacted by Radio Free Europe for comments on the real estate market, a representative of Arteks’ sales team, Mesut Kozumali, explained that prices had increased in recent years, reaching up to EUR 3,500 per sq. m. Mr Kozumali gave the firm’s buildings in the neighborhoods Lozenetz, Iztok, and Izgrev as examples. When asked whether the firm offered extras, such as private elevators, he replied that such features had been included in apartments in the past, but were not being routinely included at the time of the inquiry. Therefore, according to the firm’s representative, an elevator was considered a rare special feature, added to price of a property.

The discrepancy between the market rates and the tax assessments of the properties is so significant that ACF experts believe the difference in the additional payment, offered by the Tzvetanovs, should have been much larger.

Transactions involving other properties in the building also point to a considerable price difference. In 2017, a smaller apartment with a surface area of 175.60 sq. m. (instead of 240 sq. m.), located on a much less attractive lower floor and without a separate VIP elevator, was sold for EUR 245,000 (around BGN 480,000). In addition, the lower-floor apartment had two parking spaces (total surface area of 29 sq. m.), located in a common garage, instead of a separate double garage with a surface area of 42 sq. m.

The above-stated facts raise doubts as to whether the price and the additional payment, noted in the exchange of property deed, were real. If this was not the real price and the Tzvetanov family had in fact transferred a larger additional payment, then the parties to the transaction violated Art. 25, par. 9 of the Notaries and Notary Activities Act by submitting to the notary a false declaration regarding the negotiated payment. In addition, this would mean that the party acquiring the higher-value property (in this case the Tzvetanov family) paid local tax and registration fee on a lump sum, significantly lower than market rates, thus incurring losses to the municipal budget and the budget of the Land Registry Agency.

On the other hand, if the price, stated in the property deed, was the real price of the transaction (the true negotiated payment), doubts are raised about potential violations of the ethical norms, established by the Rules on the Organization and Activities of the National Assembly, according to which every Member of Parliament:

  • Shall exercise his authority in accordance with the rule of law and in the interests of the public, and shall adhere to the principles of impartiality, accountability, and transparency;

 

  • Shall not put themselves in a position of financial or other dependency with respect to any natural and legal persons when this interferes with the rightful exercise of their authority;

 

  • Shall exercise their authority without seeking or obtaining any material or other benefit for himself or for any related persons;

 

  • Shall not use their position to obtain special privileges or gains;

 

  • Shall not receive any gifts, unless the gifts are recorded and valued at no more than 1/10 of the basic monthly remuneration of the MP for the respective month. Any gifts exceeding the specified value shall be handed over to the National Assembly and shall be declared in a special public register.

In view of the established facts mentioned above, the ACF is referring the case to the relevant authorities and requesting a thorough investigation.

Further information on the case can be found in the following publication by Radio Free Europe:

https://www.svobodnaevropa.bg/a/29829732.html

[1] Limited Liability Company.


Сподели: