The KTB FILE — THE MISSING NAMES, PART 3: KTB’S MEDIA FLEET AND THE PROSECUTION SERVICE takes the audience on a journey that sheds light on a cluster of media, close to figures in the innermost circle of the KTB, and their quiet transformation into uncritical lacqueys of the Bulgarian Prosecution Service.

The third part of the investigation looks at the missing names in the investigation of KTB’s bankruptcy, focusing on one of the most telling stories in the long-running scheme employed to acquire media influence in Bulgaria against cash transfers. It shows how an offshore company incorporated in a small Caribbean island poured millions of Euros misappropriated from the KTB into Bulgarian tabloids and how Ivan Geshev, the prosecutor supervising the investigation, failed to investigate said tabloids while basking in their enthusiastic support en route to the top prosecutorial job in Bulgaria.

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‘Many investigations of the defunct KTB shy away from the media implications of the grimy affair, possibly out of a misguided sense of professional solidarity, refusing to shine a bright light on the financing of other media outlets. The bill of indictment submitted to court in the KTB bankruptcy case clearly shows that the Prosecution Service also failed to pursue this line of enquiry at the pretrial phase of the investigation, which lasted three and a half years’, Nikolay Staykov, author of the investigation, points out. ‘However, media financing was an important part of the Bank’s modus operandi, which relied on depositors’ money to garner media influence, subsequently used in the pursuit of overtly political aims. These, in turn, ensured that those in the innermost circle of the Bank had continued access to financing in the form of deposits raised from State-owned enterprises and other public institutions, as well as to the public procurement market, whilst enjoying the protection of regulatory bodies’.

The total amount the bankrupt KTB ‘invested’ in the acquisition of media influence is estimated at BGN 350 million to BGN 500 million. The money was disbursed to dozens of websites, newspapers and national private TV channels. The media capture scheme involved both direct loans to publishing companies and covert advertising agreements ostensibly concluded in respect of ‘information services’, along with loans to side-line businesses of media owners. The entire information about the financial transactions and transfers in question was available to investigators but six years after the commencement of the prosecutorial investigation, no party has been held to account or brought to justice.

Instead of an investigation directed by the Prosecution Service, we have witnessed an entirely different effect — a wholly uncritical reporting of the work of the Prosecution Service by all implicated media, which eventually escalated into a direct and previously unseen media support for Ivan Geshev, the prosecutor in charge of supervising the KTB investigation, who has already been elected Prosecutor-General of Bulgaria.

Out of many stories throwing light on the covert acquisition of media influence using KTB money, we chose to tell the most poignant — the story of an offshore company with unknown beneficial owners incorporated in the Caribbean island of Anguilla, which received a loan of EUR 9.7 million against false collateral in a ship that the company never acquired, the Bank failing to obtain physical proof of the collateral. The collateral (ship mortgage) can be checked by anyone in the public ship register of Malta where the vessel is registered. ‘For a small fee each KTB auditor would have been able to verify the existence of the collateral. No such check was ever performed’, Nikolay Staykov said.

Having traced the funds originating from this and other offshore companies, we found out that significant amounts were paid into the private bank accounts in the KTB of Nedyalko Nedyalkov, the owner of a host of tabloid websites, ostensibly on the grounds of ‘acquisition of company shares’. No public information is available about the assets acquired. The money channelled through Nedyalkov’s accounts in the KTB was used to finance new media, with the monthly transfers to PIK News EOOD reaching BGN 100 000. In 2019, this website, well known for its pro-government stance, organised ‘citizens’ protests’ in support of the nomination of Ivan Geshev, the prosecutor in charge of the KTB investigation, for election as Prosecutor-General.

‘The KTB investigation is a missed opportunity to shed light on the financing of a significant part of Bulgarian media that — whether voluntarily or involuntarily — were complicit in the bankruptcy of the fourth largest Bulgarian bank. It is a missed opportunity to normalise the rapidly deteriorating media environment in Bulgaria. We therefore believe that the topic is highly relevant to the Bulgarian audience’, Mr. Boyko Stankushev, Head of the Anti-Corruption Fund, commented.

The investigation clearly shows that the financing scheme involves documentary fraud with implications for several jurisdictions. ACF’s legal team believes that these should be properly investigated and that a probe should be launched in parallel to establish whether the national authorities’ failure to do so to date constitutes a case of concealment and complicity on the part of investigative bodies and auditors alike in the commission of a crime both prior to and after the Bank’s closure.

Watch the full video here.