Game of Parking Lots: Persons Linked with Kapitan Andreevo Scandal Expand Their Reach to Bulgaria’s Northern Border

Is the Kapitan Andreevo scheme being replicated at Bulgarian border crossings on the Danube River; are public bodies protecting unfair competition and attempts to create a monopoly: these and other questions have been addressed in Game of Parking Lots, a video series created by the Anti-Corruption Fund Foundation (ACF).

The investigation begins with an analysis of а questionable public procurement procedure which enabled Ruse Municipality to sell the building rights for a municipal plot of 114 decares, located in the vicinity of Bulgaria’s border crossing with Romania, to a private company linked with persons implicated in the Kapitan Andreevo scandal. The series reveals several questionable practices employed by the operator of the privately owned parking lot for heavy vehicles which has since been built on the municipal plot. The project has also drawn criticism from operators of other parking facilities who are concerned about the future prospects of their businesses.

The first part, “The Capture of the Danube Bridge Crossing”, which has been released today shows that the only two participants in the public procurement procedure to sell the building rights for the plot are either directly or indirectly connected to Razmig Kerope Chakurian – Ami whose company IBTT Ltd. operates the parking lot at the Kapital Andreevo border crossing.

“The first indicator that there is an attempt to replicate the Kapitan Andreevo model – in which private companies essentially took over important functions of key public institutions – are the involved persons,” said Lora Georgieva, ACF legal expert.

IBTT Ltd. is one of the participants in the procurement procedure, announced by Ruse Municipality in the summer of 2022. Chakurian is the managing director of the company and owns 40% of its shares. The remaining shares are owned by the financial advisor and former deputy governor of the Bulgarian National Bank, Emil Hursev.

While there is no information about formal links between Hursev and Tir Parking Ltd., the obscure company which, on 4 November 2022, was announced as the winner in the tender procedure, by February 2023, he was already a majority owner.

“The clear links between the participants in the tender procedure are extremely concerning and raise many questions of whether this competition was already decided from the start,” said Georgieva. “In addition, the way in which the public procurement procedure was conducted and the actual text of the contract between the municipality and the private company also lead to similar conclusions.”

The tender procedure and the contract are not in line with good practices and contain no guarantees safeguarding public interests:

• the public procurement procedure was initiated in mid-August 2022, a time when staff at most public and private companies take their annual leave;
• candidates had just two weeks to submit all tender documents with the deadline (2 September) at a time when many employees were still on holiday;
• BGN 18 mln., the agreed amount, may initially appear large, however it will be paid over 30 years, an unusually long period of time. This means that annual installments of less than BGN 600,000;
• the asking price has been set arbitrarily, without any financial analysis of the project;
• the municipality had not conducted an analysis of the awarded company’s technical capacity to build the parking lot, nor of its financial capacity to complete the project;
• the awarded company had been founded just two days before the deadline for the submission of tender documents. Both the company and its sole owner Elshitza 99 Ltd. lack experience in the building and operation of parking facilities.
• the contract guarantees are very low only amounting to two installments;
• the contractual penalties are very low in comparison to the cost of the building rights (0,2%, 0,5% and up to 5%) with the basis for the estimate being the tax valuation of the plot which is much lower than its market price.
• no requirements are placed on the private company on how to operate the parking facility, therefore, once the parking lot is built, the municipality will have no say in how it is used, who has access to it, what fees are collected and what other facilities are built;
• all profits generated by the parking facility and any commercial facilities located on its premises will go to the private company only.

“All of these details lead to the conclusion that the municipality’s interests as an owner of the plot have not been defended,” said Lora Georgieva, senior legal expert at ACF. “On the other hand, the public interest in the existence of a parking service for heavy vehicles in the vicinity of Ruse near the border with Romania has not been defended either. Once the facility is built, the municipality has no control, everything depends on the goodwill of the private company.”

The municipal authority’s decision is also questionable from a financial point of view. Out of several possible alternatives, Ruse Municipality essentially chose the least profitable one. According to the economist Georgi Angelov, the municipality could have implemented the project independently, generating millions of levs in profits each year. Considering the large number of heavy vehicles passing the border crossing at Ruse and the high profit margin of the project, the municipality would have recovered its investment in a year or two, said the economist. Another alternative would have been to still opt to sell the building rights for the plot but to ask for a fixed percentage of the profit in addition to a fixed annual fee, or to limit the amount of time that the private company could have operated the facility.

ACF approached Ruse’s mayor Pencho Milkov for comments but was unable to obtain any. Instead, we were directed to the mayor’s deputy, Dimitar Nedev, who in turn, directed us to Elena Todorova, head of the municipality’s legal department. Asked whether the municipality had carried out an analysis of the financial aspects of the project before deciding to sell the building rights, she provided the following answer: “Considering the financial analysis, the market in Bulgaria is very small and, on this basis, we cannot estimate the level of profit of the project or whether there will be any profit.”

Boyko Stankushev, director of ACF, called on all relevant institutions to investigate the issue.

“The red flags in the public procurement procedure depicted in the first video series are only the tip of the iceberg,” he said. “There are further revelations — about the manner in which the parking lot is operated, how heavy vehicle traffic is directed and others — which are extremely concerning and raise further, even more serious questions.”