Prosecution Absolves BDB: Georgi Gergov Not a Related Party and the Credits to His Companies Companies are Legal

“Independent” expert opinions defending the state bank provided by a former prime minister and a lawyer who had been granted a loan by the BDB director, Bilyan Balev

The public prosecution has not found any violations in the decision of the state-owned Bulgarian Development Bank (BDB) to issue loans to two companies belonging to Georgi Gergov, member of the Executive Board of the Bulgarian Socialist Party, and his family.

The loans worth EUR 31.8 mln. were granted at the end of 2016 to International Fair Plovdiv JSC (“Mezhdunaroden Panair Plovdiv” AD) and Sunny Day JSC (“Slanchev Den AD”). The decision to finance companies related to a businessman with clear links to a political party prompted the Anti-Corruption Fund Foundation (ACF) to file reports with the public prosecution and the Bulgarian National Bank.

How does the Sofia Public Prosecution Office interpret the proof of links between political parties and individuals associated with them?

Upon the prosecutor’s request, the BDB leadership provided legal opinions, according to which, pursuant to the Commercial Act, the companies belonging to Gergov’s family and the Bulgarian Socialist Party (BSP) were not related entities despite the fact that Gergov was a member of BSP’s Executive Board at the time the loans had been granted. The prosecutor’s decree points out that “Georgi Gergov’s factual affiliation with BSP is legally irrelevant because he, being a physical person, a member of a political party, has not been granted credit”.

According to the ACF legal team, however, the applicable definitions in this case are the ones in the Credit Institutions Act, which are much broader and outline an explicit prohibition on “granting credit to political parties and individuals associated with them”. The application of a much narrower interpretation to the Commercial Act is manipulative. It also contradicts the clearly outlined restriction in the bank’s statutes which prohibits the granting  of credit to companies owned by politicians.

(According to the Commercial Register, some amendments in the BDB statutes, which are in the spirit of the stands submitted to the Public Prosecutor’s office, were enacted on 4 December 2017. They clearly specify that only the women’s, youth’s and other organizations, established by the political parties themselves, are considered entities affiliated with those political parties.)

Two legal opinions – both of them issued by politically-affiliated jurists:

One of the legal stands, commissioned by BDB and submitted to the public prosecutor’s office, had been issued by Prof. Ognyan Gerdzhikov, a lecturer at the Law Department of Sofia University and a provisional prime minister in 2017, appointed by the President Rumen Radev. The independency of such a stand, however, is extremely controversial from a legal point of view because the originator occupied the position of a provisional prime minister in the period January – May 2017 and his ministers exerted direct control both upon the state bank, and the company the credits were granted to. Some of the legal actions the signal referred to were conducted in that period, too.

The other legal stand, provided to the public prosecutor’s office, was issued by Rosen Karadimov, from the same department (editor’s note: Karadimov is an ex-chairman of BSP’s youth organization and a counselor of the prime minister Stanishev), and also benefited the state bank. It is interesting to note that, according to the financial reports of the British company FINNIVEST LLP (100 percent owned by the CEO of the bank as of that moment – Bilyan Balev), Karadimov was granted a personal credit amounting to 114,480 British pounds, which seriously questions the independence of the legal stand given in BDB’s favour.

The issued decree, which enacted a refusal, does not bear evidence of any individuals interrogated, except for the persons who had sent the signal, and all the remaining stands from BDB and the company that had been granted the credit were collected in a written form.

The Public Prosecutor’s office has not detected any violations of the law in the remaining items pointed out by the signal, including the fact that a credit was granted to International Fair Plovdiv JSC (“Mezhdunaroden Panair Plovdiv” AD)  without its annual financial reports having been approved, as well as the lack of approval of the company’s General Assembly in case of credits granted in favour of third persons, as the case with the credits intended for MPP is.

The Anti-Corruption Fund’s legal center states it will appeal against the decree enacting the refusal to conduct pretrial proceedings before a higher instance. “We can hardly expect from a centralized structure, such as the Public Prosecutor’s office, to find sufficient grounds for starting pretrial proceedings against a person who has publicly declared he is on close friendly terms with the chief prosecutor”, comment the jurists from the legal center.

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