Criminal Corporate Raiding in Bulgaria

Criminal corporate raiding and legal nihilism are concepts coined to reflect Russian reality. Yet, the illegal takeover of private businesses and selective prosecution are common in some EU member states like Bulgaria, too. Of course, Bulgaria, which is currently presiding the Council of the EU, isn’t the average newcomer. In contrast to other former-communist countries in Eastern Europe which made their way to the EU, Bulgaria didn’t face a revolution. The Bulgarian communist regime fell under the pressure of its own weight – one wing of the omnipotent Communist Party trumped another. And this made all the difference.

While Bulgaria’s façade was “renovated” to appear democratic to the Western onlooker, the solid communist establishment remained in all branches of government. Not only the country carried out merely cosmetic, piecemeal reforms in key institutions and legislative areas, but also those close to the Communist Party kept their positions of influence. To give an example, it does not seem astonishing that Bulgaria’s current Prime Minister Boyko Borisov was the personal bodyguard of Bulgaria’s communist dictator Todor Zhivkov.

In a report of September 2017, the Council of Europe raised concern that the separation of powers in Bulgaria is threatened and judicial independence – compromised. In a prior statement, the President of the Venice Commission expressed disapproval of the Soviet model of Bulgaria’s prosecution which turns the institution into “a source of corruption and blackmail and creates opportunities for its use for political aims.”

These “opportunities” have been exploited shamelessly since 1989 when the communist government fell. The European Court of Human Rights, for instance, has handed down plenty of judgments against Bulgaria in which it isolates the vertical structure of Bulgaria’s Prosecutor’s Office, the inexplicable inefficient investigations, and the refusal of access to court as persistent problems. Established democracies like the UK and Germany traditionally turn down extradition requests from Bulgaria on the grounds that Bulgaria’s General Prosecutor has uncontrollable powers and acts with impunity.

In recent years, however, the problem has exacerbated. The case of Bulgaria’s Corpbank – the fourth largest bank in the country based on assets, which was ruthlessly attacked by the Bulgarian Prosecutor’s Office in June 2014, is a classic example of criminal corporate raiding and selective prosecution whose scale can rival major Russian scandals like the one described in Bill Browder’s now famous book Red Notice. Unsurprisingly, the case of Corpbank escalated into an application under the US Global Magnitsky Act for which Browder himself lobbied. The application, which is currently pending before the US Government, nominated Bulgaria’s General Prosecutor Sotir Tsatsarov and Member of Parliament and undisputed Bulgarian media mogul Delyan Peevski for sanctions. It was supported by Bill Richardson’s Center for Global Engagement.

The facts of the case remind that of a film noir scenario. On 13 June 2014, Bulgaria’s prosecution raided Corpbank’s offices under the false pretense that it was investigating a murder plot against Peevski allegedly devised by the bank’s majority shareholder Tzvetan Vassilev. The raid was shown live on television and extensively reported by Peevski’s almost monopolistic media. These events triggered a major bank run. On 18 June 2014, Bulgaria’s General Prosecutor admitted he made a mistake, but it was too late – 20% of the bank’s assets had been withdrawn in four days. The central bank declined a request for liquidity help, refused to accept a rescue plan by the shareholders, and took control of the bank.

The ultimate goal was to allow companies allegedly affiliated to Peevski to plunder Corpbank’s assets. To facilitate the “takeover,” the central bank forced Corpbank into artificial insolvency by revoking its license based on a controversial evaluation of assets, which has been kept secret to this day, and the government amended the laws several times to suit the raiders’ scheme. Meanwhile, to shut the mouth of the majority shareholder, the Prosecutor’s Office fabricated new charges against him ­– in fact, it had altered the accusations several times since 2014, finally indicting him of running an organized criminal group aimed at stealing the bank’s assets in 2017, which peculiarly contradicts the reality that the assets went into the hands of those who organized the raid against Corpbank.

Corporate raiding is certainly illustrative of the lack of rule of law and disrespect for democratic values. In addition, experts concur that it presents a serious threat to the economy and FDI. Hence, it may not come as a shock that Bulgaria has the lowest GDP per capita in the EU and that FDI has been steadily declining since 2007. Corporate raiding and selective prosecution also affect the public image of state institutions – according to an opinion poll of December 2017, 67.1% of Bulgarians don’t trust the government and 80.7% do not trust the justice system.

In the end, we also need to consider whether this Russian-inspired practice is acceptable in the EU and whether it isn’t high time for fundamental reforms in Bulgaria. Recently, following the latest Corruption Perception Index by Transparency International, which confirmed that Bulgaria is the most corrupt EU member state yet again, Bulgaria’s President Rumen Radev asked publicly the Prime Minister Borisov to disclose his ties with Peevski. He also declared that Bulgaria needs to finally tackle corruption.

This is a rather modest start towards better governance, but, at least, it looks like a start.

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