EU Financial Interests Watchdog Sleeps through Scam with Rent-a-Car Subsidy

by Димитър Стоянов

The owner of “Retro Museum Varna” Tsvetan Atanassov told Bivol how a businessman from the town of Peshtera had tried to sell him a new Mercedes, bought under a European program for advancing rent-a-car services in rural areas. His complaint to the Interior Ministry’s Protection of the European Union (EU) Financial Interests Directorate (AFCOS), tasked with investigating abuses of EU funds, has ended in the “round folder” (Bulgarian slang for trashcan). Once our media began investigating the case, the State Fund Agriculture (SFA) announced that it had imposed a 100% penalty and would demand back the BGN 370,000 for 12 Mercedes A-Class cars. What the Interior Ministry is doing is not clear to this day.

Right after we exposed the guesthouse of the former Deputy Minister Alexander Manolev, the same one with the mineral water pool, our team was swamped with stories about irregularities in the EU programs. Tzvetan Atanassov from the Black Sea city of Varna also approached Bivol. He is known as the creator and owner of the Retro Museum Varna – Museum of Socialism.

Atanassov told Bivol in a camera-recorded interview that about three years ago he had a business relationship with Dinko Kushev from Peshtera, who also owns a museum – “The Cars of Socialism”. Atanassov has sold to Kushev a dozen vehicles from the socialist era such as Moskvich, Lada, and Volga. The buyer has offered to pay for them through barter, Atanassov says, by trading the socialist vehicles for a brand new Mercedes-Benz A-Class. Kushev has informed him that he has acquired the German car under a European program financed by the SFA to advance rent-a-car services in Peshtera. Therefore, he would not be able to transfer it formally until the end of the project’s five-year monitoring period.

Rent-a-Cars for sale on a car-trading site?

According to Atanassov, three years ago, Kushev had boasted to him that he had been able to “sell” several cars under this scheme. Atanassov also said that Kushev had offered cars for sale on sites such as mobile.bg and cars.bg. The car sale scheme appears to have included a long-term bogus car rental contract and a subsequent car transfer. The direct sale of vehicles is a risky business because a subsequent inspection by the SFA may detect it.
We met with Dinko Kushev to seek his stance on the subject. He described the allegations as completely unfounded. There had been such a project, but the company had been renting the cars, as described in the application under the SFA program, and the beneficiary company had owned all 12 Mercedes cars purchased under the project.

AFKOS must investigate but is unwilling

Tsvetan Atanassov told our team that he had decided to exercise his civic duty and in January 2019, he had referred the case to AFKOS. His communication with the Head of the Directorate, Ivaylo Nikolov, however, had left him speechless and dumbstruck. The Directorate had replied that his claim did not comply with the additional provisions of the European Structural and Investment Funds counter fraud guidance. The AFCOS has asked for a clear reference to the specific project – the funding program, the specific unit that has approved the financial assistance and a detailed description of the irregularity and has given Atanassov a five-day deadline to align his complaint with the requirements.

In practice, Ivaylo Nikolov’s letter shows that a common citizen, without having authorized a lawyer and without friends in the State administration, who can possibly write their complaint, has no chance to approach AFKOS and be in compliance with the regulatory requirements.

However, the Directorate had sent Atanassov’s complaint to the Main Directorate National Police to inform them and to launch actions under its competence, because they believed it contained information about a committed crime.
Atanassov says he only wanted the Interior Ministry and AFKOS to check whether the vehicles purchased under a European program had been offered for sale through online trading platforms such as mobile.bg and cars.bg. Common citizens cannot obtain legally information on the subject, but the Interior Ministry and the Prosecutor’s Office have mechanisms in place.

The Interior Ministry does not say whether it is probing the Mercedes scheme

To be unbiased, we decided to approach AFCOS and ask for their stand on the subject. We wrote a letter to them, requesting an interview with their leadership. They replied that they had forwarded it to the Interior Ministry’s press office and were awaiting permission. Two weeks later, a little edgy because of the long wait, we asked the press office what was happening with the permission or a decline of the requested interview. The reply was that the press office knew nothing about such an interview.

We requested again an interview with the Director of AFCOS. This time from the Interior Ministry’s press office. Our second letter was more successful, at least in theory. They denied a video interview but promised to answer the questions if we put them in writing. We decided to compromise and sent a letter with our questions. When they saw him, the Interior Ministry told us to “ask the questions under the Access to Public Information Act, (APIA)”. We did and have been waiting for several weeks to receive an answer by the Interior Ministry whether they are checking the complaint notifying them that Dinko Kushev had offered for sale cars acquired under by the SFA’s Rural Development Program before the expiry of the five-year monitoring period.

We wanted to find out what cases of irregularities with European funds are being investigated by AFCOS, what is the Directorate’s budget, how many employees are there and on how many cases do they work on average per year. We also asked about the success rate of the Directorate – how many of the investigations found irregularities and resulted in corrections, sanctions, and charges against beneficiaries? The behavior of the Interior Ministry and their refusal to communicate with us makes us suspicious that the Directorate is hiding something…

Reshuffles at the SFA lead to more transparency

When we sent identical questions to the SFA, their answers were comprehensive and thorough, something that was not typical of the previous management. We learned that the Fund has data on four projects of individuals from the Kushev family. The first one they mentioned is a project of ASI TOUR with manager Asibina Yusufova Kusheva, a relative of Dinko Kushev, for “Remodeling of Existing Premises in a Recreation Area and a Fast Food Restaurant in Peshtera”.

The project, which had been monitored until October 8, 2015, had not been in the sample of risk analysis and there had not been an ex-post verification after the final payment in 2012. The second project, indicated by the administration of the Fund, is of Art Design Ltd. with manager Nina Georgieva Kusheva, wife of Dinko, for the “Purchase of Rental Vehicles for Non-agricultural Activities”. This is exactly the project that should have developed the rent-a-car business. Following a request from the Interior Ministry Regional Directorate in the city of Pazardzhik, the Fund had conducted a check on the spot after the payment. “The business plan has been badly implemented for three years. A financial correction decision has been issued for 100% of the subsidy paid.”

The Fund experts have not collected data on car sales. The beneficiary company has presented to the inspectors contracts and invoices for over 140 car rentals – from one day for personal use, to almost one year for office use. The vehicles have been leased to repeat users, both companies and individuals, including to ASI TOUR, for which it became clear that it is owned by Dinko Kushev’s mother. The latter finding also corresponds to Tsvetan Atanassov’s complaint.

Now, the Fund will try to collect back the subsidy and will probably enter a court battle with Kushev. Of the more than BGN 533,000 in approved project costs, the SFA had financed over BGN 373,000.

The family also has two unrealized projects. One is of DK Travel Ltd. with manager Jamal Yuseinov Kushev, who is the husband of Asibina. He has signed a contract for the construction of a family hotel for rural tourism in Peshtera. However, no final payment request has been made and the contract has been canceled.

Evelin Demirov Kushev, who is Dinko’s brother, has tried to obtain financing through the company Ecobalcan Ltd., whose manager he is, for a project titled “Riding Jet Boats in the Batak Dam, Water Attractions, Bike Rides and Off-road Excursions with Crossover SUVs in the Region”. However, the project has been rejected.

Asibina Isufova Kusheva is the manager and owner of the legal entity EUROPACONSULT BG, which is registered as a consulting company for European projects. However, the SFA failed to tell us whether this company has consulted projects financed by the Fund because they did not maintain a register with consultants of EU-funded projects.

Although the SFA clarified the issue with the rent-a-car project by its decision to impose a 100% penalty to the beneficiary, our team will continue to seek an explanation on the case from the Interior Ministry, as its actions on the complaint remain unclear.

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