Flats for Their Russian Excellencies Mind the horns!

It is a duty of an ambassador to promote the business relations between his country and local entrepreneurs. However, it seems that a number of recent Russian Ambassadors in Sofia went far beyond this, using their business contacts to also promote their personal wealth.

Part I: The Ambassador’s Flats

Lyudmila Genadievna Isakova, the wife of His Excellency the Russian Ambassador in Sofia Youri Isakov, is not a successful real estate investor. From 2010 to 2012, she lost a pretty large amount of money from real estate transactions.

In May 2010, Mrs. Isakova paid € 221,000 for a luxury flat of 163 square meters (Sq m) on “Dondukov Blvd”, in the heart of Sofia82. This is € 1,300 per Sq m and matches the average prices in the central Sofia area at the time – € 1,192 per Sq m, according to imot.bg.

The Ambassador’s family lives in the official residence of the Embassy and this flat was obviously an investment. But the Isakovs didn’t make any profit. In December 2012, two and a half years after the acquisition, Mr. and Mrs. Isakov sold the same flat for € 143,000, or € 858 per Sq m. At that time, the average price in central Sofia was € 904 per Sq m.

Sofia did not escape the global real estate crisis and from 2010 to 2012, real estate prices had a negative trend. From 2013 on, these prices have been recovering slowly but even now a square meter in the city center is cheaper than in 2010. However, there was hardly a worse moment to sell this asset than when the family did. In two years, Mr. and Mrs. Isakov lost almost € 80,000, probably more than the annual salary of the diplomat.

The Sofia flat is not the only acquisition of the Isakovs in Bulgaria. In 2009, one year after Mr. Isakov took office, he bought two other properties: a 57 Sq m flat in the luxury resort Saint Tomas on the Black Sea, south of the city of Burgas (€ 57,000) and two 60 Sq m flats in the Golf and Spa Resort in Pravetz, the hometown of former communist dictator Todor Zhivkov (€ 73,800).

Therefore, the total real estate expenses of the Isakov family from 2009 to 2010 amount to around € 354, 000. And the family lost more than 20% because of the unfavorable market.

There is no way to verify whether Mr. and Mrs. Isakov’s income matches the Ambassador’s real estate expenses during his stay in Bulgaria because Russian diplomats are not required to submit income declarations, though this is mandatory for other Russian officials. A plausible estimation is that the annual salary of Mr. Isakov is about € 50,000-60,000; so, the family was either investing in real estate money earned before they arrived in Bulgaria or they had another source of income.

PM Plamen Oresharski and His Excellency Youri Isakov assisting at the soldering of the first pipes of the South Stream pipeline in Bulgaria

From the “Energy Oligarchs” to the “Energy Ambassador”

It seems logical that big Bulgarian energy companies that are trading, reselling and processing Russian gas and oil maintain privileged relationships with the Russian Embassy. Being on good terms with the Russians is obviously a key factor for success in this business.

Whether coincidence or not, two Bulgarian companies, one linked to Gazprom and another linked to Lukoil, sold flats to Mr. and Mrs. Isakov.

According to a source, requiring anonymity, the flat on “Dondukov Blvd” was a kind of corporate gift to the Ambassador from the company Overgas, owned by energy oligarch Sasho Donchev.

Mr. Donchev had personally visited the flats that a real estate agent had selected for the Ambassador and discussed the price, the source said. And while there is no direct proof of such a gift, which would mean outright corruption, there is evidence that Overgas officials were involved in the transaction.

Overgas is a close partner of Gazprom, owning a distribution network in Bulgaria and selling Russian gas to private and corporate customers. It was created in the 1990s as a joint venture between Gazprom and the Bulgarian company Multigroup. The link with Gazprom is also substantiated by the fact that Mr. Youri Viakhirev, son of former Gazprom Chair Rem Vyakhirev, was a partner in Overgas Inc.

The company that sold the Sofia flat to Mrs. Isakova is named Best Estates BG. The firm was created in 2009 and the single shareholder in it is OG Enterprises Limited, registered in the British Virgin Islands (BVI). By November 17, 2009, a bank document shows that the company’s capital, amounting to BGN 640,000 (€ 320,000), was available in its bank account in Sofia.

The newly created company appointed three directors. One of them was the son of Sasho Donchev, Georgi Donchev, while the Director of Overgas Holding, Yavor Manuilov, was the proxy of the company.

A few days after the company was incorporated in the Trade Registry, on December 4, 2009, it bought the flat on “Dondukov Blvd” from another company for € 204,000. Next, on May 5, 2010, the same flat was sold to Ms. Isakova.

Only a month after Ms. Isakova sold the flat аt a big loss, Best Estates BG transformed itself and became a limited company with a single director – Georgi Donchev. The last owner of Best Estates BG was the consulting firm DD Management. DD Management is represented by Mr. Sasho Donchev , one of the directors of Overgas.

Although Best Estates BG was created with the purpose to buy and sell real estate and to promote construction, its only activity on the real estate market has been the purchase of this flat and its resale93. It clearly looks like that the firm was created for this single purpose and padded with offshore money to buy the flat on “Dondukov Blvd”, only to sell it later to the Ambassador’s wife.

Ms. Isakova paid the flat cash

Approached with questions, Mr. Donchev rejected any allegations about a corporate gift. He admitted he was controlling OG Enterprises and explained that Best Estates BG was created to acquire rights under a license to study prospects of oil and gas deposits on the territory of Bulgaria. Asked about the origin of the funds deposited as Best Estates BG Ltd. capital he said the funds are “from commercial activity”.

After lawmakers Delyan Peevski and Yordan Tsonev passed a bill banning the participation of offshore companies in companies holders of such permits (gas and oil prospects), Mr. Donchev explained, Best Estates sold the rights to another company under the control of Overgas Holding JSC. He also pointed out that the company that remained without activity was not liquidated and was transformed into Best Estates BG Ltd., and has another activity since November 20, 2012.

However, we could find no evidence of any such gas and oil prospects permit delivered to Best Estates, and the bill banning concessions for offshores was passed not in 2012, but in 2013.

Mr. Donchev rejected firmly any suspicions about a corporate gift to Mrs. Isakova. He said she paid € 221,000 in cash to Best Estates BG.

Mr. Donchev has not been involved in major corruption scandals in recent years. He is the owner of the newspaper Sega, one of the last shelters for critical journalism in Bulgaria, a country ranking 113th in the RSF Freedom of the Press report for 2016. He is publicly promoting liberal values and reducing government “red tape” for the business.

“There isn’t anything or anyone that has helped me to create the trade relations between my company – Overgas – and Gazprom”, Mr. Donchev stated. He referred to a US diplomatic cable revealing the US pressure to eliminate the intermediaries in gas trading. “With the support of the Russians, the Bulgarian Prime Minister accomplished the task assigned to him and suspended Overgas from the natural gas trade”, he said.

According to another US State Department diplomatic cable, in the 1990s Mr. Donchev was connected to powerful organized crime groups such as Multigroup and VAI Holding, dealing with all kind of dirty business, including racketeering, illegal drugs and prostitution. Actually, there are very few Bulgarian businessmen who do not come from this background.

Gazprom, but also Lukoil

Mr. and Mrs. Isakov bought the two flats in Pravetz from the company Tera Tour Services, owned by the father of Valentin Zlatev, the CEO of Lukoil. In the same classified cable, published by Wikileaks, Zlatev is exposed by US diplomats as a powerful kingmaker linked to Russian intelligence.

The declared price of the transaction was € 73,000, which matches current flat prices in this luxury resort.

Uncannily, the third company that sold the Black Sea flat to Mr. Isakov was linked to the South Stream Project. This is Glavbolgarstroy, the company that was leading the consortium selected to construct the Bulgarian section of the pipeline in a public procurement procedure worth over € 1 billion.

Part II. His Excellency in business with a mobster and vodka

In 2005, Bulgaria was a fresh member of NATO, on the eve of its EU accession and under pressure by Western partners to fight corruption and organized crime. That’s one of the reasons why thenUS Ambassador in Sofia James Pardew prepared and sent to Washington an extensive report on Bulgarian organized crime – the already-quoted State Department cable, revealed by Wikileaks.

A number of organized crime groups are listed in this text, among them VAI Holding, also known as VIS-2: “As the largest player in the drugs market, VAI controls trafficking routes, production facilities, and distribution networks. The group is also involved in trafficking stolen automobiles from Western Europe to the former Soviet Union. Its other criminal activities include extortion and racketeering, illegal arms trading, gambling, prostitution, and smuggling.” Those conclusions were most likely inspired by the well-informed US intelligence and law enforcement services. After all, earlier in his career, His Excellency James Pardew was a military intelligence officer.

At that same time Anatoly Potapov, Pardew’s Russian colleague in Sofia, had more important tasks then analyzing “who is who” in Bulgarian organized crime. He was busy planning his future life and business after retiring from office.

His Excellency Anatoly Potapov, Russian Ambassador in Bulgaria 2004–2008

Mr. Potapov left his diplomatic post in July 2008 but it did not take too long for him to return to business in Bulgaria. In 2009, he became officially a member of the Board of Directors of the company V.R.B. Group. His son Sergey joined the board of V.R.B. at the same time.

Mr. Potapov’s business partner99 was and still is Plamen Vassilev Timev AKA “Gandhi”, described by Ambassador Pardew as one of the “high-ranking members” of VAI. Yes, this is the same criminal group involved in all kinds of illegal business.

Plamen Timev, a.k.a. “Gandhi”

In 2007, “Gandhi” was arrested and accused of financial fraud100. But his criminal connections date from far earlier. Plamen Timev, who was once an architect, was the owner of the Varna football clubs Spartak and Cherno More and in business with one of the most famous gangsters of the 1990s.

Nowadays, “Gandhi” owns and manages a myriad of companies. One of them is V.R.B., whose headquarters are in Sofia. V.R.B. trades in goods and in 2013 it declared to the revenue services a comfortable net profit of over BGN 897,000.

The secret behind this profitable trade is Russian vodka. Timev’s company is the official importer in Bulgaria of the well-known vodka brands “Stolichnaya” and “Moskovskaya”, produced by the Chernogolovka spirits factory. Having a former Russian Ambassador as a partner is probably very advantageous for alcohol import activities, which are closely monitored by Customs.

However, Potapov’s family seems to have even closer links to Bulgaria. His wife and sons started investing in real estate while he was still in office, our investigation has discovered.

In February 2008, months before his father retired, Sergey Potapov bought the company Integrated Visions EOOD101. Then on June 20, 2008, he bought a flat in the St. Helene and Constantine sea resort, near the city of Varna. According to notary deeds, he paid BGN 73,800 (€ 37,000)102. Afterward, Sergey injected some money to increase the Integrated Visions capital to up to BGN 596,500.

A month after her husband Anatoly retired from the diplomatic job, Tatyana Potapova bought two companies: Irix and Quadrex. She paid BGN 691,000 (€ 350,000) for Irix and BGN 60,650 (€ 31, 000) for Quadrex.

Irix was a bargain. The company annual report for 2008 displayed a comfortable cash availability of BGN 775,000. However, part of this money came from the same family. Mrs. Potapova bought Irix on August 28, 2008; only three weeks earlier, on August 6, 2008, Irix sold two flats in Sofia to her son Nikolay Potapov. He paid BGN 459,620 (€ 230,000) for the flats, located in the highly affluent Lozenets district.

Then, in 2011, Tatyana Potapova decided to increase the capital of Irix to BGN 1 million. She wired BGN 381,850 to the Bulgarian bank account of the company. After that she donated Irix to her other son, Sergey Potapov.

Quadrix was a bargain too: the company managed to exchange with the State three modest flats in Sofia for one valuable land plot in the ski resort of Borovetz.

So far, the Potapov family assets look pretty good: two flats in Sofia, a flat in Varna, a plot in the mountains and BGN 1 million in cash.

Therefore, the total assets of the Potapov family in Bulgaria exceed BGN 2 million (€ 1 million). Are these savings from life-long, honorable diplomatic service, or…? The Ministry of Foreign Affairs has refused to comment and as we have noted above, assets declared by Russian Ambassadors are not available for public scrutiny.

The text was published first in English and Russian languages in the Report “Failed in Action. Why European Law Enforcers are Unable to Tackle EU-Russian Transborder Corruption” by the expert group “Fighting Transborder Corruption” from the EU-Russia Civil Society Forum.

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Атанас Чобанов

Специализиран в журналистика на данните и фанансови разследвания. Член на борда на OCCRP от 2016 до 2018 г. Global Shining Lights Award за 2017 и 2019 г.

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