Massive Siphoning Made Axe Fall on Lukoil Bulgaria CEO

by Екип на Биволъ

Over BGN 45 million have been siphoned from Lukoil only over deals with land for gas stations through companies related to GP Group, according to large-scale research by Bivol into hundreds of deals by Lukoil Bulgaria and its partners. The mechanism is simple – a company buys the land from private individuals or from a municipality and a few days or weeks later, it resells it to Lukoil with a huge profit. Then, GP Group builds the gas station itself, also with a huge profit. The companies have offshore ownership but are clearly linked to GP Group. The exposure of these schemes within the “GP Gate” scandal led to the removal of the Director of Lukoil Bulgaria Valentin Zlatev. This is a colossal event in Bulgaria’s political life, and its implications are yet to grow.

In September 2019, Bivol exposed in a publication several such dealings, done through the PI firm. It is owned by an offshore and, in turn, it is the owner of the land and the building where the GP Group headquarters are located. The phones and e-mail addresses of GP Group and PI are identical – [email protected] PI ‘s proxy is Velizar Lyubenov Radev, who is co-owner of GP Stroy with one of the shareholders and a director of GP Group – Georgi Vassilev.

According to sources of the online edition Mediapool, this publication by Bivol is the basis of an internal investigation into Lukoil Bulgaria, which led to the removal of Valentin Zlatev from the company’s leadership. Zlatev, himself, denies any connection with GP Group, despite the fact that the company is building his father’s hotels as well.

Bivol engaged in a methodical tracking of the ownership of Lukoil’s properties in the Property Register, which revealed a much larger picture of Lukoil’s siphoning. It turns out that PI has sold to Lukoil property for over BGN 17 million, which it bought for about BGN 8 million and it has happened all over the country, in a number of cities, suburbs and smaller towns. The buy-sell differences are particularly drastic in the town of Dryanovo, where the property has been bought from the municipality for BGN 90,000 and three days later, it has been resold to Lukoil for BGN 1,186,473. There is a similar case in the village of Gorna Malina near Sofia, where a property sold by the municipality for BGN 180,000 BGN has been resold to Lukoil for BGN 1,448,534.

The company Campanella has participated in several deals, where it has initially acquired the land, has resold it with a huge profit to PI, and PI has resold it to Lukoil almost without any difference in price. Campanella’s owner is the other co-owner of GP Group – Vladimir Jitenski. For example, in the town of Gorna Oryahovitsa, Campanella had bought land from a private person for BGN 120,780 and two weeks later, it resold it to PI for BGN 941,500. PI, in turn, resold it to Lukoil for BGN 991,140.

Well-oiled property scheme

However, the brokerage achievements of PI pale compared to those of the company Eternity, which until November 2018 was owned by Georgi Vassilev, the other GP group co-owner (on the headline photo, below Zlatev). Vassilev received a money laundering charge as a result of the “GP Gate” scandal, and November 21, 2018, he transferred the company to Velizar Radev.

At the time of the deals in 2006-2008, Eternity was owned by the Belize offshore “Balkan Investment and Trade” and was represented by attorney Velizar Radev. The same offshore “Balkan Investment and Trade” also owns PI, which speaks of a joint-command center of the companies and respectively of the deals through which Lukoil was siphoned.

Eternity has managed to buy properties in over 40 locations in the country for a total of BGN 54,375,287 and has immediately resold them to Lukoil for a total of BGN 91,303,308.82 with a net profit of BGN 36.9 million. If we add the transactions of, both, PI and Eternity, LUKOIL’s losses only from land deals amount to BGN 45,893,875.

Then GP Group, itself, enters scheme by building the gas stations and supplying equipment. There is no public information on the prices of the construction sites, but Bivol has learned from its sources that just one single trash can cost Lukoil BGN 2,000. It is very likely that the profit for GP group from the gas station construction exceeds the profit from real estate transactions of the companies linked with it.

All of this, of course, has happened at the expense of Lukoil’s operating profit, so the management’s decision to remove the long-time Director Valentin Zlatev is logical from a business point of view. In addition, serious evidence of other similar schemes has accumulated over the years.

Zlatev – the regent of Borisov

It is believed that Valentin Zlatev has a key role in the rising to power of Boyko Borisov with whom they have maintained close relations since the early 1990s. The economic expansion of Borisov’s security firm Ipon is mostly due to pipeline security contracts with Lukoil. However, that is just the tip of the iceberg.

A US State Department diplomatic cable, published by Wikileaks, says that in the past, Prime Minister Boyko Borisov has been involved in Lukoil’s oil-siphoning schemes, taking advantage of his close relationship with Valentin Zlatev.

13. (S/NF) Accusations in years past have linked Borisov to oil-siphoning scandals, illegal deals involving LUKoil and major traffic in methamphetamines. Information from SIMO tends to substantiate these allegations.

As a Tageszeitung investigation found, SIMO is a code name for the CIA, so the information in this cable is undoubtedly of great value.

There is evidence that the political project “Borisov”, from Mayor of Sofia to his party Citizens for European Development of Bulgaria (GEB) winning the general elections, has been financed by Zlatev with funds diverted from Lukoil. This is also implied in another important paragraph from the same cable, which is classified for the US State Department as “secret/no foreigners”.

14. (S/NF) Borisov has close financial and political ties to LUKoil Bulgaria Director Valentin Zlatev, a vastly influential kingmaker and behind-the-scenes power broker. Borisov’s loyalty (and vulnerability) to Zlatev play a major role in his political decision making. The Mayor has engaged LUKoil in a number of public-private partnerships since taking office: LUKoil has agreed to donate asphalt for the repair of city streets, take on the upkeep of a Soviet Army monument, and finance construction of low-income housing. In a reciprocal gesture, Borisov has advocated using municipal land to develop new LUKoil stations. Though this may seem a significant quid-pro-quo, Borisov’s public agreements with LUKoil are only side deals in his much deeper and broader business relationship with Zlatev, which has been reported in other channels.

Boyko Borisov, himself, is not denying his friendship with Valentin Zlatev and admits to playing cards with him. Numerous photographs are a testimony of their close relations since the time when Borisov was a security guard of Bulgaria’s Communist dictator Todor Zhivkov.

The Americans also have had suspicions that Zlatev is a representative of the Russian intelligence in Bulgaria. Valentin Zlatev’s deep ties with the Russian Federation also became evident from the scandal surrounding the meeting of Deputy Minister Mariy Kossev in Moscow with representatives of Rosatom on the Belene Nuclear Power Plant (NPP) in 2011. According to Kossev’s own words, the now-former Lukoil boss surprisingly appeared at the meeting in an unclear capacity.

“GP Gate” and Zlatev’s fall

The “GP Gate” investigation by Bivol, which provoked the fall of Valentin Zlatev, reveals a huge scheme for siphoning European funds and public procurement through consulting firms of Peter Elen Petrov, Tatiyana Delibasheva and Lilyana Zorteva who manipulate tenders so that the construction company GP Group emerges as the winning bidder (see here and here). For this purpose, they have also distributed bribes to officials. Bivol further revealed the money trail, leading to Russian billionaires Roland Isaev and Paata Gamgoneishvili, who also own Bulgarian passports.

Zlatev’s removal from Lukoil’s operational management in Bulgaria is certainly associated with this scandal as well. It is a fact that the Russian office of Free Europe devoted a large article to GP Group, detailing all the connections revealed by Bivol and the mechanism of siphoning Lukoil.

At this point, it can be said that Zlatev’s removal is the most significant effect of Bivol’s investigation and is an indicator of serious tectonic shifts in the backstage scheme that supports the rule in the country.

Zlatev – proud owner of offshore companies

A study of the Panama Papers, to which Bivol has access under an agreement with the International Consortium of Investigative Journalists (ICIJ), found two offshore companies registered in the name of Valentin Zlatev – MIRACLE TRAVEL AND TOUR LIMITED and STEENBOK HOLDINGS LTD. In order to confirm his rights as an ultimate economic beneficiary, the Lukoil’s former executive director has sent copies of his personal ID documents, an electricity bill and a bank statement certified by the offshore company registrar Consulco.

There is no data on the economic activity of these offshore companies in Bulgaria.

Bivol sent questions about Zlatev’s offshore companies to Lukoil’s press office. We also asked for a comment on the theory that the disclosure by Bivol of the property deals had led to his removal. We did not receive an answer by the editorial closure of the article. In his previous reactions to our “GP Gate” investigation, Zlatev denied any connection with GP Group, threatening to seek “protection of his rights in all possible ways” without specifying whether this also involved illegal practices.

“GP Gate” six months later

Initially, Bivol’s disclosure of the GP-related large-scale corruption scheme hit a wall of silence in the Bulgarian media. The omerta cracked, though only partially, after Dimitar Stoyanov of Bivol and his Romanian counterpart, Attila Biro of Rise Romania, were illegally detained by the police as they tried to save from destruction documents related to the consultancy firms’ projects. Even then, however, there was no substantive coverage of the bribery and the manipulation schemes.

In this context, the only media that gave publicity to “GP Gate” was the regional TVN and the host of the show “Detector”, Victoria Marinova, who dedicated the first edition of the show to this scandal. A few days later, she was savagely murdered. Those governing the country immediately ruled out any link between this crime and her professional activities and instantly mobilized their loyal media to convince the audience that Victoria was not even a journalist, but something like a curator.

However, on the international level, the spinning of these talking points failed. The scandal traveled around the world and reached the European Commission, which commissioned OLAF to investigate the projects won by GP Group.
The Bulgarian Prosecutor’s Office also launched an investigation, formally on the grounds of a signal by Bivol and Deputy Prime Minister Tomislav Donchev. A “discreet” charge was pressed against Georgi Vassilev and another person from GP Group for the laundering EUR 14 million. A reaction by Prime Minister Boyko Borisov followed as he ordered that the employees whose names can be found on the lists of people having received bribes be sent on forced leave while the investigation is underway, and then ordered GP Group to be removed from public procurement.

OLAF officially confirmed last month in a letter to Bivol that there is an investigation into several infrastructure projects, but refused to provide more detailed information to preserve the secret of the investigation.

However, the removal of GP Group from public procurement did not happen. The consultancy companies continue to work undisturbed, according to Bivol’s information and have only changed their addresses. GP Group continues to win public procurement, despite numerous scandals over poor construction works. There is no action against the other major construction companies explicitly mentioned in the investigation, namely Glavbolgarstroy and ISA-2000.

Headline photo: Collage of photos by Bulphoto

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