Over the years, Bivol has investigated in detail several schemes for criminal abuse of European funds under the European Union Rural Development Program (see here and here). One of the investigations, which triggered huge public response, is for 752 guest houses funded with over BGN 202 million.

This money is provided by Europe to create sustainable livelihoods and jobs. This is not just a wish, but a clearly regulated requirement in Ordinance No. 29 from 11.08.2008. Art. 16, para. 2. In order for a specific project to obtain approval, a business plan should be submitted for a period of at least five years. The plan must prove economic viability and sustainable employment for a period of five years and, in the case of construction and assembly works – for ten years.

To put it simply: the business plan for each guest house should indicate how many jobs will be created and preserved for the ten-year period. If they are not created, there is a violation and the beneficiary must return the money. However, this is not happening in Bulgaria. Our investigation revealed drastic discrepancies with these requirements and lack of control of violations. In reality, a significant part of the houses is used for personal vacation and residential purposes.

The mother-in-law house

The guest house, built by a company of the mother-in-law of a senior employee of State Fund Agriculture (SFA), became the symbol of our investigation. It is owned by the company “NOVA SMART” and it has been built in a picturesque location in the village of Lilyanovo, which is the villa area of the southern Bulgarian spa resort town of ​​Sandanski. Lilyanovo is located on the road leading to the “Popina Luka” resort. “NOVA SMART” is 100% owned by Tsetsa Krasteva, who is the mother-in-law of Yanaki Chervenyakov, a former Department Director in SFA. He was hastily fired by the Fund after an investigation by Bivol revealed that he drives expensive cars and his lifestyle does not match his income. After that, the National Security Agency (DANS) staged a boastful operation in SFA, about which nothing more was ever heard.

The house, built by a company owned by the mother-in-law of the SFA boss, Yanaki Cherveniakov, had been financed by the EU with nearly BGN 300,000.

The house’s story begins with the acquisition of a plot in the picturesque valley of the Sandanska Bistritsa River, on the road leading to the “Popina Luka” resort. In the height of the New Year’s holidays, on December 27, 2007, a decision of the Land Commission in Sandanski was recorded, with which property number 006060 was restituted to 14 heirs. The property was transferred to one of the heirs, Yordanka Lyubenova, on the same day. On June 24, 2008, Yordanka and her husband, Pando Lyubenov, sold the property to Yanaki Nankov Chervenyakov.

Chervenyakov was obviously not happy with the acquisition, because five months later, on November 21, 2008, he sold back the property to Pando Lyubenov, who then sold it to the company SMART 5 a month later. This company is owned by Tsetsa Petrova Krasteva – Chervenyakov’s mother-in-law. Another month passed, and on January 12, 2009, the property was transferred to NOVA SMART, which is also owned by Tsetsa Krasteva. This property is the grounds on which the company filed an application in SFA for a grant for a guest house project, amounting to BGN 281,984. The company eventually won it.

The mysterious twists with the restituted property that Chervenyakov bought and then gave back to the previous owner to sell it to his mother-in-law had obviously aimed at concealing conflict of interest.

In November 2016, Bivol sent a team on location. It found the house locked and there was no indication that it is operating as intended. There was actually one operational guest house in the village – the Kaltsunov house, and all local people shrugged when we insistently asked them where to find Tsetsa Krasteva’s guest house.

The situation was the same at the end of October 2017. No one in the village knew that there was such a facility. The only guest houses in the village belong to “the policeman and the lady prosecutor,” the local people informed us. Even the neighbors did not know that there is an accommodation facility next door.

“This is a house of people from Sofia, they come occasionally… We are here constantly, we have not heard (that the house is accepting guests – editor’s note),” a neighbor from the village told us, speaking in front of our camera.

The submitted annual financial statements of NOVA SMART for the period 2010-2014 do not include declared personnel costs and there is no such personnel. This means that no new jobs have been created and the project has not fulfilled its goal of creating a sustainable livelihood in the rural area, which is actually a resort one.

SFA’s answers to our questions about this site made it clear that the house has never been checked for its intended purpose and will not be checked anymore because the oversight period of five years after the signing of the contract has expired. What has been done is done.

Our investigation into the guest houses entered the “Black Book of Government Waste in Bulgaria”, and in January 2017 it was highlighted during the political talk show “Simply Dikov” on BiT TV. There, Bivol’s Editor-in-Chief Atanas Tchobanov showed how SFA had denied access to the minutes of the meeting of the Transparency Expert Committee, which had approved the mother-in-law project.

“Any company that builds a guest house is mandated to hire staff and declare it to the National Social Security Institute (NSSI). Had State Fund Agriculture wanted to check, it could ask the NSSI if these companies had hired personnel for the respective time period. If the guest house has no staff, there is no guest house. It is this simple,” Tchobanov stressed.

After this broadcast, Yanaki Chervenyakov filed a defamation suit against Atanas Tchobanov, claiming damaged reputation.

Houses for personal use are mass occurrence

However, the house of the mother-in-law is no exception, showed a study by Bivol on the basis of the list of projects that have received funding. It used to be one of the big secrets in the State, and SFA stubbornly refused to provide this information, but Bivol was successful in its fight to get it under the Access to Public Information Act (APIA). By cross-checking multiple registers, the guest houses were mapped in detail.

Out of all 752 projects for BGN 202,058,293, Bivol randomly selected and examined 229 sites funded with a total of BGN 60,235,278. For each company from the sample that had received funding, we checked the National Revenue Agency’s (NRA) registers and the submitted annual financial statements to find out whether it had hired staff in connection with its project.

The result is that 104 companies (45% of the projects) have not employed even a single person. The total amount received by these companies is BGN 22,924,800, which is 38% of the money paid. The list and map of these objects are published here.

Interactive guest house search engine created by Bivol at https://dfz.bivol.bg/guesthouses/

If we extrapolate the sample data to all 752 projects, it is estimated that BGN 76 million, out of a total of 202 million, had not been granted for their intended purpose, but for the personal needs of about 300 dodgers. As the SFA’s responses, requested under APIA, have shown, only a few sites have been sanctioned.

While the majority of Bulgarian people repays over their lifetime their mortgages, dodgers with power and influence have received hundreds of thousands in European money to build private villas masked as guest houses. Without creating livelihoods, jobs and other annoying demands for the use of Europe’s millions (given with the best intentions).

The former SFA head and current Minister of Agriculture Rumen Porozhanov is to be largely credited for this situation. Most projects were approved and funded precisely when he was managing the Fund.

***

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