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Interpol hunts Bulgarian banker in Vienna

The Local · 14 Aug 2014, 16:54

Published: 14 Aug 2014 16:54 GMT+02:00

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The prosecutor's office in Sofia announced on Tuesday that Vassilev is sought in connection with an investigation of massive fraud, relating to illicit withdrawals from the Bulgaria's fourth largest bank, the Corporate Commercial Bank (CCB).

Prosecutors claim that Vassilev diverted a total of €103 million from his own bank in the period 2011-2014.  Charges have already been filed against the bank's manager, the chief accountant and other bank employees of the ailing bank.

Bulgaria's banking system has been under severe stress in recent months.  In June, after a series of runs on banks the president of the country issued a statement saying that "Your money is safe."  The EU also granted Bulgaria an emergency line of credit, to prop up its ailing banking system.  

The run on CCB began when a local businessman, Delyan Peevski, suddenly withdrew large amounts of funds, with other depositors following suit causing a liquidity risk.  Allegedly, the run was also driven by a series of emails and texts, that called into question the liquidity of the CCB.

The Bulgarian National Bank (BNB) has called for 10-year jail sentences and stiff fines for those found guilty of “disseminating misleading or untrue information about banks or financial institutions in order to cause panic”.

Peevski was allegedly engaged in a dispute with a major shareholder of CCB, thought to be Vassilev.  Allegedly, the argument between the two oligarchs escalated to death threats, causing Vassilev to relocate to Austria.

In July, the BNB conducted an audit of the CCB, and found serious problems:

"Findings of the Corporate Commercial Bank audit are, speaking mildly, actions incompatible with the law and best banking practices. Missing, and most likely to have been destroyed in the days before conservatorship, is a material credit record of a credit portfolio amounted to 3.5 billion lev out of a 5.4 billion lev total loan portfolio. A significant part of this portfolio shows a very high connectivity between debtors and majority shareholder Mr. Svetan Vassilev."

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"As a result of lack of information, the auditors express an opinion that they cannot evaluate the financial condition of the debtors’ ability to service their loans. The availability and quality of collateral also cannot be evaluated, which in turn makes it impossible to draw a final conclusion on the status of the loan portfolio amounting to 3.5 billion lev. Unfortunately, these actions cannot be registered with the tools of off-site bank supervision and are suggestive of intentional abuse."

"These particular actions of officials in Corporate Commercial Bank are likely to amount to knowingly defrauding the bank of hundreds of millions lev. It is evident that the minority shareholders of Corporate Commercial Bank are also victims of these abuses."

"For these reasons today BNB will bring the auditors’ report on the review of the assets and liabilities of the Corporate Commercial Bank to the attention of the Attorney General of the Republic of Bulgaria."

Forbes magazine reports that because of the extent of the fraud, BNB says that nationalizing CCB is not an option – it describes it as a bottomless barrel.
"CorpBank will therefore be wound up. Its banking license will be revoked, and all 'good' assets and liabilities will be transferred to its Credit Agricole-Bulgaria subsidiary, which will be nationalized.  All deposits except those associated with majority shareholder Svetan Vassilev will be guaranteed by the state," said the BNB.
The allegations against Vassilev are serious.  Specifically – according to conservators – on June 19 this year, the day before the Corporate Commercial Bank was to be placed in special measures, a third party downloaded and delivered against receipt to the majority owner of Corporate Commercial Bank 205,887,223 BGN equivalent in cash, mostly Euro - that's €105 million at the current exchange rate.
Vassilev himself denies any wrongdoing and claims that there is a campaign to vilify him.  At stake is the credibility of Bulgaria's banking system, while serious questions remain about the supervision by the BNB.

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