Corporate raiders: Bulgarian mafia and corrupt media mogul sack the country’s most successful bank

Between 2013 and 2014, the country of Bulgaria saw one of its largest and most successful banks demolished by a trio of a corrupt judiciary, corrupt media, and corrupt government officials in a classic corporate raiding scheme.



Corporate Commercial Bank’s (“KTB” or “Corpbank”) loans and investments made up ten percent of the country’s GDP. The bank grew the economy. It was the first bank in Bulgaria to ever operate using a Western-style, entrepreneurial model that gave loans to and invested in small businesses.



Yet, due to a corporate raiding scheme, the bank was ultimately shut down, its assets stolen, and depositors lost untold amounts of savings. The corporate raiders made off with the assets.



Corporate raiding

Corporate raiding refers to the illegal takeover of a business using manipulation of state power.



“Raiders” are people who usually work in business but also occupy government positions of power, giving them access to state resources that are necessary to carry out the raids. Corporate raiding has typically taken place in Russia, although the practice has spread to other former Soviet bloc countries.



In the case of Corpbank, a corporate raiding scheme was carried out by businessman and member of Parliament Delyan Peevski in conjunction with the Bulgarian Prosecutor’s General’s office and the Bulgarian National Bank, which the country’s central bank — the Bulgarian equivalent of the U.S. Federal Reserve.

A classic corporate raid typically is comprised of three main components: fabricated criminal charges, a “black PR” campaign, and exertion of undue influence by the regulatory system.



In the case of Corpbank, the owner of the bank, entrepreneur and founder Tzvetan Vassilev, was targeted with an arrest warrant and accused of trying to murder the very person who was orchestrating the corporate raid, subjected to a massive negative media blitz, and ultimately forced to turn over control of the bank to the Bulgarian National Bank, the government regulatory body which oversees banks.



Fabricated criminal charges



Corporate raiding starts with fabricated or commissioned criminal prosecutions.



In these situations, the criminals pay off a judge or prosecutor to get search warrants and arrest warrants for the business owner. This can result in the business owner being arrested, thereby incapacitated during the rest of the raid, unable to defend themselves against charges that are false.



Judges and prosecutors are paid for their services in these types of schemes.



The raider will typically seize control of the target business by using an unsubstantiated judicial order, obtained using corrupt means, like a bribe or payoff. Sometimes, raiders use the pretext of executing a search warrant of the business in order to grab corporate documents, which they then falsify in order to take control over the company and its assets.



In the case of Corpbank, fabricated criminal charges were used extensively.



First, Vassilev was accused of trying to orchestrate a murder plot against Peevski. Those allegations were soon withdrawn after they were announced.



Second, Vassilev was officially charged criminally with embezzlement, accused of stealing large sums of money from his bank. The charges contained little information about how he conducted the embezzlement, simply suggesting that he carried out the money in actual bags by hand.



Third, additional charges were filed against Vassilev, stating that he was the head of an organized criminal group along with eighteen others, including bank employees and outside auditors. Again, the charges were backed up with no evidence.



Yet evidence isn't needed for the second component of a corporate raiding campaign: "Black PR."



Criminals disseminate their falsified information to members of the media, who often believe it, as it comes from a government source. Their reports validate the false charges, turning public opinion against the target.



More than 1,000 news stories related to Vassilev and Corpbank were run over a twelve day period between June 12 and June 24, 2014. Most of the reports were published in outlets owned by Delyan Peevski.



Exertion of undue influence by the regulatory system



In most countries, banks are heavily regulated. In Bulgaria, this is certainly the case.



Yet Bulgaria is known for its corruption. It is well-documented by international experts that the Bulgarian government is run by organized crime, or the “Bulgarian mafia”.



The final piece of a corporate raiding scheme is undue influence by a regulatory body. This is accomplished through political power and the exertion of that power by the criminals raiders conducting the scheme.



Because regulatory bodies hold significant power over companies, those bodies can make determinations that result in the closure of the companies and/or in the seizure of the company’s assets for any alleged wrongdoing. In the case of corporate raiding, after assets have been seized, corrupt regulatory officials often steer those assets to the criminal raiders.



In the case of Corpbank, the corrupt Bulgarian government eventually seized control over the bank and its assets. Its investment companies, money, and assets have been distributed to Peevski and his partners in this corporate raiding scheme.



The building of Corpbank



Between 2000 and 2003, Vassilev served as Chairman of the Executive Board and Executive Director Corpbank. In 2003, he became the owner by becoming its majority shareholder.



Vassilev turned Corpbank into both a depositor’s institution and investment bank (the combination of the two is prohibited in the United States under the Glass-Steagall Act).



Vassilev changed the culture and business model of the bank by giving out loans to, and investing in, fellow entrepreneurs. He worked constructively with emerging industries to collateralize their assets, offering lines of credit and taking equity positions. Though common in the West, no other bank in Bulgaria had ever taken this approach.



By 2014, Corpbank was Bulgaria’s fourth largest bank. At one point, the effect that the bank’s activity had on the country was responsible for 10% of the Bulgaria’s GDP.



The Vivacom deal



In 2012, Vassilev bought a stake in the Bulgarian Telecommunications Company (Vivacom). It is the largest telecommunications company in Bulgaria, the market leader in landlines, mobile phones, Internet access, radio, and TV.



While Vivacom was seen as a shrewd investment for Corpbank, it also made the bank a target.



Its purchase put Corpbank and Vassilev squarely into the crosshairs of Peevski. The Peevski-led corporate raid on Corpbank was intended to steal control of Vivacom, as well as Corpbank’s other assets.



Who is Delyan Peevski?



In the early 2000s, Vassilev first met Peevski as a young Bulgarian working for the youth section of the King’s political party.



During his career, Peevski would serve as a member of Parliament, head of the national security service (for only one day, due to large public protest) and an as investigator.



Using loans from Corpbank, Peevski funded a number of businesses that were actually owned by his mother, but beneficially owned by Peevski. His debt to the bank began to increase. By late 2013, Peevski’s debt reached approximately €200 million.



Instead of paying his debt to the bank, Peevski demanded a percentage of all of Vassilev’s businesses. The dispute between the two men escalated. In May 2014, Vassilev received information that Peevski might be planning a plot to have him killed. When he heard this news, Vassilev filed a criminal complaint in the country of Austria, where Peevski kept a home.



On June 13, 2014, in a turn of events, the Bulgarian Prosecutor General publicly announced that the authorities arrested three people for plotting to kill Peevski. The prosecutor stated that Vassilev would be investigated in connection with the case, implying that Vassilev was behind the plot to kill Peevski.



Bulgarian media outlets, including those controlled by Peevski, widely reported these allegations. One example: Telegraph, a tabloid owned by Peevski, ran a front-page story with the headline, "The Boss of KTB Ordered the Murder Of Peevski. Three Men Have Been Arrested."



Five days after the prosecutor’s announcement and four days after Peevski’s headlines, on June 18, the prosecutor admitted that there was no actual murder plot against Peevski.



The fall of Corpbank



Days after the Bulgarian prosecutor announced the murder plot and Peevski published the story among his newspapers, Bulgarian law enforcement officials executed searches on several offices used by Vassilev and Corpbank.



The searches were broadcast live on Bulgarian televisions owned by Peevski.



Peevski continued his black PR campaign against Vassilev. Using his media empire, Peevski ran stories accusing Vassilev of stealing more than $1 billion from the bank.



Although Vassilev was vindicated by the prosecutor’s office, the damage to his and Corpbank’s reputation was already done.



The criminal charges against Vassilev, as well as the media stories and live television broadcasts of the raids were two of the three essential moves — fabricated charges and black PR — of a criminal corporate raiding scheme.



The only move that was left was the undue exertion of power by the regulatory system.



Run on the bank



The media reports caused a panic among Corpbank depositors.



According to one source, “These public and sensational allegations of murder and financial misdeeds predictably caused a run on KTB [Corpbank].” In the seven day period between June 13 and 20th (the period between which the prosecutor publicly accused and then rescinded the accusations against Vassilev), Corpbank’s depositors withdrew 20% of all of the bank’s assets.



During the run on the bank, Vassilev attempted to negotiate with the Bulgarian National Bank (BNB) deputy governor in order to try to get assistance for the bank from BNB. During negotiations the media reported allegations which were confirmed by prosecutors that the deputy governor was suspected of official misconduct in connection with his dealings with Vassilev.



On June 20, 2014 Corpbank was placed under special supervision by BNB. Instead of reconsidering options for recapitalization, the parliament rejected Corpbank’s shareholder plans to rescue the bank in November 2014.



Two days later, BNB announced that it was going to nationalize (take over) Corpbank. On June 29, the EU Commission on Bulgarian Banks announced a liquidity support plan where Bulgaria agreed to provide state deposits to credit institutions with a maturity of five months. BNB helped other troubled banks but refused to provide support to Corpbank under this plan.



Criminal charges against Vassilev



Finally, on July 28, 2014, the Bulgarian Prosecutor General charged Vassilev with embezzling more than 200 million Bulgarian lev (equivalent to approximately €105 million) from the bank. The government contacted Interpol to request an international warrant for his arrest.



The charges brought forth by the Prosecutor General provided no specifics about Vassilev carried out the embezzlement. The prosecutor provided no supporting evidence in the charging documents. The allegations are based on the assumption that Vassilev simply carried out the money (€105 million) in bags by hand.



This is how the charges were portrayed in the media: the cover story of Peevski's Telegraph on July 11, 2014 depicts Vassilev carrying a suitcase full of money falling out of it, under a large headline stating “Vassilev drained 3.5 billion from KTB.” This story was published more than two weeks before the charges were filed, as the prosecutor leaked information about the charges to Peevski’s media outlets.



According to the charges, Vassilev allegedly stole the money between December 2011 and June 2014. However, audits of the bank conducted during this period did not identify any evidence that large sums of money were missing. Respected international firms like KPMG were among Corpbank's auditors.



Even the Bulgarian National Bank in 2013 concluded that the general financial situation of the bank is good. On May 30, 2014, Moody’s declared it that the bank had “solid liquidity buffers.”



In 2016, the Bulgarian prosecutor filed additional charges against Vassilev, alleging that he was the head of an organized criminal enterprise for the purpose of embezzling funds from Corpbank.



Experts who have looked into this case have concluded that the criminal charges and arrest warrants were simply another part of the corporate raiding scheme that took place against Vassilev and Corpbank.



On November 6, 2014 the Bulgarian National Bank officially revoked Corpbank’s license. Shareholders tried to sue in court over this issue, but the Supreme Administrative Court denied the lawsuit.



As a result, the bank ceased to function. Peevski avoided repaying his debt. Most of the businesses financed by Corpbank are gone. Many were taken over by Peevski and his business partners.



Today, Vassilev and his wife live in Serbia, Bulgaria’s next-door neighbor with whom it does not have an extradition treaty.