Bulgaria has been mired in a tangled web of lies ever since troubled Corpbank collapsed this summer. The ensuing debacle showed that in a mafia state like Bulgaria heeding investigative journalists' words pays off. Literally.
By Milena Hristova
November 25, 2014
The rise and fall of Bulgaria's notorious Corporate Commercial Bank (Corpbank) offered great chance for creating some of the most important and memorable examples of investigative journalism in the Balkan country over the last few decades.
Digging up dirt on the bank?
No matter whether we call it a Ponzi or a pyramid scheme, it was clear as early as in 2012 that the operations of Corpbank are dangerous and put at risk Bulgaria's national security and people's money. It was clear as early as in 2012 that those risks were deliberately downplayed and the bank's collapse was very likely, even inevitable.
Here are the top 10 dirty facts that investigations revealed back then:
1. Corporate Commercial Bank held nearly half of the deposits by Bulgarian top state-run companies and financed the media group of mogul Irena Krasteva, which turned into a monopolist on the market. The money attracted from Bulgaria’s state-owned enterprises and deposited in Corpbank stood at at least 1 billion levs. We can only guess what types of commission fees were offered and paid.
2. The politicians did so that the money of state-owned companies is deposited in Corpbank, in return the bank does them personal favours. Only the deposits of the energy sector companies, for example, are believed to have stood at BGN 630 M. The money is then used for funding privatization deals, which benefit certain persons, who share the same interests.
3. The special services worked diligently to keep the bank stacked with funds. There was no problem to divert money transferred to one Bulgarian bank to the accounts of Corpbank. This was done at the order of the security services just because they decided to do so.
4. The knot of intertwined interests included people from Corpbank, the special services, politicians, as well as magistrates. The symbiosis gave those people the power to control and influence the market, including privatization deals and energy sector.
5. It was clear that if anyone decides to withdraw the money of the state-owned enterprises from Corpbank, the stability of the banking system is put at risk. The Bulgarian people and the government were thus being held hostages by one private institution.
6. Corpbank crediting of a media empire, which fawns on the government, was absolutely absurd. Any normal person would provide credit to no more than one newspaper, one radio and one TV channel. The media market here is restricted, this was just crazy.
7. If a company had a deposit or checking account at Corpbank, the interest rate was about 2%. Add another 2% for covering the bank expenses. So this makes 4%. The bigger part of the credits extended to physical persons, private companies, as well state enterprises however came at an interest rate of 9.5-12%. It is easy to see that if the deposit stood at BGN 600 M, the net profit for the bank will be BGN 5 M.
8. The scheme was profitable only for those who pocketed commission fees, while the state and the people are losing money.
9. The scheme breached article 252 from the Penal Code. 2.
10. The state regulatory bodies were obliged to go inside the bank and check. They knew well, as early as in 2012, that if the money is withdrawn, the bank will go bankrupt.
Unfortunately the revelations led to no – let alone sweeping – changes.
Now we are just wallowing in the fall-out.