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Sunday, March 24, 2019

The Curious Case of Tzvetan Vassilev: Scapegoat and Victim of Corporate Raiding in Bulgaria

Tzvetan Vassilev

Decades ago, Bulgaria was a satellite country of the Soviet Union, a Balkan presence of the communist regime. During this era, Bulgaria had no private property or banks. Only one bank existed—Unicredit—and it was run by the communist government. After the fall of the Soviet Union in 1990, Bulgaria adopted a capitalist banking system, with a group of farmers joining forces to form the a financial institution known as the Central Cooperative Bank.

Tzvetan Vassilev, who recently was named the second most influential person in Bulgaria by Forbes magazine, joined Central Cooperative Bank in 1996 as an employee and board member. At that time, Bulgaria was in the midst of a banking crisis due to hyperinflation, with 80 percent of the bank's loans in default. Much of this was attributed to the fact that the bank owners with farming backgrounds lacked essential banking knowledge, especially in the area of loan distribution. Vassilev took assertive action to help restore the bank to solvency by loaning American dollars in lieu of Bulgarian currency. Because of his actions, Vassilev played a major role in Central Cooperative Bank's survival throughout the financial crisis of 1996.

In May 2000, Unicredit Bulbank, the largest bank in Bulgaria, purchased 35 percent of Central Cooperative Bank. The latter's CEO protested the decision and left. Vassilev left, too, along with 30 of its employees, and went on to purchase Corporate Commercial Bank (Corpbank). At that time, Corpbank was the smallest bank in Bulgaria with only $5.5 million in assets. Vassilev and his partners paid $6.5 million for it.

Vassilev went on to transform Corpbank into a major business bank, offering export financing receivables loans as well as other types of products to small and medium-sized businesses. This type of bank, along with the services it provided, was the first of its kind in Bulgaria. Eventually, Corpbank expanded into an investment bank, taking minority stakes in several clients, which is perfectly legal in Bulgaria (in the United States, a commercial bank cannot operate as an investment bank under the Glass-Steagall Act). Through these investments, Corpbank's capital surged to $400 million, and its total assets increased to an astounding $4 billion.

Eventually Vassilev and Corpbank were responsible for 10 percent of the Bulgarian GDP. According to Vassilev, his bank was essentially the only "Western-style" bank in the Balkans. In 2008, the state fund of Oman even purchased a 35 percent stake in the bank.

In 2009, the Bulgarian government began to target Corpbank and initiated an onslaught of attacks against Vassilev. For example, he was accused of stealing money by a Bulgarian prosecutor, accusations that had no merit or evidentiary support. Delyan Peevski, a Bulgarian attorney, politician, and businessman, borrowed $200 million from Corpbank to finance a vast majority of the country's media outlets, including newspaper companies. When the bank attempted to collect on its loan, Peevski refused to pay, and retaliated by with his media outlets by running a smear campaign against Vassilev and his bank, releasing an overwhelming amount of negative propaganda. In the mix, Vassilev was also accused of plotting to murder Peevski, which is another claim that has been unfounded.

In 2015, Corpbank was seized and shut down by the Bulgarian government, resulting in a significant decrease in the number of loans given to small businesses. Because of the blatant "corporate raiding" and corruption conducted by the Bulgarian government, there is a lack of confidence in the country and much hesitation for international investors to put their money there.

Presently, Vassilev and his wife are residing in Serbia, which is not a part of the European Union (EU), and, therefore, does not have an extradition treaty with Bulgaria. Because of the ferocity of the these accusations, Vassilev remains adamant that the Bulgarian government’s strong mafia influence, spearheaded by Peevski, was the source of the targeting of his bank, him, and his wife. It is a well-known fact that the Bulgarian mafia has a stronghold on the national government.