Zornitsa Markova THE KTB STATE Sofia, 2017 All rights reserved. No part of this book may be reproduced or express written consent from Iztok-Zapad Publishing House. transmitted in any form or by any means without first obtaining © Zornitsa Markova, 2017 © Iztok-Zapad Publishing House, 2017 ISBN 978-619-01-0094-2 zornitsa markova THE KTB STATE CHRONICLE OF THE LARGEST BANK FAILURE IN BULGARIA — THE WORKINGS OF A CAPTURED STATE THAT SOLD OUT THE PUBLIC INTEREST FOR PRIVATE EXPEDIENCY CONTENTS LIST OF ABBREVIATIONS AND ACRONYMS / 12 EDITOR’S FOREWORD / 13 SUMMARY / 15 READER’S GUIDE TO THE INVESTIGATION / 21 1. HISTORICAL BACKGROUND / 23 DEVELOPMENTS IN THE BULGARIAN BANKING SECTOR THAT PRE-DATE KTB ..........................................................25 Headed for a Banking Crisis .................................................................................................. 26 Scores of Banks Close Their Doors................................................................................... 29 First Private Bank — Backed by the Powerful, Favoured by the Government ......................................................... 33 Criminal Syndicates and Their Banks — the Birth of a State within the State ...........................................................................35 A Post-Crisis Change of Players ..........................................................................................37 A FRESH START FOR THE FLEDGLING KTB ..................................................... 40 KTB SALE ..........................................................................................................................................42 The Bulgarian National Bank with Tied Hands ...................................................................................................................... 46 WHO IS TSVETAN VASSILEV .............................................................................. 48 2. KTB AND THE NDSV GOVERNMENT ...............................................51 EARLY DAYS — THE SAXE COBURG-GOTHA GOVERNMENT .......................53 Stepping Out into the Light ................................................................................................... 54 The First Long-Term Deposits Attracted ........................................................................ 54 Vassilev Meets Peevski ...........................................................................................................55 6 FIRST INDICATIONS OF HIGH-LEVEL PROTECTION ..................................... 58 The Universiada Hall — a Gift from Luciano ..............................................................58 The Land Beneath Universiada Hall .................................................................................60 Velder BG and KTB ..................................................................................................................... 62 A Building in the Historical Center of Sofia ..................................................................63 3. KTB AND THE THREE-PARTY COALITION GOVERNMENT — THE BIRTH OF A MODEL / 65 WHO IS DELYAN PEEVSKI ................................................................................... 69 The Talented Mr. Peevski .........................................................................................................71 IT NEVER RAINS BUT IT POURS — PUBLIC MONEY FLOWS INTO KTB .....73 The Early Days .............................................................................................................................73 Quantum Leap ...............................................................................................................................74 Legacy of the Three-Party Coalition Government .................................................. 76 Top-Performing Sectors of the Economy .....................................................................77 The Curtain Lifts .......................................................................................................................... 79 KTB and the GERB Government ......................................................................................... 81 Rules Finally Put in Place — Too Little, Too Late ......................................................85 GOVERNMENT RESERVE FOR PRIVATE USE ..................................................87 The Wheat Swap..........................................................................................................................88 Warehouse Renovation Project ..........................................................................................90 MEDIA EMPIRE .......................................................................................................93 Media first ........................................................................................................................................ 94 Early Romance ............................................................................................................................95 A Decisive Step Forward ........................................................................................................96 Newspaper Acquisition Ad Lib. ..............................................................................................97 Disentangling Identities ...........................................................................................................98 The Financing Model ................................................................................................................99 How About a Newspaper All Your Own? ......................................................................100 Buying Editorial Policy .......................................................................................................... 102 The Move to Television ........................................................................................................... 104 KTB-Backed Media after the Bank’s Demise ..............................................................107 DIGITALISATION — CONTINUED EXPANSION OF THE BUSINESS EMPIRE ................................................................................109 Broadcasting Next in Line To Fall ...................................................................................... 110 The Acquisition of Transmitting Antennas .................................................................... 110 The State at Your Service ......................................................................................................112 Clearing the Way Forward .....................................................................................................113 7 KTB’s Link to Broadcast Relay Stations .........................................................................113 Multiplexes Take Centre Stage ............................................................................................116 Europe Not Caught Napping for a Change .................................................................. 118 POLITICAL FRIENDSHIPS ...................................................................................120 The Digitalisation Scam ...........................................................................................................121 THE OMANI CONNECTION ................................................................................. 127 The Deal ..........................................................................................................................................127 The Omanis and Their Bulgarian Counterparts ....................................................... 128 The Figure behind the Bank ..................................................................................................131 Before and after the Crash ....................................................................................................132 A PROPERTY SCAM WITH A LITTLE HELP FROM THE TAX AUTHORITIES ...........................................................................135 Currying Favour with Gifts ................................................................................................... 135 A Deal Is Struck with GERB ................................................................................................. 138 POST-ELECTION CATHARTIC OUTPOURINGS IN THE PEEVSKI-CONTROLLED MEDIA ..........................................................140 New Framing Statements Emerge ....................................................................................141 Crisis in Waste Collection ......................................................................................................142 Mafia Ties ........................................................................................................................................143 Boyko Who?...................................................................................................................................143 The Perpetual Grind оf The PR Machine ......................................................................144 Borisov for Prime Minister and the Election ..............................................................145 4. KTB AND THE GERB GOVERNMENT ............................................. 149 ASSET HOARDING ................................................................................................152 First Wobbly Steps ....................................................................................................................152 Onwards and Upwards — The Golden