London judge rules auction-rigging case can go to full trial

Originally Posted by Thomson Reuters, March 6, 2018

A London commercial court judge has given a provisional ruling that a case alleging VTB Capital, a Financial Conduct Authority-regulated institution, rigged an auction to sell Bulgaria's largest telecommunications company, should go to full trial. 

The judge rejected the claim that the entire auction should be voided on the grounds of fraud. The decision means Empreno, the company bringing the case, could have a claim against VTB Capital for damages, depending on the outcome of the full trial. VTB Capital is the Russian VTB's corporate investment business and is based in London.

Provisional ruling

The court report on the provisional hearing said Empreno claimed it was excluded from an auction of a 43.3 percent block of shares which they themselves owned, in a company associated with Bulgarian telecoms company Vivacom, as a result of the actions of VTB Capital (VTBC). 

The judge's conclusion to this provisional hearing was Empreno should be able to "claim damages or monetary compensation, in respect of their alleged loss of a valuable chance or opportunity to participate in the EY sale process". 

VTBC hired EY as "special adviser", to "enforce the sale of the shares", the provision ruling said.

The complainants' contention that the sale of the block of shares should be set aside on the grounds that "fraud vitiates everything" was dismissed.

The court's provisional ruling reported Empreno's claim that the auction "was a dishonest sham, intended to give the false appearance of being a genuine sale at arm's length for a fair value while in fact delivering the shares at an undervalue to the purchasing consortium". The company whose shares were auctioned is Vivacom.

The complainants are LIC Telecommunications and Empreno Ventures, two companies owned by Dmitri Kosarev, a Russian businessman. VTB Capital and a number of other companies and individuals who were part of a consortium that participated in the auction are defending the claim. 

"All allegations of wrongdoing are denied; in particular the sale was not in any way rigged or improper," Said a court document describing VTBC's defence.

Claimants allege conspiracy

The judge's ruling, however, disclosed the claimants' contention that, "the sale was rigged and was the product of a conspiracy between VTBC and some of the other defendants to remove control of the Bulgarian telecommunications industry, or at least a substantial part of it" from the claimants.

The events at issue began in early 2015, when VTBC appointed EY as its special adviser to assist it in "enforcing the shares held by VTBC as security". This move was taken during a "standstill period" when VTBC (and a related company Delta Capital International, another defendant) agreed not to exercise certain rights under a loan agreement to "enforce the transaction security". 

A series of events culminating in the auction are outlined in the court documents. First, Empreno wrote to VTBC requesting an explanation of VTBC's intentions in appointing EY in October 2015. It did not receive a reply. Empreno then offered to refinance the loan for three months and VTB responded by saying that it would consider any serious offer.

"The reality was that VTBC made no real effort to engage with Empreno on this," the claimants contended. Empreno signed a non-disclosure agreement with VTBC, with the expectation that it would be brought in on the negotiation for the sale of the shares. This did not happen and Empreno was told the agreement was non-negotiable. 

The auction

The next critical step was the holding of an auction. This took place on November 19, 2015 and the court document reported that on November 20, 2015 VTBC announced it had sold the shares at auction for 330 million euros. The claimants contend (according to the judge in his ruling) the price obtained at the auction undervalued the shares by at least 143 million euros. 

A report of the hearing from One Essex Court, which acted for one of the defendants, stated: "The defendants are alleged to have procured the sale of shares in the operating subsidiaries of the Vivacom group, held by an intermediate holding company, known as V2, at an undervalue. The shares were pledged to VTBC as a security for a loan granted to the group by VTBC." 

The Luxembourg company InterV owned 100 percent of the shares in Viva Telecom Bulgaria EOOD, a Bulgarian telecoms company, which "lay at the head of the Vivacom Group", according to court documents.

Winning consortium

Members of the winning consortium included Milen Veltchev, a former Bulgarian finance minister and the current CEO of the Bulgarian affiliate of VTB Capital, and Spas Roussev, a businessman and associate of Veltchev.  

"We are pleased that the judge has said to VTB that it must now explain at trial what happened during the rigged auction, why it shut us out the way it did, why they strung us along, and why they allowed it to be sold to themselves at a fraction of its true value," Kosarev was quoted as saying after the judgment.

A spokesman for VTB welcomed the court ruling, which it said confirmed the absence of legal grounds for the claims of Empreno regarding the results of the Vivacom auction. 

"VTB will continue to defend its position in the future as we believe that the claims made by Empreno in court regarding the validity of the auction are unfounded," the spokesman said.

Spas Russev Out of BTC

Originally posted by BIG5, March 10, 2017

The businessman has been unable to get into BTC for more than 15 months after the fabricated tender procedure.

Despite his more than 10 attempts to control the management of Viva Telecom Bulgaria, as well as those of the Supervisory Board and the Managerial Board of the BTC, in the end of February the Supreme cassation Court stipulated that the businessman from Pernik and his close associates would not control the companies before the issues with the legitimate major owner of the companies, Mr. Kosarev, have been solved.

The Supreme Cassation Court statement was also confirmed by a number of definitions by the Sofia-city Court and by the Sofia Court of Appeal, by which were rejected Spas Russev’s demands for registration of new managers. On its behalf, even the Commercial Registrar rejected Russev’s petitions, and at the following appeals the Court confirmed the merits of those rejections.

It was exactly Spas Russev and VTB’s impossibility to draw BTC off, as they planned - as a result of a suspicious tender of November 2015 - that was in the root of the refusal from “Levski”. With regard to the strange transfer of EUR 2 000 000 from BTC to VTB, made in November 2016 by the chief executive director of BTC, Mr. Atanas Dobrev, and to the plans to draw another EUR 43 000 000 off, the Prosecution has already been approached, which was confirmed by the beginning of an investigation under the case.

The followed sale of the last ready assets of the Russevs in Bulgaria and the garnishing of assets on the behalf of Spas Rusev’s creditors around the world, combined with the Bulgarian court rulings under the “BTC” case, show that after relinquishing Levski, Spas Rusev is in definitive impossibility to seize the BTC. The planned sale of a central property of the BTC is just another attempt to draw funds off and which would actually fail.

The pending appeals of the CPC decisions, stipulated in favor of Russev in breach of the law and at the presence of an obvious political errand, are on their way to finally confirm the inability of Russev and VTB to finish the attempt for hostile buyout of BTC.

The investigation of the tender from November 2015, which the Prosecution stubbornly refused to deal with, will reveal the scales of the prepared plan for harming the interests of the state on the behalf of Russev and the VTB, together with the political, economic and media groups standing behind them. The assignees of CCB, on the other hand, are continuing to support the process and are not in a search of those BGN 150 million that were supposedly waiting for them in accounts of VTB in London.

After the Court defiantly confirmed Spas Russev’s inability to control and draw BTC off, the whole truth about the strange tender held in November 2015 and the real goals of the participants in it will be revealed. Hopes are that, unlike KPMG, the main organizer of the “tender” – “Ernst & Young” – will not avoid the revocation of its license, as well as that Atanas Dobrev will be kept responsible for transfers to VTB by which BTC has been financing its own acquisition.


Originally posted by Афера.БГ, January 9, 2017

Obviously worried about the end of the support provided by the current Government and personally by the figure standing before the mirror, its reflection – Mr. Delyan Peevski and the “appointed” owner of BTC Mr. Spas Rusev just performed yet another particularly desperate attempt to legitimize the theft of BTC.

The plan included series of misleading publications in the Peevski-controlled media like and Monitor newspaper, where some of the notoriously independent judges were pressurized in order to change the established case practice in favour of the Rusev/Peevski duo.

Following this media attack, on 5 January 2017 Rusev/Peevski bombarded the Commercial Register with four applications to change the control over Viva Telecom Bulgaria EOOD – the company, which controls BTC. As we all know, Rusev announced his “acquisition” of BTC at the end of August, but still is Mr. No-one in both BTC and its mother company. By the end of 2016, the Sofia city court and the Sofia court of appeal have issued a number of resolutions confirming that Mr. Rusev and his team shall not be registered as managers of the companies that they claim to control.

In his desperate recent attempt, Mr. Rusev tried all of the below – to reappoint himself as a manager of Viva Telecom Bulgaria, to appoint his son as a manager, to appoint a foreign procurator and to make sure that Milen Veltchev represents the company alone (as he was already doing illegally).

By means of 3 court resolutions issued on the next day – 6 January 2017 – three of the applications were dismissed. The judge that failed to dismiss the application (having done the opposite just a day before that on similar grounds) revealed the actual irony of the situation Spas Rusev put himself in.

In a humiliating resolution dated 7 January 2017, the Commercial Register pointed out a series of mistakes made by Mr. Rusev and his team, and confirmed that even if these mistakes were to be corrected on a later stage, the registration of Spas Rusev as a manager of Viva Telecom Bulgaria would be rejected.  

In his desperate attempt, Mr. Rusev revealed an interesting resolution by a court in Luxembourg, which reveals the full technology of the theft of BTC. It reveals the fact that there have been offers for BTC, which exceeded three times the price paid by VTB to … themselves. The Resolution also provides a list of breaches made by VTB Capital, Rusev and Milen Veltchev with the obvious support by the state representatives and their mirror – image -Peevski.

Definitely, there is a very good reason for Rusev & Co. to be very nervous about. Rusev himself declared wrong circumstances before the Bulgarian institutions in relation to the BTC theft, which brings risks of different dimensions.  The English litigation is coming to a decisive moment and the cases in all other jurisdictions are advancing. The CPC clearance is under judicial review. VTB’s loan is unsecured. The CEO of BTC is pushed to expose himself to extreme risks for the payment of 2 million EUR in interest to VTB in an attempt to suggest that it is business as usual. Bankers and businessmen are chasing Rusev for the various loans, which he secured with the planned thefts from BTC once it is taken over. The political change in Bulgaria is coming any minute now and the prosecutors might decide to move away from the “umbrella” over Rusev & Co.  

Dmitry Kosarev: Yuri Soloviev is the mastermind of the attack on Vivacom

Originally posted at  30th June 2016

On the 10th of June, 2016 the VTB press service announced the completion of the bondholders’ solicitation process, and also that a change of Vivacom shareholders will occur in the near future. The sale of the operator is disputed by Vivacom’s owner Dmitry Kosarev, who owns 76% of the company. In a new interview, Mr. Kosarev explains why, in his view, VTB Capital will not be able to close the deal on the resale of the company.

Dmitry, good day, let's start with the last event. Is that true that Vivacom bondholders allowed a change of shareholders, and how it will happen?

- In the release of VTB, which is published on its website, a surprising amount of text is devoted to my modest person, and surprisingly little information is given about what was actually signed by Vivacom bondholders. And nothing there is so clear, rather the opposite - the paper signed by creditors contains a number of clear conditions that are impracticable for VTB Capital. In general, lawsuits in several jurisdictions are under way in relation to the results and organization of the "auction".

Moreover, as defendants appear both VTB Capital and members of the consortium, that VTB Capital announced as winner of the so-called "auction". The bank is well aware, because they accepted the jurisdiction of the High Court of Justice of England in our dispute with them about who has the right to do what with the Vivacom shares.

It turns out that in this case VTB Capital acts both as a seller and as a buyer, and it is also in the role of lender, and of an agent in obtaining the consent of the bondholders. A separate question relates to the sources and the structure of this deal’s funding. I think that in the course of legal proceedings, when the defendants will testify by my requests before the English court, we will learn much more interesting. For example, who is behind Spas Rusev and where he got the money to buy my company.

Could you clarify who will be the buyer of your company if the deal goes through?

- There are many questions to the company-buyer. Let me remind you, it is called Viva Telecom and at the beginning of the story that we have been told by VTB Capital, it belonged to Spas Rusev, and now it turned out that as buyers of my company are acting not only Spas Rusev, but VTB Capital itself, and also company Delta, owned by Milen Velchev - the same senior manager of the Bulgarian VTB Capital, who on the pages of Russian newspapers talked about how fair and transparent "auction" he managed to organize. In an interview with the Russian press, he explained that invitations were sent to more than 40 investors, and as a result of "hard" struggle Rusev’s company won. And it is apparent that in a consortium with Rusev we can find VTB Capital itself and Milen Velchev - just coincidence. But I do not believe in such coincidences, and I am confident that the English court will not believe in this as well. Now it is clear to everybody how honest and transparent "auction" was organized.

By the way, I would like to share an interesting detail, which became clear during our court pleadings in London. In its last press release the PR office of VTB continues to insist on calling an "auction" that, what happened in the last year in London. The lawyers of VTB Capital in their last letter to the court refuse to call an "auction" what happened last November in London: now they claim that this was a so-called "private sale". Let's see how their testimony will further change during the proceedings.

That is, you believe that "Vivacom" will not be sold as a result of the auction conducted?

- This is a difficult question, because the bank still in November last year signed with the buyer the contract of sale-trade. The fact that the deal has not yet been closed, says that a lot of people within VTB Capital are aware of the risks that they have to take following the approval of the deal. Under current conditions, if VTB Capital will close the deal, it will open up great prospects for us making a claim against the bank for more than 300 million Euro of loss caused to the company's shareholders + minority claims. In addition, the bondholders will have the opportunity to demand from the company early repayment of 400 million Euro of debt (in the case of violation of the conditions of approval of the bondholders, they have the right to demand early repayment). That is, they can, of course, against the will of the bondholders to transfer the shares to the ownership of their consortium, but only if the head of VTB Capital Yury Solovyov (head of VTB Capital - Note) would get in person from his purse 400 million Euro on the early repayment of the bonds. But, as we now can see, Mr. Soloviev prefer not to get his money, but somebody else’s, and preferably by somebody else’s hands. Now, it is obvious to me that as the mastermind of the whole process appears exactly Yury Alekseevich.

Within VTB CAPITAL they claim that the change of Vivacom shareholders has been already approved by the antitrust authorities of the European Union and Bulgaria, is not that true?

- Not exactly. Firstly, the European Commission has not agreed to the deal, and the Bulgarian regulator has been simply misled, because it has not been given all the information about the planned deal (see Release).

By the way, we have applied before the Supreme Administrative Court of Bulgaria for a review of the decision of the Bulgarian Commission for the Protection of Competition with the requirement to suspend the execution of the illegal decision. A few days ago, the entire leadership of the Commission changed, not excluding our case as one of the reasons for that, so the new decision could not be at all in favour of my opponents.

The Bank has officially confirmed just in the end of May that it is involved in the deal on the buyer's side, although I was telling so from the beginning of the "auction." Just like I announced Rusev’s name as the "front-man" a month before the end of this "auction" in London. Naturally, all of this information has not been disclosed to the Bulgarian Antitrust Commission (see Release). By the way, in Bulgaria, I filed a lawsuit demanding to cancel the decision of the Antitrust Commission regarding the permission to the deal, as its approval was based on incomplete information.

But the complete information is now available ...

- Yes, thanks to the national press. The "Kommersant" wrote that behind Viva Telecom there is a consortium standing that includes VTB Capital itself and the owned by Milen Velchev company Delta. As for the accusations against me, my opponents are good in telling people who are and who are not my friends, where I work and what I eat for breakfast, but essentially they do not give answers to the questions asked by me and by my lawyers. They do not explain how they succeed organizing this "auction", why the bank happened to act as a buyer, lender and agent in one person, and for whatever reason, trying to compensate the losses of the credit, as a result they increase the credit burden on the bank. After all, as a part of the deal with Rusev, VTB Capital is ready to give as a loan the majority of funds needed for the purchase of my company (330 million Euro). At the same time at the bank there remain as a pledge the same 100% of the "Vivacom" shares, but being of much lower quality, because the buyer is a respondent in proceedings promising multi-million losses. (According to "Kommersant" VTB buys some Vivacom shares, applications have been filed by other members of the consortium (in the press release there is information that the deal is disputed in the Supreme Administrative Court of Bulgaria), that is, VTB, as co-owner of the shares, will be defendant in the lawsuit in London).

But VTB Capital raises counter-accusations, claiming that you are not a shareholder of the company.

- In VTB Capital they like to say that I am no one and nobody, but I led the bank at the time when Yuri Soloviev, for example, just finished studying, so I have a deep understanding of all banking processes, no doubt about it. Against me has been deployed the usual dirty PR campaign. During the whole process of soliciting the consent of bondholders for a deal, I have been actively cursed in publications clearly ordered. In their irresistible desire at all costs to complete the deal with Rusev, they become more and more entangled in their own schemes. VTB Capital has openly stated both auditors and banks, and also other interested parties that I am not a shareholder of the company, but in the same time they do not clarify, who, from their point of view, is the legitimate owner. Vassilev, from whom I bought shares in the last year, publicly stated that he sold all of the shares to me. Therefore, all that is spread about me and my status of shareholder – is not true. In my arms I have all the documents giving right to the shares, and I'm going to prove in court that VTB Capital is lying. I sent a letter to the auditors of the company with the requirement to include information about the real situation with the shares in the financial statements. As far as I know, the management of the company has provided under pressure false information to auditors with respect to the share structure, thus misleading the reports’ users. This will be the subject of separate proceedings. I think that VTB Capital rightly believe that it is essentially impossible to answer to my charges, so they are trying to discredit me. Their accusations are ridiculous and make it clear that I and my staff are doing everything right, and victory will be ours.

Within VTB Capital they constantly emphasize that you have never communicated with them on the telephone, thereby explaining that they have no idea about your claims and their validity. You say the opposite. Where is the truth?

- I have argued and will argue that my lawyers have regularly contacted VTB Capital since I became the owner of "Vivacom". We sent them more than a dozen letters with the requirement to explain their position. However, they refused to communicate with me, and I was forced to go to court. The fact that the bank closes its eyes before the truth does not mean that it does not exist. Once again I want to responsibly state that I am the sole legal owner of 76% shares of "Vivacom". As for the inability to contact me or my representatives, once my opponents have not used the chance to communicate in pre-trial order, we will contact in the courtroom, let’s they there, before judges, prove that I have never contacted them. All the moves are written.

Do you have any predictions about how soon these lawsuits will end?

- Trials can last for years, but not in this case. VTB Capital could fight with me for a very long time, but it is important to note that our story is just gathering pace, and who knows what else pops up in its course. And considering that the whole process of trying to seize my company is tied to a specific person and that by his fault at VTB Capital they have all these problems, I think that the timing of our proceedings can be seriously reduced.              

Veltchev Borthers, Spas Russev and VTB got tangled in the attempt to expressly master BTC

Originally published by PIK on June 10, 2016

The Telecom asked its shareholders for a permission the control over the company to be changed, but the agent under the bonds US Bank Trustees Limited is starting a profound inspection on who are the real new owners.

Milen and Georgi Veltchevi, Spas Rusev and VTB got into trouble in their attempt to expressly master BTC. On May 25th, the controlled by Veltchev brothers operational management of the telecom required from its shareholders to allow change in the control over the company. This was taken as a clear sign that the stalemate in which the war for BTC was is now over and the group around Milen and Geogri Veltchevi, Spas Russev and the Russian VTB are making a stubborn move to capture the ownership.

After three extensions of the period for reply on the behalf of the shareholders, BTC announced it had enough positive answers for the change, but it did not have the consent of the agent under the bonds US Bank Trustees Limited that started a profound inspection on who the real new owners are.

What does all that mean?

At least until June 13th, the group around Milen and Georgi Veltchevi, Spas Russev and VTB shall wait for the agent’s decision whether it could take the control over BTC. Why is the opinion of US Bank Trustees Limited so important? Because according to the BTC prospectus, the agent shall be responsible before the shareholders for the consequences of all the changes under the emission of BTC. Initiating a profound inspection practically means that the agent is in doubt whether the information, announced by the BTC is complete and above all – trustworthy.

What did BTC announce?

In its message to the Irish stock exchange, the Bulgarian telecom announced what is formally known as of November last year. That due to the failure to fulfil the obligation under bridge loan amounting to EUR 150 mln to VTB Capital, the collateral under it – 100% of the shares of the indirect owner of BTC, the Luxemburg company InterV Investment S.a.r.l. were acquired by another Luxemburg company – Viva Telecom, also owned by the Bulgarian investor Spas Russev.

What BTC did not announce and was in fact of extreme importance, was that Spas Russev was not the real and only owner of the acquiring company. Even more –there were representatives of the management of VTB Capital and the very VTB Capital among the buyers. The purchase, on the other hand, was performed by means of a credit, again from VTB Capital. And this places the investment department of the Russian bank in total conflict of interests.

Who would own what at BTC?

Yet, if the change of control was approved by the US Bank Trustees Limited, then it is most probable that we soon witnessed and the factual change in the ownership in BTC.

According to people who are acquainted with the deal, Veltchevi brothers, Spas Russev and VTB have negotiated a harmonious allocation of the ownership.

The greater part of the shares shall be divided between VTB Capital (20% minus 1 share), Delta Capital (19% of the shares), which, even though this was not mentioned in the BTC message, belongs to the top managers of the Bulgarian VTB – the brothers Milen and Georgi Veltchevi, and 46% of the shares of the company Viva Telecom, to which Spas Russev presents himself as an owner. According to publications in Russian print issues, it is practically controlled by a chain of off-shore companies, which in its end reaches to the managers of VTB capital.

Of similar allocation of ownership, as well as that the telecom goes to the hidden ownership of VTB, also speaks in a letter of his and the owner of Empreno Ventures – Dmitriy Kosarev, who acquired Tzvetan Vassilev’s share. In his letter to the US Bank Trustees Limited he quoted the Russian VTB bank for end owner of 85% of the Bulgarian Telecom. This causes serious problem, because the bank is under sanctions from the USA and the EU and has no right of acquisitions. Especially when it comes to a strategic for the national security asset in a country from the EU.

What would happen if Veltchev borthers, Spas Russev and VTB took the ownership in CCB without the shareholders’ approval?

This would hardly happen. The reason is that at a scenario like that the bonds could be presented earlier. And this would mean that BTC would have to pay almost the whole emission of EUR 400 mln (part of it the Telecom already bought back). As the company would not be able to find such amount, this would mean a new loan – most probably with source the VTB.

But it is quite probable the bank to disagree to go further in the BTC adventure. This way the change in control may be postponed for an unknown period of time, or the parties in the dispute – VTB Capital and Dmitriy Kosarev to find a way to solve the issue. Towards this moment, this seems very little probable.

What still amazes the most in this whole mess is the passive position of the Bulgarian official authority. Because 77% of BTC have been purchased with funds, originating from the CCB and it is normal to expect the Bulgarian authorities to do even what is impossible to take this share back in the mass of insolvency of the bank. Until this moment, however, such attempts not only are not to be done, but there is no indication anyone in the country to be interested in what happens to this asset. And still, it is about the biggest telecom in Bulgaria.

Dmitry Kosarev: The court will decide which one of us is right

MOSCOW, April 6 PRIME. The trial between Dmitry Kosarev and VTB Capital Plc continues in London. The businessman, who owns through Empreno Ventures Limited76% of the shares in one of the largest telecom operators Vivacom ( "VIVACOM") thinks that the investment bank and several of its top manager tried to sell the shares of the telecom at a tender for a much lower price to a related party. Dmitry Kosarev tells about the prospects of litigation and strategies of Vivacom for protection against appropriation.

RUSSIA!: Bulgaria’s Vivacom Shareholder Sues VTB for Alleged Fraud

RUSSIA!: Bulgaria’s Vivacom Shareholder Sues VTB for Alleged Fraud

Attorneys representing core Viacom shareholder Dmitry Kosarev filed a lawsuit against VTB Capital, a UK-based subsidiary of Russia’s government-controlled bank VTB over an allegedly illegal seizure of a 100% equity stake in Vivacom.

The lawsuit was filed in the UK last week. As RUSSIA! reported, VTB Capital prevented Vivacom shareholders from refinancing a loan secured by Vivacom shares, blocked their attempts to recover the equity stake and sold it off at fire sale prices (some EUR 250 million below fair market value) to an affiliated party. And now the story continues.