" Capital" Why the report for CCB will not cure us from CCB

Why the report for CCB will not cure us from CCB: Publicity and Media Coverage of the investigation of AlixPartners is a Convenient Political Smoke Bomb Behind Which to Hide the Real problems

Originally published in Capital, Bulgaria, on February 26, 2016

"The main dependencies in related CCB companies are explained in absolutely unreadable schemes - the printing resolution is not that great to differ somethingof this small print," Grozdan Karadjov, MP from the Reform bloc, narrated on Thursday before bTV his impressions of the clash with the most searched in the country document - the report by the British firm AlixPartners, which was hired last year to track down drained of the CCB assets and make proposals for their recovery. Actually what Grozdan Karadjov spoke of and a source familiar with the document told "Capital” is actually a very detailed infographic that shows the percentage of loans granted by the CCB that have went to companies linked to Tsvetan Vassilev. The graphics were so great that it was impossible to see them on an A4 format.

For several weeks the theme for the publicity of the report of AlixPartners has had an active presence in the political debate. Prime Minister Boyko Borisov ordered its publication "to close the CCB issue." Opposition members of Parliament were fighting for its publication, and anti-CCB wing in MRF in the face of members of Parliament Yordan Tsonev and Delyan Peevski introduced legislative changes to allow publication of the text.

Sources of "Capital" familiar with the contents of the report and the process of its preparation, said that things were much more complex and the document neither would close the CCB topic nor would answer the question how this financial bubble was possible and who took advantage of it.

What does the report say

At the end of 2014 the Guarantee Fund for Bank Deposits (GFBD) started looking for an international company that would investigate and return the money from the bankrupt CCB. It was written in the assignment that what are to be found are assets acquired with money of CCB, and the companies and individuals that actually hold these assets, loans and transfers to affiliates and related companies, loans without collateral or those with collateral, which has been removed illegally, falsified assessment of credit risk, high-risk practices in the management of the bank, money laundering, unprofitable contracts with related parties, transactions missing in balance sheets, negligence in the work of auditors, etc.

The fund was negotiating with 5-6 companies and in the process of selection remained two - Alvarez & Marsal and AlixPartners, as the second company was ultimately selected.

On Friday, Vladislav Goranov said that the value of the contract is 800 thousand Euros.
Experts of the company were working in the building of CCB on "Garibaldi" and received information from the assignees in bankruptcy. They had to rebuild the facts about where the money went - analyzing each credit file and data on financial transactions, which are kept in the CCB.

The analysis showed that a significant portion of the loans, over 2/3, were awarded to companies associated with Tsvetan Vasilev. Schemes seemed quite simple, as there were no others that have not been out already in the public domain. The absence of over 200 million levs in cash was confirmed. Transactions that aimed at hollow raising the bank's capital, others - to related companies, with which old loans were repaid (again of related companies), etc. were found.
According to the evaluation report about 2.5 billion Levs are wasted and under one billion Levs are potentially recoverable, but only if a concrete action is taken. It is known that value of the assets falls rapidly in any bank bankruptcy. According to a source of "Capital", familiar with the process of recovery of money from the CCB, the report says that "a major proportion, perhaps 90% of assets are in Bulgaria, so local companiesare arehired to return them. It is impossible, however, some of them to be returned - for example Crown Media – the money for TV7 - there 300 million levs are lost, which are drained through purchases of equipment, advertising contracts, salaries, etc. Work is done on "Petrol",  "Dunarit", "Avionams",  " Sana Spice Hotels" , “BTC ".

The document describes specific suggestions on how the money can be collected - a kind of strategy against whom and how to take action. There are also recommendations for potential claims against individuals and organizations whose actions and inaction also contributed to the bank's situation.
According to people familiar with the contents of the report possible disclosure will prevent the measures for reimbursement of the money because it will show how far along the traceability of money has gone, will undermine the prepared strategic analysis and for example will put the assignees in bankruptcy in a weaker position when negotiating for the realization of a underlying asset.

The analysis showed that the CCB is completely local event and there are very few transactions that go outside of Bulgaria.

The assignment of GFBD provides seven steps and at this stage only one of them was fulfilled. This means that there is an option AlixPartners to be involved with the implementation of other steps that provide for specific actions for blocking and recovery of assets, as the company will receive a percentage of them.

How do these companies work

Iliana Canova, a deputy prime minister in the caretaker government of Raikov and Bliznashki, who worked for such a company in Washington in 2001, told "Capital" that the work of the consultant includes several stages from analysis of the event to the recovery of assets . First, they talk with various authorities familiar with the case, in this case BNB, prosecution, bank employees, shareholders, attorneys, etc. In this phase a review of asset quality of the bank and collecting evidence are included. Then a detailed plan for investigation is made, by identifying priorities and objectives, and then specialists begin work on tracing and identification of assets, including in various jurisdictions,  used intermediaries and other financial institutions.

 In this phase a card of related parties is prepared(what Grozdan Karadjov spoke of- ed. note),  ownership of assets is clarified and financial flows, bank accounts are traced, etc. The third stage is the tracing of assets - in this phase the database is complemented with evidence and lawsuits are prepared. "It is very important that the first three phases take place as soon as possible after the event has happened. This will prevent further leakage of assets and blurring of traces," said Iliana Canova. The fourth stage is the actual recovery of assets, as the company assists during trials. Iliana Canova says that during the caretaker government they insisted such investigation to begin immediately.

Diplomatic sources told"Capital" that AlixPartners had been hampered in their work by several circumstances – first, the time that has passed since the beginning of their work on the case and the closure of the bank. Second, the tasks assigned by the treaty had not given complete freedom tothe company, which leads to the third problem - the obligation for interaction with the prosecution (where part of the documents were) which had not been going smoothly. State prosecutions even asked AlixPartners to provide an employeeas an expert to testify in the case of draining the bank.

"In a case like that of CCB thefirm and timely response of authorities in the direction of tracing and recovering of assets is essential to prevent the looting of the bankruptcy and to minimizelosses for the budget. Why AlixPartners did not have a full mandate to work and why the society, two years after the collapse of CCB, does not have a reliable answer what happenedand where 4 billion levs are buried are questions that society expects to hear, "commented Iliana Canova.
A knowledgeable source, having regard to the process of recovery of assets, said that the second stage - recovery of assets, has begun and the state has decided not to work with AlixPartners, but has "signed with different contractors that are judged to be most appropriate for the asset and for work in the corresponding jurisdiction."

He explained the decision by stating that "for each asset depending on the jurisdiction in which it is located, a suitable legal team is recruited. Alix might be the best in the world, but they are not the best in our region . For example, a leading law firm from Serbia was hired for the assets in Serbia. ThereAlixPartners would not be appropriate for obvious reasons. "

Publicity or not?

Accordingto Iliana Tzanova the Finance Minister is right not to make public the report of AlixPartners, becausethis would prevent the possible work on tracing and recoveringthe assets of CCB.

A professor from the Sofia University in obligations, family and inheritance law, attorney Christian Takoff thinks otherwise "a clause of confidentiality (privacy) protects not both, but usually one of the parties in the contract. The following feature comes from this one way confidentiality: if the party in whose interest confidentiality is established decides it is no longer its interest to preserve the secrecy, it can reveal it without asking the other side. To put it in more understandable terms: if I hired a private detective to stalk my wife and he brought me the exciting details of her affair, do I need to ask the detective whether I can make her a scandal or require his permission to use the information in my divorce? The case with the report for the CCB is precisely such. The Bulgarian state, i.e. the Bulgarian taxpayer may have an abstract interest that data in the report are generally confidential. Once these data is revealed to the assignees of bankruptcy of CCB, the Guarantee Fund for Bank Deposits (which appointed the assignees of bankruptcy), the Council of Ministers and the Bulgarian National Bank (which have appointed managers of the fund), these bodies and persons assess what is confidential and what is not. Therefore, data that do not contain sensitive information can be safely exposed. That is why the explanations of Minister Vladislav Goranov that "the contract (for the report) was a private, not a state one", that a permission is needed from those entrusted with preparing the report to reveal details thereof, and other spoken by the Minister pearls are deeply offensive to the intelligence of the audience. We are radiated with stupidity, because most people do not feel comfortable in the unfamiliar environment of "confidentiality clauses."
Sources from the ruling majority told that there is a political decision for the publication of the report (i.e. support for the proposal of deputies Delyan Peevski and Yordan Tsonev for its declassification) - something Tsvetan Tsvetanov said publicly. The thin calculation is that the possible disclosure of a document by decision of the parliament will avert any claims of AlixPartners for breach of contract. The truth is that each of the participants in this story obviously pursues different goals - some want to again brandish evidence that only Tsvetan Vasilev drained the bank, others want to raise a smoke bomb to continue timelessness in which what -is-left of the CCB is transferred to another owner, third, quite naively mounting the theme of absolute publicity, try to score political points, others- to attack government that it spent some money for nothing.

Still goals that will hardly help to restore the drained money and will not provide an answer to the question who made the CCB possible.