by Stanimir Vaglenov and Tsvetana Balabanova
The former Vice Minister of Agriculture, Dimitar Peychev, was recently arrested – at least according to every major Bulgarian news website on 1 July 2010. An hour after the first report appeared, the police denied it, saying Peychev was simply being questioned. Meanwhile, journalists found him in an office at his firm in Plovdiv, the second largest city in Bulgaria. Despite the official denial, news about Peychev’s possible arrest didn’t exactly come as a surprise to journalists or the Bulgarian public. Scandals surrounding him are legion, with some said to be on prosecutors’ desks.
In 2009, the former minister’s wife and daughter received over €1.5 million in subsidies from European programs intended for farming, when he was responsible for distributing money meant for general EU policies. This was revealed in an investigation by farmsubsidy.org in Brussels in May 2010.
That investigation was published simultaneously on 5 May 2010 in the online editions of the two largest Bulgarian newspapers – Trud and 24 Hours – and the following day it appeared in their paper editions. The news was later reported throughout the Bulgarian media, including on websites, radio and TV stations, and in other newspapers. According to official data from the Bulgarian Ministry of Agriculture, Galina Dimitrova Peycheva-Miteva, Peychev’s 27-year-old daughter, received €781,456 in subsidies from the European Union’s common agricultural policy: €69,084 in direct payments and €712,372 from the rural development program. According to the application forms for rural development subsidies, the money was meant to be used for buying farm equipment.
Ms. Peycheva-Miteva would appear to be Bulgaria’s largest private recipient of EU farm subsidies. Not only is she registered as a producer of vegetables, watermelons and cantaloupes, she also has shares in five companies, some of which her father has involvement, along with other members of their family.
These companies’ major activities include tourism, construction, cauldron-making, energy production, tax advice and accounting services. Most of their offices have the same address as the location her father used for a reception for voters when he was Vice Minister of Agriculture. As for his daughter’s agricultural activities, Peychev says: “Galina is a producer and has applied to the rural development program. She is classified according to all Bulgarian and European Union rules, just like thousands of other manufacturers in Bulgaria.”
What’s more, according to Peychev, the media have scrutinized his actions as Vice Minister for three years now, trying to find conflicts of interest, but have so far found no discrepancies.
“My daughter graduated in New York and I convinced her to come back to Bulgaria to work, but I now regret that decision” he adds. Still, he doesn’t know how many acres his daughter is working with: “I don’t know the exact acreage, but I’m convinced it’s enough.”
Peychev’s wife, Halena Malecka-Peycheva, also received a large European agriculture subsidy, not as a private individual, but through her own firm. This was revealed by the current Minister of Agriculture, Miroslav Mladenov, on Bulgarian National Radio, when he was invited to comment on the scandal surrounding Peychev’s daughter, following the farmsubsidy.org investigation.
“Yes, the European subsidy was granted to Dimitar Peychev’s daughter at the time when he was in office and was responsible for the EU subsidies,” Mladenov said. “The Ministry of Agriculture alerted the prosecutors office as early as September 2009, indicating that an investigation was needed into the management of CAP funds and potential conflicts of interest.”
In 2008, Halena Malecka-Peycheva received subsidy payments amounting to €828,872, and in 2009 she got another €45,631. Interestingly, the firm that got the funding is half-owned by Dimitar Peychev. The owner of the beneficiary company, Trakia PM, is a limited liability company called Kollo. Its ownership is split between Peychev and his wife. Halena Malecka–Peycheva is also the manager of both firms. In 2008, another of the family’s firms, Trakia Eko Petrol Inc., received a subsidy from the European Union.
Trakia PM is a former government firm, taken private by Dimitar Peychev and his wife in 2004 for €744,000. Since then, they have made millions in profit by working on government and public orders. In fact, agriculture is just one of several areas in which the company works. Others include water and sewage projects, building landfills and garbage depots, transportation, construction and tourism.
The official registry of public orders has shown that Trakia PM has earned 30 public orders for over €11 million. As an agricultural manufacturer, the company works on land that grows vineyards, wheat, barley, canola and sunflower, among other crops. Before Bulgaria joined the EU, Trakia PM was also subcontracting projects under the SAPARD program.
Dimitar Peychev’s younger daughter, Christina, has also followed the family tradition by applying for subsidies. However, according to the Ministry of Agriculture, the 23-year-old’s two projects for restructuring and converting vineyards were rejected. Moreover, a lawsuit has been filed against her for providing false facts and withholding evidence with the intention of receiving EU funds.
In total, then, companies connected to Dimitar Peychev and his family received €1.65 million in subsidies from European programs when he was Vice Minister for Agriculture. The Sofia City Prosecutor is now investigating Peychev, on the suspicion he used his position for personal gain. The Main Inspectorate at the Council of Ministers has also begun an investigation into him for conflict of interests. And yet, according to the 2009 law for preventing and revealing conflicts of interest, Peychev cannot be held responsible. The only potential action might have been an administrative sanction while he held the office of Vice Minister of Agriculture.
So the investigation against the ex-minister remains in its infancy. For now, the only person facing actual charges is his younger daughter, Christina. If any criminal evidence is obtained during the course of that investigation, Galina Peycheva-Miteva and her father may yet face charges.
Still, the curious thing about this case is that Dimitar Peychev, whose nickname is Uncle Mitko, proclaimed himself to be an active opponent of conflicts of interest when he was in office. He was even part of the administration of the Association for the Prevention of Conflicts of Interest.
Following the publication of farmsubsidy.org’s investigation, in late May auditors from the EU’s agriculture directorate came to Bulgaria. According to the Bulgarian economic weekly newspaper Capital, they specifically wanted to look at Galina Peycheva-Miteva’s projects. So far, there has been no official information from Bulgarian institutions about the results of the investigation.
Thanks to the investigations by farmsubsidy.org, Bulgarian authorities have also begun implementing changes in the rural development program. In late May, they introduced limits on the receipt of European subsidies from related firms and partnering enterprises, as well as an extension of the period for working on a project from three to five months.
As a result of these changes, every candidate for EU farm subsidies will be checked more thoroughly to ensure the subsidy limit isn’t exceeded. The aim is to stop the widespread practice, carried over by SAPARD, of artificially separating firms and transferring land between relatives who realistically don’t fulfil the requirements.
With the signing of new contracts for financing small municipalities with European funds via the rural development program, the current Bulgarian prime minister, Boyko Borisov, warned in May that closed circles of firms and family bonds will no longer be tolerated when distributing subsidies. He also recommended that mayors consider carefully with whom they sign public procurement contracts, so that there aren’t problems with Brussels down the line.
Following farmsubsidy.org’s investigation, journalists have conducted several checks on the recipients of European subsidies, revealing some scandalous facts. For example, the government agriculture fund, set up to be an independent distributor of subsidies, gave itself €792,697 for an unknown purpose.
Generous European subsidies totalling €763,744 were also received by another government institution – the National Service for Advising in Agriculture. Both the agriculture fund and the National Service received the funds under the rural development program. Journalists also uncovered an interesting case concerning Bulgarian businessman Mladen Milkov, whose firm Sprink Inc. received €1,130,569 in agricultural subsidies in 2009. In February 2010 Milkov was arrested on charges of withdrawing taxes from the national budget. His wife, Anelia Milkova, was thrown in jail, where she hanged herself on her first night. The investigation of that case continues.
Meanwhile, the largest Bulgarian recipient of agricultural subsidies by a single company that isn’t a farmer (i.e. an agricultural producer) happens to be a salesman who received €2.36 million in 2009. Fantastika 95, owned by Georgi Cankov, tops the charts of subsidy beneficiaries for the second year running.
In an interview with 24 Hours newspaper, Cankov discussed the hardships that every candidate applying for EU subsidies faces. Besides voluminous documentation at least 700 pages long, the criteria appear to be serious, he said. To deal with them and become the country’s number one recipient, the company formed a 14-strong department to study the acts, related changes to them and everything concerning the documentation.
Georgi Cankov is a town councillor of the New Leaders party and head of the town council in the Rodopi community near Plovdiv. This case is thus indicative of the tendency often observed in the distribution of EU farm subsidies – that most subsidies don’t go to producers but to intermediaries.
Cankov trades rice, sugar, flower, milk, and cold meat. The total number of items in his warehouses tops 10,000. He is among the major players in the market for providing state and public facilities such as canteens, kindergartens, schools, and military bases, as well as supermarket chains such as METRO, Billa and Trokadero Market, and smaller stores, pizza places, and restaurants. Indeed, his company delivers to over 2,100 sites around the country, most of them daily.
According to official statistics, Bulgaria received €457 million in farm subsidies from the EU in 2009. That’s approximately €34 million less than in 2008. Despite that, however, the number of subsidy-funded millionaires, such as Georgi Cankov, has risen significantly. In 2009, there were 63 millionaires. A year earlier? Only 12.
The European Commission last month published its seventh report on the progress that Bulgaria has made since it joined the EU in January 2007. Sofia has again blotted its copy book. The report claims public procurement procedures in the Balkan country remain bedevilled by shortcomings, including corruption and fraud. In particular, the report highlights conflicts of interest involving politicians and civil servants responsible for administering public funds.
Take Emilia Maslarova, the minister for social affairs under the previous Socialist-led government. She was prosecuted for giving a €5.5m contract to renovate a retirement home to a company linked to her husband. Then there’s the former head of the national roads agency, Vesselin Georgiev, who was charged with approving lucrative contracts to companies run by his two brothers.
The trouble is, that was all meant to be in the past. Prime Minister Boiko Borisov, whose centre-right GERB party came to power last July, promised to be uncompromising when it came to suspicions of corruption. Yet just four months ago his health minister, Bozhidar Nanev, was charged with graft over the procurement of swine flu vaccine last December.
The European Commission’s report illuminates the extent of Bulgaria’s problem. To make matters worse, it says the country’s judicial and administrative branches are “not in a position to protect public procurement against conflict of interest in an effective way”. Borisov certainly has his work cut out.
Stanimir Vaglenov is chief of the Department of Information and Online Services at the Newspaper Group Bulgaria, which manages the biggest Bulgarian newspapers and magazines and is responsible for the group’s internet projects. Until 2007 he was a senior editor at 24 Hours – Bulgaria’s second largest daily newspaper. His reporting on the Balkan energy market was recognised with a Shining Light Award at the Global Investigative Journalism Conference. In April 2007 he founded the Bulgarian Investigative Journalism Center http://www.bijc.eu/en/.
Tsvetana Balabanova is completing her degree in journalism at Sofia University, Bulgaria and was a visiting student at the Catholic University of Louvain-la-Neuve, Belgium. She works for the websites of two leading Bulgarian newspapers, 24 Hours and Trud, and is a member of the Bulgarian Investigative Journalism Center. Both are members of the farmsubsidy.org network. Their investigation began at the annual Farm Subsidy Data Harvest Festival in Brussels, 2-3 May 2010.