C FOR CONFISCATION

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Why in Bulgaria the story about Al Capone and his taxes still looks like fiction

Open Society Institute – Sofia logo This periodical has been selected to be supported in a media pluralism promotion contest funded by the Open Society Institute – Sofia. The content of publications in it is responsibility of the authors and in no circumstances should be regarded as an official position of the Open Society Institute – Sofia.

Among the easiest ways of putting a mafia boss behind bars is to prove him guilty of tax evasion: Bulgarians seem to be well familiar with this rule of thumb. Brian de Palma's masterpiece The Untouchables is often run on Bulgarian cable TV, though not so much because of its cinematic qualities but because of its distant year of production and, accordingly, the low broadcasting rights.

But for some years now Bulgarians have been able to follow such scenarios also on their TV newscasts. At least in some measure. Since 2005, when the special Illicitly Acquired Properties Commission, known mostly with its nickname, the Kushlev Commission, named so after its first chairman, was set up, some spectacular news reports about the arrests of the suspiciously wealthy citizens X or Y and the promises that he or she would be sent to prison Al Capone-style have been a frequent occurrence.

With good reason. The country is awash with instances of wealth amassed in a shady manner. Just take a look at the cars waiting for the traffic lights to change at a Sofia intersection at rush hour and you're bound to see an astonishing number of 20-somethings who are obviously not Wall Street traders but nevertheless sit behind the steering wheels of latestmodel Porsches. A year ago agents of the National Revenue Agency, or NAP, used a helicopter to take pictures of astoundingly luxurious compounds in Sofia's southern areas. After the Katunitsa riots a NAP check on Kiril Rashkov, has shown that although the man – known as Tsar Kiro, or King Kiro – and his family live a life of affluence, he owed the state thousands of leva in unpaid taxes. Shockingly, and in full compliance with the law, he had been exempted from paying a portion of his arrears due to a prescription period.

Unfortunately, the examples of convictions for unlawful enrichment are a lot fewer than the ones in which the arrested "criminals" are being shown by the Interior Ministry's press service to keep viewers convinced that something is being done. Bulgarians are yet to have their equivalent of an incarcerated Al Capone.

Todor Kolarov, the current chairman of the Kushlev Commission, was unequivocal in summing up a portion of the hurdles that the commission must overcome to be truly effective. He cited the case of Tsar Kiro, who is a notorious businessman of Gypsy origin rumoured for years to be the mastermind of a moonshine operation. "Our hands are tied," Kolarov told the media. For one thing, the commission has the authority to confiscate a property only after a sentence to that effect has been passed by a court. In the Rashkov case, there's one further obstacle: The man known as Tsar Kiro has been charged with murder threats, illegal production of alcohol and petty felony. None of these crimes are in the commission's jurisdiction.


The legal constraints on the commission's actions is obvious. "Under the current legislation, the Kushlev Commission is only an appendage to the Prosecution Office. To effect a confiscation a sentence must have been passed in a criminal case," says Ivanka Ivanova, Programme Director of the Legal Programme of the Open Society Institute, a liberal think tank. "The commission cannot start working on a case unless it has been alerted by the Prosecution Office. It also cannot request a confiscation order from a court without the Prosecution Office's having beforehand achieved a final sentence. The effectiveness of the commission derives from that of the Prosecution Office." This explains why despite the fact that the Kushlev Commission was set up in 2005, the first sentence on a case that it has built came up in 2009.

But there are problems in the commission itself.

One of them is... corruption. The commission's first chairman, Stoyan Kushlev, was dismissed in early 2011 because of an instance of a conflict of interest he got himself into. A probe had established that over the five years he had been on the post he had appointed his wife's relatives on various positions and had received some 500,000 leva (255,000 euros) in salaries and "additional material stimulation." This could have gone down – after all, a high salary is considered an antidote to corruption – if the commission's performance had been more pronounced.

In October 2011 a new scandal erupted. The commission's chairman, Todor Kolarov, went public saying he was unable to manage his own subordinates. One of his deputies was in a state of a conflict of interest, and together with another colleague had refused to sign contracts that would reduce their salaries. This had effectively produced an absurdity in which they were earning more than their superior.

Ivanka Ivanova referred to a further problem. "In 2010 more than 5,300 alerts were filed with the commission and it built 177 cases – that is, the commission has wide discretion as to whether to go ahead with a case. This is limitless power. Second, contrary to logic, some of the commission's branches outside Sofia are more active and have achieved better results than the headquarters in Sofia. In 2010 the commission had the most cases in Veliko Tarnovo, Lovech and Plovdiv – their combined number is greater than that in Varna and twice as large as that in the City of Sofia (a separate administrative unit). One should either assume that the number of illegally rich people in Veliko Tarnovo and Lovech is twice as large as that in Sofia or that the performance of the Sofia staff is below average. The latter two problems can be easily resolved by amending the current legislation."

The amendments to the Confiscation Act were put forward by Justice Minister Margarita Popova in the autumn of 2010 and have been the subject of never-ending debates ever since. The bill, which was quickly called the Popova Act, lays down that the commission can start cases at its own discretion and can act independently of the Prosecution Office. The bill was given international backing, including from the European Commission and the American Ambassador to Bulgaria, James Warlick, but in July 2011 it was turned down by parliament at first reading. Incumbent President Georgi Parvanov also disapproved of it.

The texts that brought about the conflicts were those that provide for the so-called civil confiscation, which authorise the commission to confiscate a property without a sentence being passed beforehand.

The supporters of these provisions pointed up that such a practice already existed and was being effectively carried out in some EU member states.


But the opponents do have a point. On the one hand, in a highly corrupt society many Bulgarians can be affected not because they have done something wrong but because of someone's whim. One of them are the employees who are paid part of their salaries "under the table" – a practice that's still widespread despite the efforts of a series of administrations to bring people's incomes "out into the light." This practice in fact is more widespread now due to the economic crisis. Another factor is that thousands of families receive money from relatives living abroad, and this money go undeclared.

Among common Bulgarians, there is a strong suspicion that the amended law would be used for score-settling and extorting ordinary citizens.

Ivanka Ivanova believes that the bill should be thoroughly refashioned. "Under the Bulgarian law, if a bill was overturned at the first reading, it may be put forward again after three months at the earliest, provided that factual amendments have been made to it."

The widely advertised idea that the amendments are a requirement of the EU is greatly exaggerated.

"The expectation of the European Commission, and in much greater degree of the Bulgarian citizens, is that the state has effective instruments to fight organised crime. The main instruments for this are the Prosecution Office and the police, in which no substantial reforms have been taking place," Ivanova says. "The common rather than criminal law confiscation of properties allegedly acquired through criminal activities is an extraordinary measure that has been introduced in a limited number of states, all of them having the common law system. But Bulgaria works under the continental legal system, which is also used in the majority of the EU member states. So far there has never been a successful attempt at the integration of civil confiscation of criminally obtained property in a country with a continental legal system. The necessary material amendment to the so-called Popova Act puts enormous difficulties before its proponents and the Bulgarian parliament. These difficulties, I reiterate, haven't been overcome in other countries. And while we are waiting for their resolution, precious time has been lost, in which a better effect could have been achieved if the necessary amendments to the current law had been made."

Ivanova also points out that the disputes around the bill move the public attention away from what matters: "The unceasing talk about 'civil confiscation' as a panacea works to direct the public focus away from the heart of the problem – the poor effectiveness of the Prosecution Office and the police in key cases. Unless factual reforms are carried out in the Prosecution Office and the police, even a body of perfect civil confiscation legislation would not restore Bulgarians' faith in the justice system."

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