The prosecutor’s office did not find any money laundering or tax evasion in the profit of more than 3.9 million dollars made by GERB deputy Lachezar Ivanov. This can be seen from a decree of the Sofia City Prosecutor’s Office, which terminated the investigation initiated by the special prosecutor’s office on materials from the anti-corruption commission KPCONPI. “Now” has the 15-page document signed by the prosecutor back in February of this year.
The investigation was initiated in August 2021 for money laundering – for the fact that a member of parliament acquired property that he assumed was acquired through an act dangerous to the public. However, a tax crime was also investigated.
Ivanov is a People’s Representative from GERB for the tenth time in a row, for the first time he is a deputy in the 40th Parliament, whose mandate began in July 2005. For years he has demonstrated closeness with the leader and long-time Prime Minister Boyko Borisov, even being declared his personal doctor.
What has been established in the case
Ivanov performs consulting work for an American company that develops medicinal products. Instead of cash remuneration, he received shares in the company. A few years later, the deputy sold part of his shares on the stock exchange and made a big profit. Then it becomes an object of interest on the part of the services that start an investigation.
As a doctor, in parallel with being a member of parliament, he worked for years with the American company “Enzolytics”, whose management is the Bulgarian Hari Zabilov. His name became famous in Bulgaria during the last decade along with the development of a preparation for the treatment of HIV and several types of cancer. The product was tested even before 1989 by his late father Dr. Hari Zhabilov.
In 2018, Ivanov concluded a contract for consulting services with Zhabilov Jr.’s company, having previously worked for the company through an intermediary, but without receiving remuneration. In his contract from 2018, it was written that for his activities, the deputy will receive 20 million shares of the company, but at that time they were not handed over and provided to him.
In 2018, Zhabilov issued 20 million ordinary shares as compensation to Ivanov for the work and efforts invested, without his consent, but with knowledge of it, the prosecutor’s office found. The par value of the shares was $0.0001. Since the company’s shares were under $3, they could only be traded on a special exchange. This means that the holder of such shares does not have the right to trade them for 2 years after their issue. That is why Zhabilov did not send them to Ivanov immediately after their publication. He did it in January 2021.
The procedure for unblocking and transferring them to Ivanov’s account is not automatic and was initiated by him on January 15, 2021. On February 25, Ivanov concluded a contract for brokerage services with an investment intermediary, which sold 18,459,993 Enzolytics shares.
Prior to January 13, 2021, Ivanov did not have the shares, could not operate with them and had no certainty that they would be handed over to him, for which reason he did not declare them in his property declaration before the KPCONPI, the prosecutor explains in the decree. If he owned the shares on paper or electronic media, but did not declare them, this would be a violation, the prosecutor reasoned.
A judicial-banking-financial and economic expertise was assigned to the case. It shows that for the period March 12, 2021 – May 25, 2022, $3,949,767.09 was transferred to Ivanov’s account from the investment intermediary. The stock sold for more than $4.1 million, but there are commissions and third-party costs involved.
The tax audit
In the case, two audits were ordered – of Hari Zhabilov and of Lachezar Ivanov. They cover the period from the beginning of 2016 to the end of 2020. For Zhabilov, no income from sources in Bulgaria, nor tax obligations, have been found.
For Ivanov, the auditing team found that for 2016, 2017 and 2018, his expenses did not exceed the amount of income. But the comparison of income and property showed that for 2019 and 2020, expenses exceeded the amount of funds and income received. With BGN 44,748 for 2019 and with BGN 23,439 for 2020. Thus, it was established that taxes are due – BGN 4,474 for 2019 and BGN 2,343 for 2020, as well as interest – over BGN 1,400 .for both years.
For 2021, an inspection was carried out, during which it was found that Ivanov realized profits from the sale of shares from “Exolitics”, for which he owes BGN 644,383 in tax, which he paid.
The prosecution questioned as a witness the tax officer K.A., who participated in the auditing team, to tell about the tax obligations for 2019 and 2020. He testified that he made two requests for the provision of documents from Ivanov. The deputy responded in writing, but did not provide documents to support his claims. Ivanov gave his consent for bank and insurance secrecy, and the auditors also worked with his property declarations from the KPCONPI register.
When the tax authorities found that Ivanov had undeclared and unpaid taxes, he explained that with the help of the accountant he saw that he had confused his declarations submitted to KPCONPI, i.e. from the NRA used wrong information when they revised it.
7 instead of 1 here, a six appeared there
For 2019, he declared BGN 106,350 available, instead of the BGN 46,350 he had. The mistake came from the fact that he filled in BGN 27,900 in the first row, and BGN 78,450 in the second, and not BGN 18,450, which was correct. However, the deadline for a corrective declaration had expired and Ivanov did not submit one. According to him, the declarations for the following years showed that he did not have such an amount and it was a technical error.
He also made a technical error for 2020. In the first row, he filled in BGN 27,900, and in the second, BGN 136,850, not the correct amount of BGN 13,850. Ivanov claims that the error was visible in the second declaration he submitted in 2021 .on his release as an MP.
The taxman K.A. was questioned again. and he was presented with Ivanov’s new declarations before KPCONPI. The NRA employee then says that if he had these declarations, he would have caught the MP’s mistakes and there would have been no shortage of funds for 2019 and 2020. K.A. claims that if Ivanov had given him all the documents while the audit was in progress, it would not have resulted in the establishment of tax liabilities.
However, a report from the National Revenue Agency, current as of November 17, 2022, shows that the deputy has no tax obligations and has repaid the amounts established by the audit. (Which, it turns out, he doesn’t owe.)
The conclusions
As a result of the conducted investigation, no evidence of money laundering or tax evasion was found, the prosecutor wrote in his decree. Then he cited what money laundering is according to the law – in general, there must be a crime from which the money in question was acquired. And no criminal activity by Ivanov or any other person was established before the period in which the financial operations were carried out.
“It has not been established that the financial transactions are units of a series of operations aimed at legalizing property and considered by themselves, they do not carry the characteristics of the crime of “money laundering”, the decree says.
And more: “No evidence was gathered that “Enzolytics” is developing unregulated activity prohibited by law. There are no restrictions on the sale of the company’s shares, there are no restrictions, and they are freely traded on the American stock exchange. (…) The crime for which the present criminal proceedings were instituted and conducted, it was not carried out and it concerns completely legal income.”
As for tax evasion, the prosecutor accepts that there is none.
In addition to Ivanov and a tax official, 11 more witnesses were questioned in the case, including Zhabilov. Attached are documents from the BNB, the Financial Supervisory Service, the Registration Agency, the investment intermediary, KPCONPI and the National Narcotics Agency.
According to Sega’s information, the termination was also confirmed by the higher prosecutor’s offices.