Expressions of a captured state

Buying Hippoland toys became a pertinent symbol of the resistance of 2020 protesters to state capture

Expressions of a captured state

Three stories of how rules are applied unevenly in Bulgaria

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Buying Hippoland toys became a pertinent symbol of the resistance of 2020 protesters to state capture

© Юлия Лазарова


There is a salient rhyme in Bulgarian that goes like this: "Za milioni nyama zakoni, za kokoshka - nyama proshka." It loosely translates as "For [those with] millions there are no laws and there is no pardon for a chicken," meaning that common laws do not apply to the rich and powerful, but if one is weak - they can only expect to be smashed by the state. Below, you will see a series of three recent examples that attest to this popular wisdom and showcase why the country is often and consistently placed at the bottom of all sorts of rule of law indexes in Europe.

The Lord of the High Mountain

Malyovitsa, the second highest peak in the Rila mountain - and, thus, the second highest in the Balkan peninsula as a whole - is a special place, and not only for its unmistakable silhouette. It is also considered the home of Bulgarian mountaineering, climbing and ski sports, with several generations training in the Central Mountaineering School (CMS) there. Unfortunately, the end of Socialism led to the decline of the CMS, which has now been privatized by (proxies of) Bulgarian energy mogul and politician Hristo Kovachki. In the past ten years, with the help of state institutions and a practically privatized Bulgarian Mountaineering Union, he has crept up the slopes of Malyovitsa, buying up land, renting buildings long term and, ultimately, planning to turn the place into a new ski resort.

There are several potential problems with that. First, there is Mr Kovachki's track record of doing business. Considered one of the richest Bulgarian businessmen, Mr Kovachki is a shadowy figure who rarely gives interviews or appears in public. It is not documented how he became a millionaire, but after graduating Physics in (then) Soviet Russia, he launched a couple of small trade and retail companies, just to end up buying (via proxies) several of the biggest Bulgarian mines and power plants (TPPs) in the 2001-2009 period. These include Maritza East-3 TPP, the Bobodov TPP, which are associated with poor working conditions, unconstrained pollution and, most recently - burning Italian trash without having proper facilities for doing so. All kudos to the always-helpful role of the state. Mr Kovachki officially does not own much - he is just a consultant of these TPPs and mines, so all investigations of mishaps happening there never reach him.

Second, First Investment Bank (FIB) mostly credits Mr Kovachki and his businesses and Ivaylo Mutafchiev, one of FIB's majority shareholders, is Kovachki's best man. FIB is notorious for its investments in another resort - Bansko - that has long been a bone of contention between environmentalists and FIB's CEO, Tseko Minev. The Pirin mountain resort is infamous for its over construction over the past two decades and its almost perennial plans to expand the ski slopes to the detriment of the Pirin National Park and UNESCO reserve. It is easy to imagine that, with Mr Kovachki's connections to state institutions and FiB, mountaineers may one day wake up to find overly exploited Malyovitsa slopes where real estate development and mass tourism are prized above safely practiced mountain sports. Judging by how state regulations apply to Mr Kovachki's other ventures, such risks are hard to ignore.

Unfinished business with Hippoland

The story of the institutional attack against Bulgaria's largest toy retailer Hippoland after its employees and management openly endorsed the anti-governmental protests of 2020 stands in sharp contrast to how state regulators treat Mr Kovachki's business (mis)endeavors.

It all started at the end of June last year - just a fortnight after the start of the protests and a day after Marian Kolev, owner of Hippoland, complained in an open letter that his 17-year-old son had been pepper sprayed by police at one of the protest rallies and almost blinded. After he made his grievances public, several institutions, including the police and the National Revenue Agency, simultaneously raided the offices and shops of Hippoland only to find a 9,60 lev (less than 5 euros) mismatch between the cash in the register and the receipts issued. Cynically, the revenue agents even issued a press statement announcing their "crackdown."

This, of course, caused an enormous public backlash among already agitating protesters, with a campaign "I am Hippoland" immediately taking over social media, calling for people to buy toys from its stores in order to support its beleaguered owner. Solidarity aside, the public reaction put an end to the pressure on the protesting business owner. Or so it seemed, until two months later, when the attack was re-launched by the Commission for the Protection of Competition. The anti-trust body fined Hippoland just over 60,000 euro for unfair competition, based on the allegations that they were selling a set of Lego blocks at a discount only online and not offline. It is interesting that the anti-trust organ and not the consumer protection agency took over the case, but considering that the former is totally dominated by the MRF-GERB lobby, we can safely assume it was the best state "tool" to use to hurt, after all, the protesting business. Laws do not always apply, but when they do -there is no pardon for the chicken.

Capturing a disinfectant business

We end up with an account of how people close to the ruling parties capture a successful business through political pressure. This is the story of a Veliko Tarnovo-based disinfectant company called Hygiene-Medical Industry (HMI), a business with solid background of 26 years, which has just become ever more successful after the advent of the Covid-19 pandemic. The company, created by local businessman Evgeni Kostadinov in 1994, has suddenly been transferred to politically connected individuals between January and April 2020 - for no apparent reason.

Out of the blue, Mr Kostadinov, who had controlled the company entirely throughout its history, decided to sell the majority share to a company linked to ex-MRF MP Kamen Kostadinov (unrelated to Evgeni Kostadinov) and to independent city councilor Viktor Azmanov. The latter's political movement is in coalition with MRF on local level - and also backs the GERB majority in the local council and the two have several business ventures together.

Several worrying signals point to the possibility that Mr Kostadinov had been pressured to sell his business. First of all, when phoned by Capital Weekly, he did not respond, but instead the return call came from Mr Azmanov, who said his partner "is limited in his movement and contacts." Secondly, HMI suddenly became a sponsor of two local football teams - Lokomotiv Gorna Oryahovitsa and Etar-Tarnovo - a typical development when somebody close to the authorities gets "awarded" a successful business. Last, but not least, Mr Azmanov acquired 30% share of the growing company for just over 320,000 euro - at a time when HMI's revenue had reached 4 million euro in 2019 and was poised to grow even more in 2020.

Of course, this might be a legitimate joint venture of Mr Kostadinov and Mr Azmanov, to which the latter has been invited - as he claims. But in a country where people in power often trade influence for business stakes indirectly, the transfer of such a lucrative business in its heyday leaves doubts.

There is a salient rhyme in Bulgarian that goes like this: "Za milioni nyama zakoni, za kokoshka - nyama proshka." It loosely translates as "For [those with] millions there are no laws and there is no pardon for a chicken," meaning that common laws do not apply to the rich and powerful, but if one is weak - they can only expect to be smashed by the state. Below, you will see a series of three recent examples that attest to this popular wisdom and showcase why the country is often and consistently placed at the bottom of all sorts of rule of law indexes in Europe.

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