Bulgaria Tycoon Kovachki's Tax Evasion Trial Inches ahead

Crime | March 26, 2010, Friday // 15:25|  views

Bulgarian energy tycoon Kovachki (middle) together with his lawyers before Friday's hearing of his tax evasion trial. Photo by BGNES

The tax evasion trial of Bulgarian energy tycoon Hristo Kovachki has registered progress during Friday’s court hearing.

Kovachki, who is believed to be one of the richest Bulgarians, is on trial for failing to pay about BGN 16 M of taxes.

A total of eight witnesses were summoned by the Sofia City Court for Friday’s hearing; however, only five of them appeared to testify.

Gergana Doncheva, a commercial representative of one of Kovachki’s firms, was among the witnesses; she told the court that her job was to deliver various machines and equipment to the companies owned by the tycoon around the country, and alleged that all payments had been made and that all of the purchased equipment was in place.

Kovachki was charged with evading taxes of BGN 16 M on August 17, 2009. According to the Deputy Sofia Prosecutor, Bozhidar Dzhambazov, four of Kovachki’s firms sold assets to one another, and the state refunded the VAT they paid as part of the deals.

The first three firms are ET “Stein – Hristo Atanasov”, “MAX-2003”, and Darnesto EOOD, and they are 100% owned by Hristo Kovachki. The fourth firm – New Partners EOOD – is owned by LM Impex EOOD, a parent company for a dozen firms owned jointly by Hristo Kovachki and Nikifor Vangelov.

The prosecutors have a registered a number of deals for the sale of equipment between the firms in which Kovachki holds various stakes. Each deal led to the draining of VAT as the state refunded the tax. One of the firms was refunded a total of BGN 10 M by the state.

Representatives of the Prosecutor’s Office have pointed out that this alleged VAT draining scheme made up by Kovachki is very similar to the one applied in Bulgaria’s notorious SAPARD-draining case (also known as the “Nikolov-Stoykov” affair). Businessman Mario Nikolov is currently charged with draining EUR 7,5 M of EU SAPARD program funds by re-selling several times to related companies second-hand meat processing machines.

Nikolov is also investigated for the draining of BGN 40 M of VAT through the same deals.

If found guilty, Bulgarian energy tycoon Hristo Kovachki may receive between 3 and 8 years in jail.

Kovachki has also made steps to enter Bulgarian politics by founding and sponsoring the LIDER party, a centrist liberal organization. Because of his political ambitions and tax evasion trial, Bulgarian media have called him “the Bulgarian Khodorkovsky”, after the jailed Russian oligarch.

Before the beginning of the global economic crisis, the Polish magazine Wprost estimated Kovachki’s assets at about USD 680 M, and placed him among the 100 richest persons in Eastern Europe.

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Tags: Hristo Kovachki, tax evasion, Mario Nikolov, VAT, VAT draining, tycoon


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