European prosecutors probe possible corruption, EU funds abuse in Bulgaria’s capital

The European Public Prosecutor’s Office (EPPO) is carrying out searches on March 31 in Bulgaria’s capital city Sofia in a probe into possible corruption and misuse of EU funds to restore the city’s historic centre, including its iconic yellow paved streets, EPPO said.

The allegations under this investigation, code-named “Yellow Brick Road”, concern mismanagement of the funding allocated to Sofia’s city municipality to renovate the town’s old centre, co-financed by the European Regional Development Fund (ERDF), as well as possible corruption, with estimated damages of at least three million euro.

EPPO said that it had started the investigation ex officio in autumn 2022, based on media reports.

Under examination by the EPPO are contracts signed between the municipality of the Bulgarian capital and two commercial companies, following public procurement procedures.

According to the investigation, a first contract was signed in 2018 for the restoration of the central area of Sofia (including Tsar Osvoboditel Boulevard and Narodno Sobranie Square).

However, two years later, in 2020, when a number of payments had already been made, the contract was terminated by mutual agreement.

The reason provided was the lack of compliance between the conditions of the contract and the investment project, EPPO said.

It was also noted that the construction activities could potentially damage Sofia’s Central Military Club, built in 1907, which has historical value. Despite this, about six million leva was paid to the contractor, without default penalties.

After the termination of this contract, the municipality signed a new agreement with a new contractor, under the same conditions.

The new contractor requested advance payment of about 1.5 million leva to restore the century-old yellow paving blocks in the city centre, which are protected by Bulgaria’s Cultural Heritage Act. This amount has not been paid for the time being, pending examination of the situation.

However, the technical expertise requested by the Bulgarian Ministry of Regional Growth and Development determined that the cobblestones were poorly laid and there were also cracked paving blocks.

The poor quality of the rehabilitation work of the iconic cobblestones, dating from 1908, along with the lack of checks by the city municipality, could potentially generate additional costs, according to the financial documents provided to the EPPO.

According to the investigation, falsified documents with untrue information were submitted by the contractors, certifying that the works had been carried out in accordance with the specifications, thus leading to undue payments being made.

Today’s searches and investigative measures are being carried out by Bulgaria’s General Directorate Combating Organised Crime in five locations. The police are looking to seize documentation and electronic evidence related to the implementation of the project, for the purposes of the investigation.

Sofia municipality responded in a statement on the afternoon of March 31: “Today, in connection with the pre-trial proceedings of the European Prosecutor’s Office, certified copies of the contracts concluded for construction activities in 2018 and 2022, cost justification documents and construction documentation drawn up during the construction activities were requested from the Municipality of Sofia”.

From there, they indicate that the documentation has been provided to all the institutions performing inspections, and by the end of the day, it would also be provided to the Chief Directorate for Combating Organised Crime, the municipality said.

“The contract with the contractor PST Group was terminated in July 2020 due to the need to change the project, which leads to changes in the quantities and type of works, which requires the opening of a new public procurement for the selection of a contractor.

“On termination of the contract, the contractor PST Group was obliged to return 2 521 548.83 leva to the account of the metropolitan municipality and was fined, in accordance with the contract. Only real completed and accepted construction and repair activities were paid for to the contractor,” the municipality said.

It said that the rearrangement of the yellow paving in the section of Tsar Osvoboditel Boulevard between 15 Noevmri Street and Vasil Levski Boulevard was being carried out by Trace Group Hold and was worth 206 000 leva.

“Due to poor performance, the metropolitan municipality refused to accept the area and make any payments for it. The contractor Trace Group Hold must carry out, at its own expense, the rearrangement of the yellow paving stones, after approval of a new technology by the National Institute for Immovable Cultural Heritage,” the statement said.

At the request of Sofia municipality, the Centre for Research and Design at the University of Architecture, Construction and Geodesy was testing the construction materials placed in the area, it said.

Sofia municipality said that it was fully cooperating with those conducting the investigation.

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The Sofia Globe staff

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