A criminal network alleged to have "close ties" to the current Bulgarian Government has misused 32 million euro in Sapard programme funds for agriculture, a report by the European Commission's European Anti-Fraud Office (Olaf) said.

The report, leaked to the media, with a copy being posted online by Dnevnik, names the "Nikolov-Stoikov Group", which it describes as a "criminal network made up of more than 50 Bulgarian, European and offshore companies, controlled and/or financed by Mario Nikolov and Lyudmil Stoykov, suspected of having close ties to the current government".

Olaf Director-General Franz-Hermann Bruener says in the report that "influential forces within the Bulgarian government and/or state agencies do not have an interest in seeing the eventual punishment of anyone in the criminal gangs who has embezzled EU funds".

For the Bulgarian Government to regain the trust of Olaf and the EC, Olaf proposed that the Government co-operate with EU institutions in a transparent manner for all applications for Sapard funds to check whether they have already-established links with criminal organisations.

The online English-language version of Dnevnik reported that the letter was dispatched two weeks before the release of a much-anticipated EC report on Bulgaria's performance in tackling organised crime and corruption.

"One of the individuals allegedly financed the election campaign of the current Bulgarian president and is the business partner of the former deputy foreign minister, who, according to information available, attempted to influence an ongoing investigation into that individual," the Olaf report said.

The report said that the Nikolov/Stoikov group was involved in tax fraud, subsidy fraud, forgery of documents, money laundering, illegal imports into Bulgaria and exports to the EU (during pre-accession) of Chinese meat with falsified health certificates.

The report slamed the Agriculture State Fund (ASF), the prosecution authorities and the courts for lack of co-operation and communication.

According to Olaf, the ASF failed to initiate timely recovery procedures concerning the paid Sapard projects linked to Nikolov/Stoikov despite having all the necessary evidence of fraud. The fund also failed to forward information to Olaf and the prosecution authorities concerning all Sapard-funded projects linked to the criminal group.

The investigations into the Nikolov/Stoikov group were split and carried out by different services with no central control, the report said.
The report immediately unleashed a political storm, with Meglena Plougchieva, the deputy prime minister appointed to oversee the use of European funds, and Prosecutor-General Boris Velchev expressing indignation that it had been leaked to the media.

Plougchieva declined to comment on the contents of the report, saying that it had been intended for the judiciary and prosecutors.

Prime Minister Sergei Stanishev told a Cabinet new conference on July 16 said that the practice of leaking correspondence between Bulgarian and European institutions to the media was "very bad and vicious".

Sofia mayor Boiko Borissov and his party, the Citizens for the European Development of Bulgaria (GERB) - said by pollsters to be certain of winning the largest share of votes in the next parliamentary elections - called on the Government to step down.

Centre-right minority opposition party the Union of Democratic Forces said that President Georgi Purvanov should be suspended from office.

On July 14, Bulgarian news agency BTA reported that recently-appointed ASF executive director Atanas Kunchev said that the fund had drafted an action plan to unblock payments to Bulgaria of Sapard funds, suspended earlier this year. The nearly 30-page plan had been drafted in the previous 10 days and would be sent for approval to Brussels soon. After the EC approves the document, details would be released, Kunchev's deputy Konstantin Palikarski said.