Bulgarian Economy and Energy Minister Petar Dimitrov asked Prosecutor General Boris Velchev to investigate alleged irregularities in the management of Kremikovtzi steel mill, the Ministry of Economy and Energy said in a statement on March 13.

The alleged crimes are punishable under articles 219, 220 and 227b of the Penal Code and refer to economic crime, deliberate signing of disadvantageous deals and failure to meet the conditions for filing bankruptcy.

The request comes after an on-site probe into the financials of Kremikovtzi steel mill by an ad-hoc working group. The check included review of Kremikovtzi's accounting books for the period between January 1 2006 and December 31 2007, a check into the mill's investment programme, the financial state of the holding, receivables and liabilities, receivables' collection, as well as tenders called under the Public Procurement Act.

Apart from corporate documentation, the group has inspected annual and audit reports of Kremikovtzi filed with the Bulgarian Stock Exchange (BSE).

The working group is yet to finish the probe, but has already gathered evidence that the mill has failed to pay its workers two-month wages, is defaulting on payments toward suppliers and lacks the raw materials to keep the plant operational.

The letter sent to Velchev said Kremikovtzi's was late with payments to Bulgaria's state railway operator BDZ worth 20 million leva, incurred in January-February 2008. Liabilities toward the power grid operator NEC and gas distributor Bulgargaz Holding were 12 and six million leva, respectively, punishable under Art. 227b, paragraph 2 of the Penal Code.

The working group also found that in May 2006 Kremikovtzi steel mill acted as guarantor on a 325 million euro bond of Dutch-registered Bulgarian Steel Finance B.V. and has pawned all production facilities of the mill. From documents submitted to the BSE and the Commission for Financial Supervision, the commission found that only a small portion of the bond has been used directly for upgrades at Kremikovtzi.

In addition, some 99.2 million euro of the proceeds from the bond issue have been paid out to the majority shareholder of Finnmetals Holding, Global Steel Ltd, “which is hard to comprehend,” Dimitrov wrote in the letter to Velchev.