CQ HOMELAND SECURITY – SPYTALK

THE CONGRESSIONAL QUARTERLY: "Turmoil Erupts Over Bulgaria Bank on Eve of Bush Visit".

By Jeff Stein, CQ Staff. June 8, 2007.

With President Bush scheduled for a high-profile visit to Bulgaria this weekend, a Sofia bank with connections to the country's leadership is struggling to refute accusations by the Treasury Department that North Korea may have targeted the bank to launder counterfeit money.

During a private meeting in Washington last February, Deputy Treasury Secretary Robert M. Kimmitt warned Bulgaria's Finance Minister that the Economic and Investment Bank (EI), chaired by the girlfriend of powerful Sofia mayor and presidential aspirant Boiko Borissov, was a target of a North Korean money-laundering effort.

The bank denies it has any connections with North Korea and denounced Kimmitt for spreading unfounded "rumors," which it charges originated with political rivals of Borissov, whose right-wing nationalist party is surging in the polls.

President Bush and his wife Laura are scheduled to visit Bulgaria starting Sunday, June 10, the latest indication that Sofia has become a key U.S. military and political ally within striking range of Iran across the Black Sea.

The U.S. has opened three military bases in Bulgaria.

EI Bank board Chairwoman Tsvetelina Borislavova, who acknowledged in an interview with CQ that she was "living with" Borissov, said she had been informed of Kimmitt's warning "personally, by the finance minister," Plamen Oresharski, upon his return from Washington last February.

But she said the tip was based on "false information" concocted by political enemies of her boyfriend Borissov, who before he became mayor last year was a top official in Bulgaria's powerful Interior Ministry.

Borislavova said the bank had thoroughly investigated the allegation and found that "there has never been any account opened by a North Korean company or a joint venture company" in the bank.

"It is not true. It is a lie," she said by telephone from Sofia. In a subsequent formal statement, she called the accusation "absolutely false and groundless."

Borislavova added angrily that she was "disappointed that high U.S. officials had passed along false "rumors" and "gossip" about North Korean involvement with the EI bank, Bulgaria's second largest.

She singled out Kimmitt for criticism, saying "the next time" U.S. officials repeated such allegations she would "make a statement to the U.S. ambassador" in Sofia.

A Treasury official at first declined to discuss the particulars of Kimmitt's meeting with the finance minister, saying such details were "classified."

But informed of Borislavova's remarks, the official e-mailed a statement on condition of anonymity.

"Deputy Secretary Kimmitt and Minister Orescharski discussed our mutual obligations to protect the global financial system from the illicit conduct of North Korea and Iran, pursuant to U.N. Security Council Resolutions," it said.

"Both officials reiterated the need to remain vigilant in making the financial system inhospitable to illicit money flows."

North Korea has been accused by the U.S., China and Japan of manufacturing millions of dollars worth of high quality counterfeit $100 bills, called supernotes, and distributing them through foreign banks.

In December 2004, two Sofia-based North Korean diplomats were arrested on suspicion of smuggling synthetic drugs destined for Arab markets. They were expelled.

Help on Organized Crime

Kimmitt's warning could be seen as another sign that the Bush administration is deeply engaged in helping the former communist state emerge from decades of Soviet-style organized crime and corruption.

The U.S. finances Bulgaria's National Institute for Justice, which trains prosecutors and judges to combat organized crime, and U.S. terrorism finance specialists are working closely with a new Bulgarian bank watchdog unit.

Membership in the European Union, granted last February, also makes it harder for official corruption to flourish, maintains a Bulgarian official who was not authorized to speak for the record.

Whether Bulgaria's own financial investigators had uncovered evidence of North Korea's alleged interest in the EI bank could not be learned.

But according to a 2005 risk-analysis report commissioned by a Swiss financial concern, the bank was "believed to be a main source of funding for . . . crime organizations via money launderers and prostitution agencies."

The 3-inch-thick report, compiled by a team headed by a former top U.S. law enforcement official, also said Sofia Mayor Borissov had "a documented history of business affiliations with persons who are alleged to be the top leaders of organized crime in Bulgaria."

The dossier included details on suspected criminal associates of Borissov, who years ago was chief bodyguard for Bulgaria's last communist dictator. It also lists 28 underworld-connected "assassinations" that remained unsolved during his four-year stint as chief of staff of the Interior Ministry.

Borissov, like his banker girlfriend Borislavova, dismissed the allegations, reported in a March 2 CQ story, as politically motivated.

To be sure, the allegations didn't stop the FBI, CIA and Drug Enforcement Administration officials from meeting with Borissov when he came to Washington last year in his role as a top Interior Ministry official.

Close to Bush

While a number of foreign officials have distanced themselves from Bush over the Iraq War, Boiko Borissov hasn't been one of them. He revels in photo opportunities with U.S. officials.

One of them came at the Sofia Hilton last week, when U.S. Ambassador John Beyrle helped unveil plans for an ambitious new hotel and business-park development at the airport, financed by U.S. giant Tishman International.

Smiling beside him: Boiko Borissov.

Longtime observers of the mayor, whose popularity may catapult him into the presidency in October, expect that he'll use every opportunity to be within photo range of Bush and his wife in Sofia.

But Borissov will also be following Bush out of Bulgaria, with an unofficial visit to Washington.

A karate fanatic with a penchant for black leather jackets, Borissov had asked to meet with Daniel Fried, the assistant secretary of the Bureau for European and Eurasian Affairs, on Tuesday, June 12, according to a knowledgeable source who requested anonymity.

But he may have to settle for less, said State Department spokesman Beamer Chase.

The meeting "will likely not be possible due to . . . Fried's schedule," Chase said last week, adding that Borissov could be offered meetings with lesser officials in the European section.

Borissov is also scheduled to give a speech at the Center for International Private Enterprise, a Washington-based nonprofit affiliate of the U.S. Chamber of Commerce and the National Endowment for Democracy.

The Sofia mayor is also scheduled to meet with his Washington counterpart, Adrian Fenty, the following day.

What they would talk about, a Fenty spokesperson could not say.

Source: CQ Homeland Security
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