Taming the Wild East

Stefan Popov

Even during the communist era, Bulgaria was a center for organized crime. As Misha Glenny reports in his book McMafia, Bulgaria’s arms export firm Kintex started out in the late 1970s smuggling arms to insurgents in Africa, “but soon the channels were also being used for illegal people trafficking, for drugs, and even for the smuggling of works of art and antiquities.”

The criminality only intensified after 1989. The media tycoon Robert Maxwell, who had close ties to communist dictator Todor Zhivkov, allegedly facilitated a money-laundering operation that spirited $2 billion out of Bulgaria and into Western tax havens. The privatization of national assets was a golden opportunity for the old capitalists of the West and the red capitalists of the East to engage in corruption and graft.

Iliya Pavlov emerged as one of Bulgaria’s key red capitalists. On the surface, he was just a successful businessman, running a large corporation called Multigroup and employing thousands of people. Behind the scenes, however, Pavlov worked closely with Bulgaria’s version of the KGB to make huge profits through price-fixing. In 2003, a sniper assassinated Pavlov outside his Multigroup headquarters.

Before his fall, Pavlov was powerful enough to control Bulgarian politics. As Stefan Popov explains, “Pavlov said, ‘If the Bulgarian prime minister wants something from me, let’s talk at the table.’ Can you imagine Al Capone saying something like that about the U.S. president? That’s unthinkable, unless you’re a movie director.”

Stefan Popov is trying to change the image of Bulgaria as the Wild East frontier of the European Union. He heads up an organization called Risk Monitor, which shines a light on the more shadowy recesses of Bulgaria’s illegal economy. As a result of Risk Monitor’s work, the Bulgarian government has to face tough questions about sex trafficking and money-laundering.

Risk Monitor’s work is complicated by the high-level involvement of powerful political and economic interests. It’s not simply the intervention of a Mafia-like network from the outside.

“In a country like Bulgaria, it’s a senseless distinction between organized crime and white-collar crime,” Popov says. “Right from the beginning, the crime was white collar and had deep roots in the state and the politics of that time. It didn’t come from the outside. That makes it very difficult to manage and oppose. These are crimes that imply a close interaction or synthesis between business, politics, and criminal practices at a very high state level. That’s something very difficult to investigate.”

We talked about how someone with a philosophy degree got involved in monitoring organized crime, the choices that Bulgaria made in its early years of transition, and what can be done at this point to establish the rule of law in the country.

Former Bulgarian Socialist Party Prime Minister Andrei Lukhanov and billionaire Iliya Pavlov. Charged with criminal acts, both would end up assassinated.













The Interview


Do you remember where you were and what you were thinking when you heard about the fall of the Berlin Wall?


I’d just come back from Leipzig, Germany, where I was leading a group of students in sociology and philosophy. We were in Leipzig in August and part of September. Nothing indicated that something like that would happen. And when we came back, the Berlin Wall fell, and it all started.


It was a complete surprise even though you were in Leipzig.


Yes, it was a surprise. But once it started, everyone thought that the communists were destined to lose this game. We were young. I was 30 years old.


You didn’t expect it to happen in your lifetime?


Yes, I did. I didn’t believe that it could last forever. In Leipzig, there was a mass movement that gained momentum very quickly and was, I recall, led by the famous conductor Kurt Mazur, who later became director of the New York Philharmonic. He was quite a powerful figure, very authoritative. When we heard when we were back in Sofia already that he was leading a mass movement in Leipzig, it was already a sign that something would happen. We quickly realized that, both in Germany and in Bulgaria, the world was changing. Though, a moment before, we didn’t expect it to happen.


You were a professor in the sociology department?


Philosophy and sociology.


Did you consider yourself oppositional in those days?


Absolutely. Radical opposition.


Was there a moment in your life that you took a decisive step to become part of the radical opposition?


I wasn’t participating at that time. I wasn’t an activist. But by mentality, position, attitude, for all these years I’d been on the side of what was considered the opposition, the anti-socialist, anti-communist movement and bloc of parties. But I didn’t need 1989 to realize that. I was brought up in a family that was completely against this whole regime. Although they weren’t repressed heavily, we felt like internal immigrants in this country.


Was there a point in your early memory when you felt that your life diverged into those two personae: the inner and the outer?


Right from the beginning of your conscious life, you were divided into a public life and an internal life among your circle of friends. That’s the standard truth about this social reality. But around 1986 or 1987, these two parts started approaching each other. In 1988, for instance, we had a massive strike at Sofia University, opposing not the regime per se, but the whole method of teaching and governance at the university, which is an important institution in this country. These weren’t powerful dissident movements as was the case in the central European countries. But I’m addressing the question of whether these two poles were totally divided until 1990. No, they weren’t. They started approaching each other in 1986-88.


When you were teaching, were there specific books that you recommended or gave to your students with the idea that they would open their minds?


No. Of course, we had a number of Russian dissidents and alternative thinkers in philosophy that were quite popular. But I was teaching classic modernist philosophy, mostly Kant. There wasn’t much of an opposition element to this.


Were you teaching all the way up to the point when you joined the Open Society here in Sofia?


In 1990, I left the country and went to the United States. At the New School for Social Research, I spent more than four years and received a Ph.D. in philosophy and social science in 1995-6. Then I returned to Bulgaria. In 1998, I started to work for the Open Society Institute. In 2000, I became chairman of the Open Society Fund in Sofia and had three consecutive mandates through 2006.


In what ways do you think OSI made a significant contribution to change in Bulgaria? And where do you think it came up short?


OSI was extremely helpful in terms of its principles. For a very conservative society like Bulgaria, so close to the Soviet Union and not like Hungary or Poland, the very phenomenon of an American foundation working here sent a very strong message that there is another world. For many people, for the media, it was a kind of perpetual scandal that this entity was out there, prodding us, or whatever the perception was of OSI at that time. Even the Bulgarian Socialist Party (BSP) leaders at that time flirted with OSI to present themselves as modernizers.

That was the big thing until, let’s say, 1996-97. What we call the “revolution,” the surface-level change in Bulgaria, occurred in 1989-90. But the deep infrastructure change — like privatization, the free market, an orientation that was pro-Western, pro-NATO, pro-EU integration — started after 1997. From 1990-97, the OSI was quite a strong player.

As far as shortcomings are concerned, well, in this chaotic environment, a foundation can’t do anything other than try different things. It wasn’t very well organized. It was a very free, liberal, artistic enterprise. And then the big change at the foundation started in 1997 when Aryeh Neier came to OSI and some order and rules were implemented. I wouldn’t say that these were shortcomings. It was normal.


Do you think there were critical moments in Bulgaria when a deeper transition could have been undertaken earlier or steps could have been taken to ensure a more successful transition?


In 1990, if there had been a stronger social or civil-society basis to this transformation, it could have proceeded differently. This whole postponement of, let’s say, seven years was just a waste of time. During that time, Bulgaria not only wasted a lot of time but organized crime and big corruption, especially political corruption, grew much larger. Old powers like the former Communist Party and its different branches like the state security services had enough time to transform themselves into new economic powers. I’m not saying that this was like some world conspiracy. It just naturally happened. Because there were no well-informed citizens who could take over and lead. That didn’t emerge until later. That took seven or eight years, even more.


Could there have been any intervention from the outside to hasten this process?


Yes, but that was unrealistic to expect. For instance, a massive investment into this economy, the massive presence of big business, could have changed something. But Bulgarians should do their homework. You cannot expect anybody else to come in and save us.

We have a currency board, which means that we’re not free to print money and so on. The currency board is a kind of cage of fiscal and monetary policy. People afterwards started saying, “Why don’t we have other boards, like a board for the judicial system, a board for the parties, a board for everything?” In other words, a currency board expanded to the level of a board for Bulgaria in general. Which means: let’s become part of a larger empire. That’s a fantasy! You can’t do that. Still, the situation has become better, if only because people grow and mature through these stages of wasted time.


How did you get involved in the anti-corruption and organized crime work you’re doing now? Did you start that at OSI?


Rayna Gavrilova, who is now deputy director for international operations at OSI and was at the time the executive director of OSI Sofia, and I met with Aryeh Neier in 2003. He said, “Look, guys, I have an idea to establish a center for policies against organized crime for the entire Balkan region, a pan-Balkan think tank.” He spent two years trying to attract some other donors. Soros policy is that they give 30 percent of the funding, but the rest should be attracted from other sources. They couldn’t succeed in attracting this other funding. The idea was too exotic for western European governments.

But we in Sofia were major partners of Aryeh’s. We’d invested a lot of time, effort, and strategy; we’d sponsored conferences, small projects and so on. So, when he said that it was not realistic to establish this initiative, we said that we would continue to do it. When I left at the beginning of 2006, there was a group called Risk Monitor. It had a board. But I didn’t have anything to do with the group except some connection to the issues. When they announced the position of executive director, I applied and got the job. So it’s been five years now.


What would you say are your biggest accomplishments in this work?


I think that we opened a whole new page of developing civic expertise on something traditionally considered exclusive state activities, even secret state activities like criminal intelligence and organized crime networks and big criminal markets. Also, we made policies on how the state should counter these issues into a broader issue and challenged the notion that the state should exclusively deal with these topics. This is not only unique for this country. It’s very rare for an NGO generally to deal with the issue of organized crime.

We have three major areas of activity and expertise. One is criminal markets. The other is monitoring and assessment of institutional policies and institutional capacity. The third is transnational organized crime. In the first area, our major accomplishment is the description of the money-laundering process in Bulgaria and the organized forced-prostitution rings, which are proportionately larger than the Ukrainian and Russian ones.


Bigger than Moldova?


Yes. Bulgaria has taken the lead in prostitution in countries like Belgium, in the export of young girls and other nasty things. It’s quite an accomplishment that we produced facts and data that couldn’t be challenged by the officials in government. Our assessment shows 3-6 times higher data on everything that the government has admitted to. The different government branches — the ministry of interior, the National Investigative Service, the prosecutors’ office — have data that has been “normalized,” so to say, to be suitable for Bulgarian-EU negotiations. We revealed much higher figures for forced prostitution and trafficking in human beings, especially sex services. The government ultimately agreed with our figures. The very fact that government agencies agreed with these figures moved the discussion to a different stage.

As far as institutional expertise, we have, for instance, drafted the first-ever national strategy against money laundering. It was accepted first at the ministerial level, then in different branches of the judiciary, and finally it became an official state document of the council of ministers. We connected 12-15 different governmental branches dealing with money laundering. They didn’t talk to each other before. Just by negotiating the need for such document, we helped created a common basis for future action.

Another example: we are now in the process of producing the first-ever textbook in Bulgaria on money laundering and policies against money laundering. We’re about to help start a pioneering initiative on criminology at a Bulgarian university. We don’t have the capacity to run a whole MA program, but we are providing the expertise for this program.


For a lot of people that I talked to here, corruption and organized crime are the major preoccupations. Even if they have no data, it’s something they feel is one of the worst aspects of the situation in Bulgaria. Most of them would say that it began immediately in 1990 when there was a transfer of assets, slowly at first, but then more rapidly, from the previous elite as they changed into political and economic leaders in the new era. Is that also your perception? Is there any data to suggest that this took place? Or is it a foundational myth?


It’s difficult to say that we have specific data. These things at a very high political level are difficult to measure. We are talking about non-measurable processes and phenomena. If we speak about specific criminal markets, we can cite different data, which are publicly available and well studied. But the specifics of Bulgarian corruption are something that Western Europeans and Americans have difficulty grasping in their depth.


For instance, the American view is that the US used to have mafias like the Cosa Nostra. It came from the outside, mainly from Sicily. Then it developed in the United States, even at a federal level, expanding to the limits of the Union. Then decades after that, we found out that some corporations used similar methods, and we started to call this “white-collar crime.” The assumption here is that these external forces came in and poisoned our nice environment and our clean businesses, and we opposed them. Then, after that, we discovered some of these practices in Wall Street and so on.

That’s a wrong perception. In a country like Bulgaria, it’s a senseless distinction between organized crime and white-collar crime. Right from the beginning, the crime was white collar and had deep roots in the state and the politics of that time. It didn’t come from the outside. That makes it very difficult to manage and oppose. These are crimes that imply a close interaction or synthesis between business, politics, and criminal practices at a very high state level. That’s something very difficult to investigate. It’s not an organized criminal group. It’s not a criminal enterprise in terms of U.S. laws or UN conventions — it’s not a criminal group consisting of three subjects, having sustained existence, structure, criminal intent, and so forth. It’s very difficult for the justice system to oppose, not to speak of dismantling, such rings and practices. And they are always semi-criminal, semi-legal.


From a practical point of view, in terms of addressing organized crime and its political impact, one could argue for accepting what took place in 1990 — because as you said, it’s very difficult to make an assessment of it and address it judicially. Only at a certain point between 1990 and today, these crimes becomes actionable. Only then does the organized crime become definable and prosecutable.


At certain points in this historic period of 20-plus years, there were some points when crime within the state and within the institutions did not lead to institutional implosion or capture but led to the formation of groups that were visible, that you could describe. The most famous example is the Bulgarian company Multigroup, which is now registered in the United States as a legal business, absolutely clean. In the mid-1990s, it was notorious, known everywhere as the powerful group that it claimed to be. Its leader Iliya Pavlov was shot and killed some ten years ago. Before that, he said, “If the Bulgarian prime minister wants something from me, let’s talk at the table.” Can you imagine Al Capone saying something like that about the U.S. president? That’s unthinkable, unless you’re a movie director.

There were three major such groups in the 1990s, and the government forces eventually suppressed them because they detached themselves from the political-institutional process. But if they take root and keep their close connections to politics and business and play well within this institutional process, then it’s very difficult to go after these groups.


Al Capone couldn’t talk that way to the U.S. president. But Joseph Kennedy could, and he made his fortune in the illegal liquor business during Prohibition. And Walter Annenberg followed a similar trajectory. At a certain point in U.S. history, these illegal operations became routinized, to use the sociological term.


Yes, you had such periods in America. That’s why this distinction between organized crime and white-collar crime is shaky. But the major lesson from these examples is that something like Prohibition gives birth to criminal markets.


Looking ahead to the next couple years, what are the most likely approaches that could be instituted here that could not only address this issue of corruption and the intersection between organized crime and politics, but, almost as importantly, address public perceptions of those problems? These public perceptions seem to reduce trust in public institutions to such a low level that greater civic participation is thwarted. People think, “There are these nebulous powerful forces that stretch back in time and have accumulated such authority, so why get involved?”


I wouldn’t agree with those who say that Bulgaria hasn’t yet reached the bottom, that we are still moving downward. I think this country is a little bit on the rise toward normalization. I’m not saying that it will happen tomorrow or in five years. Maybe it will take two decades or so. But I think the darkest period was during the last decade.

Regarding organized crime, I’m a little skeptical about generalizations about organized crime. We have to look at specific processes and public risks. To me, such things like forced prostitution, human trafficking, all kinds of narcotics, these are areas where Bulgaria can do a good job in the future. The justice system, intelligence, and all these institutional forces have very low capacity, but it is slowly improving, with the decisive assistance of German, British, and U.S. expertise. It’s not just expertise, but also influence: the influence of political demands.


And money?


Maybe money.


It would seem that Bulgaria could leverage the perception that it’s a weak link in the EU, whether actual or potential. Bulgaria could say: “Unless you give us the resources to strengthen border guards and police…”


Yes, that’s something I was also about to say.

Regarding traditional criminal markets, there is some improvement in these policies. Regarding this synthesis of politics, business, and crime, that’s something I can’t imagine anything other than foreign pressure plus aggressive civic action and publicity having an effect. After all, this country is democratic. There are great deficits, it’s true, but those in power are very sensitive to public perceptions, particularly during election campaigns. During the last two or three years, we’ve seen a great number of civic actions that led the government to change its positions about secret and grey deals with large businesses. But you can’t predict an expansion of public discourse on these issues. It happens, or it doesn’t.


Can you give an example of these public initiatives?


There’s a mountain close to Sofia that was about to be given to a large business group for the building of a ski resort. The public pressure against this proposal led to the government reversing its position. There were many such cases regarding the environment, the coastline, and the business of development, which were stopped by ecological and other groups.

Our judicial system is administratively governed by the supreme judicial council. As a rule, the judicial counsel is always secretly managed. It has a mandate of five years. It is always appointed by some forces of the current executive. This year, because of a very active civic movement pushing for the transparency of the whole procedure, we saw an amazing result. Now, each potential member of the council was screened, interviewed many times. So that’s an improvement, and it’s irreversible. The next time it happens, the process will be even stronger.


My interpreter was involved in this last week. She said that they had to translate the whole process into English, because the EU demanded that. They did the interpretation for 12 straight hours.


They stayed the whole night. It was a public spectacle. We haven’t had that before. Once something like that happens, the executive realizes that there are limits to its actions.


Some people I talked to here are still in favor of a lustration process: opening the archives, screening all candidates for public office. Do you think that Bulgaria has passed the point at which lustration is advisable?


I think that all the archives that can be opened should be opened. This lustration could have played some practical role at the beginning of the 1990s. But that moment was missed. Now it has no practical relevance.

However, it could be presented like a moral oath: we’re not going to let former secret agents become ambassadors because that’s shameful. I wouldn’t oppose this.


In terms of unfinished business for your organization, what is at the top of the agenda?


We have to move to other criminal markets and try to describe and analyze them. That’s the more interesting part. But ensuring organization sustainability, that’s something that an executive director is always concerned about.

Otherwise, the organization is stable and has a clear public identity as a think tank. We’re a recognizable player in the civic sector. We receive considerable media coverage. After one of our last press conferences, we had 160 pages of media coverage. And that was only the third day after the press conference.


Sofia, October 3, 2012

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