PYRAMIDS, PHARAOHS AND … SIMPLETONS FOR

MILLIONS
The trials against Bulgarian pyramids were on their way to surpass the Egyptian ones in their
perpetuity. Four years on end the deceived depositors are waiting for their money and
retribution for the pharaohs. At the beginning of January the National Investigation Service
closed the files under the case against the chief if “East West International” Ivo Nedyalkov
with the opinion to be tried. The Main Public Prosecutor’s Office definitely says that they are
not going to return it for additional investigation and they are already writing the Indictment,
which will soon be submitted to the Court. “ All of the twenty investigations against pharaohs
are clarified as far as facts are concerned and they will be brought to conclusions” Angel
Alexandrov, head of department “Bank, tax and credit offences” of the National Investigation
Service, said for “Banker”.

MASONS KNOWN (IN THE OPEN) …

The Bohemian Nedyalkov

Was extradited to Bulgaria with the approval of the French authorities and on June 17, 1997
at 16:10 was arrested at the Sofia airport. Two days later his counsel Denyo Prodanov asked
for a medical expertise of his state of health because he had problems with his locomotory
system. Nevertheless, the magistrates did not rescind the detention of the pharaoh ant he is
waiting for setting the date of his trial in the cells of the Sofia Central Prison. The
investigation case against him has ref. # 154 dated August 15, 1995. Nedyalkov has been
charged for appropriation as per art. 206, par. 4 of the Criminal Code.

The president of one of the most scandalously crushed pyramids disappeared abroad in the
middle of 1994 when it became known that 8500 Bulgarians have been “stung” with 360
million lv.

Young Nedyalkov appeared quite “accidentally” in the Bulgarian financial circles. “East West
International” was registered on Feb. 25, 1993 with statutory capital of 1 million lv. The
main shareholder of the company is Ivo Nedyalkov – owning 99% of the shares and
Roumyana Assenova Kamenova – only 1%. Until the present day not many people know who
gave the “leaven” for the said company. In the objects of activities of the company except the
traditional commercial transactions, selling of shares is included. They were really sold in
two emissions – in 1933 and in 1994 at the extremely high for that time rate of interest 105%
for the term of … three months. In the meantime Nedyalkov creates companies one after the
other with different range of activities – “Legakon”, “Temex”, “Santa Crous” “Gepard Print”,
“Titon beldinvest”, “Omig Leasing”, “Law”, a specialized investment fund “Bulgaria
buildinvest”, an insurance company “Zodiak”, a Centre for Marketing and Social Research.
For an year and a half “East West International” shows prosperity and increases its capital to
1.1 milliard (billion) lv. According to investigation Nedyalkov’s company changed the money
into convertible currency and through Post Bank remitted it to foreign banks in more than 20
countries – England, Turkey, Germany, the USA and some states in South America.
Investigation says that the pharaoh has remitted abroad more than 6 million USD. After an
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inspection of the company’s accounts with Bulgarian Banks only 2 million lv were found.
Authorities froze them right away. Nedyalkov was declared for search by Interpol only after
starting the investigation case in 1995. Immediately after he heard the information that
Interpol is officially tracing him he accused his deputies for the collapse of “East West
International” in an interview sent by fax. The pharaoh called the national Investigation
Service to advise that he was in Belgium and that he was not hiding. Indeed, if someone
wanted to reach Nedyalkov, he could detect his traces. For instance, in August 1996 the
French newspaper “Nice Matin” announced that Ivo Nedyalkov was in the prison of Nice
because of rent unpaid. At that time he lives with his wife and his child under rent in one of
the most luxurious apartments in Kanne – “the Villa of Three Palms” against 18 000 FrF per
month.

The Coice of Life of “Life Choice”

The idea for foundation of this company appears about ten years ago. The first company
named “Life Choice” was founded in the USA in 1986 and its Bulgarian version was
registered in 1993. When registered the company was named Life Choice Int. (LCI), the
opening capital of 1 000 000 lv was totally deposited by the date of registration. The
company may legally deal with production and commercial activity, trade representation,
brokerage and other types of economic activities allowed by law. Life Choice entices
shareholders by its numerous projects. At the beginning the company really invests money in
them. They have wide range. Starting with elaborating if health cards for the shareholders of
the company, passing through new technologies for production of medicines, including one
against the plague of the century – AIDS, and going to processing of waste motor oils into a
source of energy. But all this was the window – dressing to show that money is invested in
noble initiatives. The bait on the fishhook was the profitable offer for ODR through which the
amounts deposited would become part of the company’s equity and assets. The money
deposited would be used for financing of projects developed in Bulgaria. In an interview for
“BANKER” (#31,1994) Michael Kapoustin said that banks speculate in the money
accumulated with them. According to him this happens because the credit institutions gather
funds from the depositors and after that grant them in the form of credits to contractors and
investors under heavy conditions. “Thus resources are detained and the full value of the
financial funds cannot be made use of. Whereas LCI does not grant credits but makes
investments directly in production – says Kapoustin - In this way we secure large volume
and quick circulation of funds and financially profitable production. The difference with
other companies is that we do not offer shares for sale but we gather capital by buying
depositary receipts.” In fact ODR is an investment instrument bearing fixed dividend. It is
paid either monthly or after the term of investment expires. The usual term of investment was
one year and its minimum value was 10 000 lv or their equivalent in foreign currency. After
capitalization its annual profit amounted to 151%. If the deposit was made in foreign
currency – the annual profit was 51%.

These overwhelming figures were the ones to entice about 10 000 credulous Bulgarians who
“presented” about 17 million USD to the Canadian of Bulgarian origin Michael Kapoustin. It
is true that the first to enter the scheme for a short time and retired on time won quite a lot of
money. But most of the “investors” burnt down.

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Michael Kapoustin has been under investigation since October, 1995 when Sofia City
Prosecutor’s Office receive warnings from deceived citizens. Like most of the pharaohs who
sought security abroad Kapoustin left Bulgaria too, but in August, 1996 he was found and
brought back from Frankfurt. Canadian justice has some pretensions towards him but his
misdeeds in Bulgaria seem to be more. He will be charged with embezzlement of 5 milliom
USD, fraud amounting to 7.8 million USD and appropriation of 4.7 million USD. For the
time being the last interrogations under the case against Kapoustin are going on and in
shortest time it will be sent to the Main Public Prosecutor’s Office, said Angel Alexandrov.

“You’ll recognize them by their deeds” or by the distinctive features of pyramids

In practice the most distinctive feature of a pyramid is the incredibly high rate of interest they
give for the money gathered from credulous citizens. The fraudulent structures suck out
financial resources from large circles with the only promise for high revenues – interests,
dividends and profits. Usually the organizers of pyramids never develop economic activities
and remit the funds accumulated abroad. If some of the pharaohs demonstrated some activity
in economics, this was for the purpose of concealing the scheme.

THE UNKNOWN MASONS

It is known from the facts found that in the basis of the pyramidal structures stay people from
the higher levels of authority holding high and responsible state posts, as well as politicians.
Thanks to their names the pharaohs succeeded in enticing depositors. The state men took the
promised amounts and left “clean” the fraudulent structures. Investigators say that they will
not be amenable to law unless their partnership with pharaohs is undoubtedly proved.

The crushing of pyramids began in the summer of 1995. Quite a lot of analyzers of economic
processes in Bulgaria expressed their opinion later that this collapse has helped for the
destabilization of Bulgarian currency and for the troubles of some smaller commercial banks.
The money gathered from the depositors were changed into foreign currency and remitted
abroad illegally. Only in a couple of cases the usual ways were used – through bank transfers.
Invoices for fictitious import of goods were used. Banks are obliged by law to check whether
the deal is effected. But investigation does not have data available whether some of the credit
institutions have taken the trouble to trace if the deal declared has been really effected.

The inertness of department “Bank control” of BNB undoubtedly also helped the “building
up” of pyramids, say some investigators. “What is more, the Board of Managers of BNB and
“Bank Control” licensed some of these structures although they did not meet the law
regulations. After that the Central Bank did not exert any control over their activities”, they
said from the National Investigation Service. It was in 1994 when the National Investigation
Service notified the Parliament, the Ministry of Finance and BNB about the frauds. In a
report of the National Inv. Service in 1997 department “Bank Control” was named to be the
”main culprit” because they had not exercised their authority as per art. 53, par. 3 of the “Law
for Banks and Crediting Activities” after having received warnings for not regulated
depositary activities of the pyramids. In this way the inertness of BNB gave the chance for
exercising banking activities breaking the law.

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The total number of cases against pharaohs in the whole country is 20. As per the official data
of investigation the pyramids have taken 13 billion lv from 137 394 depositors. A
considerable part of the deceived have not claimed before judiciary authorities because they
do not believe they will get their money back or they feel ashamed of their simplicity. A
considerable part of the assets “invested” in pyramids is dirty money and no one will ask for
them officially, say the experts.

Today’s governors have to be aware of the fact that Bulgaria still has not protective
mechanism against new pyramids despite the changes in legislation. On the other hand the
evidence begin turning pale and lose a considerable part of their value for the years of
delaying investigation.

We are waiting for verdicts and depositors … should not be enticed by quick profits. In the
way described only certain people make profits and their names are determined beforehand.

“Banker”, Feb. 23 – March 1, 1998, # 8 (251)

Page prepared by Lillia Tentenieva

Translation M. Radoulova
September 12, 1999