Bulgartabac Holding (BH) managing director Hristo Lachev has rejected media reports alleging that the Bulgarias tobacco giant diverted 500 000 leva through advertising campaigns.

At a news conference, Lachev showed BH spending on advertising and other investments that he said proved his claims.

Lachev also offered proof that his company had no relationship with Euromodels agency. He did this in response to reports that contracts with Euromodels were used to divert money from Bulgartabac.

Five days before the news conference, models from the agency protested on Sofia's Vitosha Boulevard against the involvement of their company in the corruption scandal.

They held up banners reading, among other things, "show the Euromodels contract with Bulgartabac".

Mediapool news agency reported at the time that Lachev had said that the contract with Euromodels was not for a big amount and the models had been pictured for a calendar.

On May 21, Lachev presented documentation showing that the most costly Bulgartabac advertising contract was for a cigarette promotion, amounting to 36 000 leva including value added tax (VAT). 

He said that Bulgartabac was working with about 30 advertising agencies but the company had not, as was alleged, signed any contract for 500 000 leva related to advertising. Lachev said that his family and company employees were offended by the allegations.

On May 16, during an operation ordered by Deputy Prosecutor-General Roman Vassilev, the economic police entered Bulgartabac headquarters and confiscated documentation.

Margarita Popova, a spokesperson for the Prosecutor-General's office, said that an investigation had been launched against unknown perpetrators for large-scale embezzlement, Mediapool reported.

State officials were looking for documents connected to the Bulgartabac audit.

After the corruption allegations involving Minister of Economy and Energy Roumen Ovcharov, who is also the executive director of Bulgartabac, and his deputy and Bulgartabac managing board chairperson Kornelia Ninova, Ovcharov was sent on compulsory leave and Ninova was fired.

However, on May 19 Bulgartabac called a general meeting for June 28 2007 to vote whether to purchase a 430 sq m rest house in the Black Sea town of Nessebar at a price of 2.51 million leva before VAT. During the June meeting, Bulgartabac shareholders will also vote on the distribution of financial results and on amendments to the companys statutes, Focus news agency reported.

Bulgartabac's 2006 net non-consolidated profit was 43.06 million leva, which was 10.76 million leva higher than the sum reported in December 2005. It was decided to put aside 32.3 million leva and distribute as dividends to shareholders the balance of 10.76 million leva.

Meanwhile, British American Tobacco (BAT) launched an initiative entitled "BAT information club for the media", which is to involve several informal meetings between Bulgarian media representatives and BAT international experts on the tobacco industry and market.

At the first meeting in Sofia on May 22, the topics of cigarette prices and excise duties and the illicit cigarette trade were discussed.

Fransoas Osse, who spoke on excise duties, described the current EU rules. She said the maximum recommended selling price was fixed by the cigarette manufacturer, and said that the minimum levels were measured on the basis of the most popular price category (MPPC), which is a reference price category that can move up and down. VAT on cigarettes in nominal value in the EU is between 15 and 25 per cent.

For Bulgaria, the MPPC was 2.60 leva for a packet of 20, and after the country joined the EU, this became two leva for a packet of 20. There is considerable pressure regarding the minimum excise amount, which currently represents a significant gap with EU levels. To overcome this gap, in the coming three years Bulgaria is required to come up with a clear timetable for an excise increase.