Bulgarian prosecutors searched the offices of State Fund Agriculture on July 7 2008, Bulgarian news agency BTA reported, quoting sources familiar with the investigation.

The prosecutors seized paperwork filed for projects under European Union pre-accession aid programme Sapard, filed by a company whose name was not disclosed, the agency said.

Later in the day, Dnevnik daily reported, quoting unnamed sources in the prosecutor's office, that the initial reports about a search of the Sapard payments agency were not true and that the fund's management co-operated fully with the prosecution.

The same sources denied reports that the search was in relation to the probe against Lyudmil Stoykov, prominent businessman and one of the largest campaign contributors for the re-election of Bulgarian President Georgi Purvanov.

Stoykov was among the owners of a firm alleged to have syphoned off 7.5 million euro in Sapard funds allocated for the purchase of agricultural equipment, who were later acquitted by a Bulgarian court.

The prosecution raid comes only days after Bulgaria's Deputy Prime Minister in charge of EU Funds Meglena Plougchieva said that funding for 624 projects, worth a total 276 million leva, has been frozen following an investigation of the European anti-fraud office (OLAF) on suspicion of corruption and malfeasance.

Funding was frozen after OLAF's probe found out that Bulgaria's State Fund Agriculture, in charge of the payments agency for Sapard funds, exercised next to no control over who received the money, allowing freshly set up companies with ties to firms already banned from submitting funding requests, to receive Sapard funds, Dnevnik said.