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Stung in Sofia

Date: 19.01.2010

Stung in Sofia

You can make a killing in real estate, especially in the Eastern European market. Or you can lose your shirt, as three businessmen from Petah Tikva learned.

Three years ago, the trio was merrily trolling for opportunities in the Bulgarian real estate market when they found what was apparently a trap set by an Italian architect.

Their first Bulgarian investment was made in 2007. They bought a 71-dunam lot in the coastal city of Varna on which 500 apartments were to be built. With the land in hand, the Israeli threesome set about finding a local contractor to build the project.

According to the complaint they filed with the Bulgarian police last year, the Israeli entrepreneurs met with one David Boccolini, an Italian citizen living in Bulgaria, among others. Boccolini introduced himself as a senior executive with a company called Denarius, which he claimed could handle big housing projects, of thousands of apartments.

Boccolini offered the group architectural and construction services in Varna, and scheduled a meeting with the three Israelis at the lot they had acquired. He came to the meeting, say the three, with his partner, an architect named Carlo Dimiccela, and a lawyer named Valerio Rendazzo. The Italians looked at the site and said they could do the job.

Boccolini also offered to acquire 30% of the project, on condition that his company be hired to carry out the works. His proposal made the Israelis feel more comfortable about the seriousness of his intentions and the ability of his company to carry out the job.

The upshot was that the three decided to work with Boccolini. Planning commenced and relations between the parties grew closer: Boccolini invited the Israelis to visit him in his offices in Sofia, located in the central plaza across the street from the parliament building.

"The impression we received was terrific," one of the Israelis said. "We came to the Denarius offices, in the heart of Sofia. The offices were ornate, with 17 employees, including secretaries and lawyers. The cars in the company parking lot were luxury vehicles and [the company] maintained a private restaurant with an in-house Italian chef."

The Israelis invited Boccolini to visit Israel, and during the trip the parties discussed more potential business deals between their groups.

"A lot of Israeli companies had bought land in Eastern Europe," said one of the Israelis. But many found themselves stuck with the land, unable to develop it, in part because of infrastructure difficulties, he added.

"And suddenly here comes a company that says it can solve the construction [problem]. We decided to set up a joint corporate entity and to offer the company's construction services to other Israeli companies that owned land in Eastern Europe," he said.

According to the complaint the Israelis wound up filing with the Sofia gendarmes, Boccolini's real goal wasn't their project in Varna. It was to sell a number of office buildings he owned in Sofia to the Israelis.

"One day Boccolini called and said he and his partners had bought an office building on Svorna Street, Sofia. Because the deal was a really good one, he was offering to bring us in as partners," one of the Israelis said. The Israelis, who were home at the time, flew to Bulgaria to view the property.

"It was an office building, six stories high, that was going to be converted into a 67-apartment residential building," said the Israeli.

Boccolini, Rendazzo and Dimiccela claimed they'd bought the building in full and had legal possession. The Israelis were sorely tempted by the idea of linking arms in business with these European businessmen, who swanned about the Bulgarian capital in luxury cars and seemed to be turning over vast sums in real estate deals. "They showed us legal documents, registration papers signed by the previous owners, and other documents," one of the Israelis said.

Their worst mistake, the Israelis now admit, was that they neglected to show the documents to their own lawyer in Varna. "She was on a business trip and couldn't make it," said one of the Israelis. "So we sent the papers to our lawyer in Israel and settled for that. He thought the documents looked all right. Also, I went with the [Italians'] architect to the Sofia municipality and he presented the papers there. To the best of my understanding at the time, everything looked all right."

The Israelis signed the documents and in the following weeks, they began to hand over money, paying directly into Boccolini's bank account. Then they sat back and waited to be registered as part owners.

During that time, Boccolini suggested that the Israelis join him as partners in three other buildings in Sofia, and in a 160-dunam lot in a town just 2.5 kilometers from Sofia.

The Israelis bit. Altogether, during 2008, they paid Boccolini 2.01 million euros.

"After we'd transferred the 2 million euros, we waited for the registration documents ... But shortly after we were supposed to gain ownership of the first building, on Svorna Street, according to the contract, Boccolini called and said registration would be delayed by a month. Only then did I start to smell a rat," said one of the Israelis.

They called their lawyer in Varna and asked her to examine the documents they'd signed. When she did, her news was not good. They were all forged, she told the Israelis.

"Now I know that the building never did belong to Denarius and that Boccolini had bribed the guards at the entrance to let us in to see the place," said one of the businessmen.

In other words, the Israelis had been had. They called Boccolini and his lawyer Rendazzo, demanding their money back. The two Italians admitted all, claim the Israelis, and promised to return their money plus costs if they would forgo complaining to the police.

But for all the Israelis' repeated attempts to get their money back by amicable means, it didn't happen.

"The answers we were getting - in a week, give us two more weeks, give us more time - finally induced us to complain to the police in So fia," one said.

At present the Israelis are awaiting answers from the Bulgarian police, who - after intervention by the Israeli police - are questioning Boccolini. They expect Boccolini to wind up behind bars and meanwhile, they aren't going to invest in Eastern Europe any more, they say.

The Israeli police were brought into the picture by Benny Katz, a lawyer the Israelis hired who specializes in international criminal law. Katz has words of wisdom for Israeli businessmen on how to avoid similar scams. First and foremost, any Israeli coming to do any business in Eastern Europe has to understand: He's not in a position of strength, Katz stresses.

"He is in a position of inferiority mentally, linguistically and from the perspective of contacts, too," Katz says. Moreover, the Eastern European nations are only now starting to upgrade their standards and regulations to those of the European Union, including in respect to the cleanliness of the legal system, Katz said. "They're on the right track. But they aren't there yet."

There are steps that foreign investors, such as Israelis, can take in order to minimize their risks of being reamed, he says. Primarily, don't ignore warning originating from your gut. Look closely at previous deals, especially recent ones, by potential partners in business, and examine bank credit and other bank statements attesting to the potential partner's creditworthiness. Hire a local law office of repute - and hire a second law office to look into the first one, to be on the safe side.

"Before any big deal, employ a local independent investigative firm that will supply a comprehensive report at the end of its inquiry," Katz continues. "The amount you pay is negligible compared with the sum being invested." And don't chintz on translation: have every document converted into a language you understand, he urges.

There's more: In case of a lawsuit, there's always the risk that the process is tainted. That's why if you've been conned, you're better off pursuing a criminal complaint than a civil lawsuit, Katz counsels. And you'll also want an Israeli lawyer, and the help of the Israeli police, if you want your money back.

Shlomit Tzur, (Israel)

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