Fighting the Big Boys

James Nedelkow defected from his native country 30 years ago to escape its rigid Communist regime. During his recent return to Bulgaria as an investor, the Southern California businessman challenged another powerful force--a criminal syndicate muscling into new industries.

U.S. Embassy officials said they were worried that Nedelkow’s public opposition to organized crime’s control of a Bulgarian pager system could get him killed.

“The thought had crossed my mind, that I may wind up in a car where they blast me,” said Nedelkow, who lives most of the year in Rancho Palos Verdes.

Yet Nedelkow--a Bulgarian champion light-welterweight boxer in his youth--recently won the round, if not the match.

As a result, the 54-year-old U.S. citizen is feeling quite healthy and hopeful, both about his own pager firm in Bulgaria and about the reforms being implemented by the market-oriented government that was elected in April. Hyper-inflation and a collapse of the banking system last winter led to the ouster of the previous government, which was controlled by socialists and thought to be extraordinarily corrupt even by Balkan standards.

“Things are looking on the bright side. The new government is changing things and changing things very, very quickly,” Nedelkow said during a series of interviews conducted first at his fifth-floor office in the Park Moskva Hotel, which offers fine views of Sofia, his childhood home, then later at the Gardena factory of his Nespa Inc., which manufactures spas and luxury bathtubs for hotels and homes.

In 1993, Nedelkow’s new Link Communications Systems won one of two Bulgarian airwave licenses for pager systems. Nedelkow said he then invested about $1 million to build a system that now covers about 70% of the country and has about 2,000 customers, each of whom pays $12 a month. He said the venture will need at least 8,000 subscribers before it becomes profitable.

But such growth, he feared, was threatened by the subsequent award of a third license to a pager company that is widely acknowledged to be controlled by the infamous Multi Group syndicate. The organized crime group’s pager system had a shot at dominating the industry through intimidation and connections to some top officers in the Bulgarian military. The license for military use was issued without an auction or a tender.

Nedelkow appealed to various arms of the previous Bulgarian government. Not surprisingly, he at first made no headway in his allegations that the Multi Group license was illegal and would allow expansion into civilian life.

“I was very much upset that there was no one to turn to, that you knew they were doing illegal things and you had all the evidence of that. And no one would pay attention to it in the old government,” Nedelkow recalled.

But then the new government took control, and the U.S. Embassy added its voice to back Nedelkow’s case. About a month ago, a freshly reformed Bulgarian Commission for Post and Telecommunications rescinded Multi Group’s license.

An official in the U.S. Embassy described the commission decision as a victory for reform and an encouragement for American investment: “Yes, this is exactly the way we view it. This is a good indication of change.”

Said another embassy employee: “I think the bottom line here is that a courageous businessman, namely Jim, pressed his case effectively.”

The other legal license holder is Mobikom, a joint venture between Bulgarian Telecommunications Co. and Cable & Wireless of Great Britain. A Cable & Wireless spokesman in London confirmed the details of Nedelkow’s appeal, which he said Mobikom supported.

Mobikom would not fight the issuance of a third license if it was granted “through an open, competitive process rather than on a friends and contacts basis,” the spokesman said.

For his part, Nedelkow thanked the U.S. government’s commercial officers in Bulgaria for their help. “My attitude in the past was that the United States Department of Commerce was only good for spending our taxpayers’ money. But in my particular case, they really jumped in,” said Nedelkow, a UCLA alumnus who earned a master’s degree in business administration from Thunderbird Graduate School of International Management in Arizona.

Now he and his wife, Juliana, expect to spend several months at a stretch in Sofia, where his mother and brother still live. Nedelkow will be turning over Nespa to his eldest son and a partner. The firm has built spas for the Chicago Bulls basketball team, Maxim’s Hotel in Palm Springs and the Luxor in Las Vegas, among others.

Nedelkow and partners are starting a consulting firm in Sofia and have their eye on buying a chain of retail stores and a metallurgical concern in the upcoming rounds of Bulgarian privatization sales. The country is well behind such former Soviet bloc countries as Poland and Hungary in switching from a centrally controlled economy, but he thinks the pace is picking up.

At the same time, Bulgarian suspicion of American investment is easing. At one point during Nedelkow’s appeal, Sofia rumors depicted him as a Pentagon agent trying to get control of Bulgarian military communications. He can laugh at that now, even as he plans to bid on the contract for Bulgarian army pagers.

“I would love to be funded by the Pentagon, but I am just a private businessman,” he said.