With President Bush scheduled for a high-profile visit to Bulgaria this weekend, a Sofia bank with connections to the country’s leadership is struggling to refute accusations by the Treasury Department that North Korea may have targeted the bank to launder counterfeit money.

During a private meeting in Washington last February, Deputy Treasury Secretary Robert M. Kimmitt warned Bulgaria’s Finance Minister that the Economic and Investment Bank (EI), chaired by the girlfriend of powerful Sofia mayor and presidential aspirant Boiko Borissov, was a target of a North Korean money-laundering effort.

The bank denies it has any connections with North Korea and denounced Kimmitt for spreading unfounded “rumors,” which it charges originated with political rivals of Borissov, whose right-wing nationalist party is surging in the polls.

President Bush and his wife Laura are scheduled to visit Bulgaria starting Sunday, June 10, the latest indication that Sofia has become a key U.S. military and political ally within striking range of Iran across the Black Sea.

The U.S. has opened three military bases in Bulgaria.

EI Bank board Chairwoman Tsvetelina Borislavova, who acknowledged in an interview with CQ that she was “living with” Borissov, said she had been informed of Kimmitt’s warning “personally, by the finance minister,” Plamen Oresharski, upon his return from Washington last February.

But she said the tip was based on “false information” concocted by political enemies of her boyfriend Borissov, who before he became mayor last year was a top official in Bulgaria’s powerful Interior Ministry.

Borislavova said the bank had thoroughly investigated the allegation and found that “there has never been any account opened by a North Korean company or a joint venture company” in the bank.

“It is not true. It is a lie,” she said by telephone from Sofia. In a subsequent formal statement, she called the accusation “absolutely false and groundless.”

Borislavova added angrily that she was “disappointed that high U.S. officials had passed along false “rumors” and ”gossip” about North Korean involvement with the EI bank, Bulgaria’s second largest.

She singled out Kimmitt for criticism, saying “the next time” U.S. officials repeated such allegations she would “make a statement to the U.S. ambassador” in Sofia.

A Treasury official at first declined to discuss the particulars of Kimmitt’s meeting with the finance minister, saying such details were “classified.”

But informed of Borislavova’s remarks, the official e-mailed a statement on condition of anonymity.

“Deputy Secretary Kimmitt and Minister Orescharski discussed our mutual obligations to protect the global financial system from the illicit conduct of North Korea and Iran, pursuant to U.N. Security Council Resolutions,” it said.

“Both officials reiterated the need to remain vigilant in making the financial system inhospitable to illicit money flows.”

North Korea has been accused by the U.S., China and Japan of manufacturing millions of dollars worth of high quality counterfeit $100 bills, called supernotes, and distributing them through foreign banks.

In December 2004, two Sofia-based North Korean diplomats were arrested on suspicion of smuggling synthetic drugs destined for Arab markets. They were expelled.

Kimmitt’s warning could be seen as another sign that the Bush administration is deeply engaged in helping the former communist state emerge from decades of Soviet-style organized crime and corruption.

The U.S. finances Bulgaria’s National Institute for Justice, which trains prosecutors and judges to combat organized crime, and U.S. terrorism finance specialists are working closely with a new Bulgarian bank watchdog unit.

Membership in the European Union, granted last February, also makes it harder for official corruption to flourish, maintains a Bulgarian official who was not authorized to speak for the record.

Whether Bulgaria’s own financial investigators had uncovered evidence of North Korea’s alleged interest in the EI bank could not be learned.

But according to a 2005 risk-analysis report commissioned by a Swiss financial concern, the bank was “believed to be a main source of funding for . . . crime organizations via money launderers and prostitution agencies.”

The 3-inch-thick report, compiled by a team headed by a former top U.S. law enforcement official, also said Sofia Mayor Borissov had “a documented history of business affiliations with persons who are alleged to be the top leaders of organized crime in Bulgaria.”

The dossier included details on suspected criminal associates of Borissov, who years ago was chief bodyguard for Bulgaria’s last communist dictator. It also lists 28 underworld-connected “assassinations” that remained unsolved during his four-year stint as chief of staff of the Interior Ministry.

Borissov, like his banker girlfriend Borislavova, dismissed the allegations, reported in a March 2 CQ story, as politically motivated.

To be sure, the allegations didn’t stop the FBI, CIA and Drug Enforcement Administration officials from meeting with Borissov when he came to Washington last year in his role as a top Interior Ministry official.

While a number of foreign officials have distanced themselves from Bush over the Iraq War, Boiko Borissov hasn’t been one of them. He revels in photo opportunities with U.S. officials.

One of them came at the Sofia Hilton last week, when U.S. Ambassador John Beyrle helped unveil plans for an ambitious new hotel and business-park development at the airport, financed by U.S. giant Tishman International.

Smiling beside him: Boiko Borissov.

Longtime observers of the mayor, whose popularity may catapult him into the presidency in October, expect that he’ll use every opportunity to be within photo range of Bush and his wife in Sofia.

But Borissov will also be following Bush out of Bulgaria, with an unofficial visit to Washington.

A karate fanatic with a penchant for black leather jackets, Borissov had asked to meet with Daniel Fried, the assistant secretary of the Bureau for European and Eurasian Affairs, on Tuesday, June 12, according to a knowledgeable source who requested anonymity.

But he may have to settle for less, said State Department spokesman Beamer Chase.

The meeting “will likely not be possible due to . . . Fried’s schedule,” Chase said last week, adding that Borissov could be offered meetings with lesser officials in the European section.

Borissov is also scheduled to give a speech at the Center for International Private Enterprise, a Washington-based nonprofit affiliate of the U.S. Chamber of Commerce and the National Endowment for Democracy.

The Sofia mayor is also scheduled to meet with his Washington counterpart, Adrian Fenty, the following day.

What they would talk about, a Fenty spokesperson could not say.

China Watchers: Last week’s SpyTalk column, on allegations that Bush administration neoconservatives had encouraged pro-independence politicians on Taiwan — thus increasing the danger of the first nuclear shooting war over the island, according to many experts — kicked up a lot of dust here and in China.

Some officials wrote or called to say that the allegation, made by Colin Powell’s former chief of staff Lawrence B. Wilkerson, and backed up by Douglas Paal, former chief of the U.S. diplomatic mission in Taiwan, was entirely false. Others contacted me to add details confirming the enthusiasm of top Pentagon officials for the independence movement.

A typical objection came from Peter W. Rodman, a highly respected longtime Republican national security official, who dealt with China issues as assistant secretary of Defense for international security affairs.

Rodman called the allegation “total nonsense.”

“The only thing I heard out of Don Rumsfeld’s mouth was quite the opposite,” Rodman said, adding that the Defense chief was sometimes “furious” with Taiwan’s pro-independence president, Chen Shui-bian.

Rodman urged me to talk to Paal, the top diplomat in Taiwan during the first Bush administration, who he called “authoritative . . . right in the middle of things.”

But when I read Paal’s quotes backing up Wilkerson, Rodman paused momentarily, and then said the notion that any top Bush official encouraged Chen to be aggressive was “wildly overblown.”

Speaking of a poking a stick in China’s eye, President Bush last week praised Rebiya Kadeer, who SpyTalk fans will remember as the dissident-in-exile here who has suffered mightily for her advocacy of autonomy for China’s Uyghur region. (See The Long Arm of China’s Secret Police Reaches Into the U.S.). A Nobel Peace Prize nominee, she and her children have all spent time in Chinese dungeons for their nonviolent advocacy. Bush met with Kadeer at the June 5 conference in Prague on democracy and security, rightly calling her “an individual who has struggled for freedom, democracy and human rights in the face of tyranny.”

Secret Numbers: Long classified intelligence budgets seem to be suddenly popping up everywhere — with surprises. In her soon-to-be-released book “Outsourced,” author/blogger R. J. Hillhouse (www.TheSpyWhoBilledMe.com) writes that she discovered “highly classified budgetary numbers embedded in a recently released unclassified PowerPoint presentation by the Office of the Director of National Intelligence.”

Last year a top DNI official blurted out in a speech that the intelligence budget was $44 billion, maybe 25 per cent bigger than generally thought then.

But “by reverse engineering the numbers in an underlying data element embedded in the presentation,” Hillhouse writes, “it seems that the total budget of the 16 US intelligence agencies in fiscal year 2005 was $60 billion.”

DNI spokesman Steve Shaw dismissed her arithmetic, telling Federal Times, “Going from those numbers on the back of the slide to any sort of estimate on the overall [intelligence community] budget is a very big stretch and just not supported by the data.”

Fully 70 percent of the $60 billion, Tim Shorrock wrote at Salon.com last week, now goes to contractors.

Steven Aftergood added more numbers to the mix in his authoritative “Secrecy News” last week.

Aftergood cited a speech the NSA’s Deborah Walker gave at a contractor conference sponsored by the Defense Intelligence Agency last month, in which she said that back in 2001, “only 140 contractors were eligible to compete for NSA contracts. Today, there are six thousand such contractors,” according to Aftergood’s account.

More astounding, “The number of contractor facilities cleared by the NSA has grown from 41 in 2002 to 1265 in 2006, according to a chart that she presented in her talk,” Aftergood writes.

Farewell: And finally: I bid readers a fond adieu until mid-September. I’m going on leave to finish a book for Hyperion tentatively titled “Can You Tell a Sunni from a Shiite?”

Have a great summer.