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Bulgarian President Rosen Plevneliev arrives to deliver a statement in the Presidency in Sofia June 17, 2014. REUTERS/Stoyan Nenov

(reuters_tickers)

By Matthias Williams and Tsvetelia Tsolova

SOFIA (Reuters) - Bulgaria's President Rosen Plevneliev urged lawmakers on Friday not to try to hush up the activities at troubled lender Corporate Commercial Bank (Corpbank) or risk opening themselves up to blackmail about their connections to it.

Clients unnerved by reports of shady deals by Corpbank's main owner withdrew more than a fifth of deposits in a week-long bank run in June, forcing the central bank to take control of the lender, shut down its operations and order an audit.

The main owner, who was locked in a public feud with a rival at the time of the run, has repeatedly denied any wrongdoing and said the run was a plot hatched by his competitors.

The crisis has put renewed scrutiny on the investment climate in the poorest and one of the most corrupt countries in the European Union. Protests against the murky ties between politicians and businessmen raged in Bulgaria for months last year, bringing tens of thousands of people onto the streets.

Corpbank was seen as having close ties to the state as a large proportion of state firms kept their money there.

Plevneliev compared the situation at the lender with the period after Bulgaria shook off Communism in 1989, when secret files compiled by the Darzhavna Sigurnost, the Soviet-era secret police, were used to blackmail politicians about their past.

"If we allow the truth about the bank to be brushed under the carpet, traded off, if we turn these files into the new gold mine for blackmailing politicians like we did with the files of Darzhavna Sigurnost, it would be a strategic mistake for the state," he said.

The Bulgarian parliament could be key to rescuing Corpbank, as for example it has the powers to approve or reject proposals by the government to raise new sovereign debt in order to finance a state bailout of the lender.

In his first address to parliament since the government resigned on Wednesday, Plevneliev said Bulgaria now had the chance to end what he described as a pretend 25-year-long transition from Communism to democracy.

"If the whole truth about the illegitimate connections of politicians, judges, prosecutors and public figures with the Corporate Commercial Bank is revealed, then Bulgaria's "pretend" transition period will come to an end and the genuine one will begin," he said.

Preliminary results of an audit carried out by E&Y, Deloitte and a local consultancy showed activities in the bank "incompatible with the law and good banking practices", according to the central bank. It also said that crucial information about Corpbank's loan portfolio was missing.

Four officials at the bank were arrested after the results of the preliminary audit were announced, and the interior ministry said the audit indicated a "serious felony" had taken place at the lender.

Bulgaria was seen as the Soviet Union's most pliable ally before fall of the Berlin Wall, but has since joined NATO in 2004 and the EU in 2007.

(Editing by Raissa Kasolowsky)

Reuters