A run-down building in Moscow and Russian-Hungarian relations

I'm usually at a loss when I have to deal with legal terms in Hungarian. Here is this "hűtlen kezelés" (unfaithful handling) business. Everywhere you turn you hear about former politicians or businessmen heading state firms committing "hűtlen kezelés." The old and largely useless Országh dictionary lists at least five or six English equivalents which mean obviously different things: fraudulent misuse of funds, fraudulence, malpractice, malfeasance, peculation. Surely it cannot be malpractice. It cannot be fraudulent misuse of funds either because I heard from a lawyer that "hűtlen kezelés" doesn't involve the misappropriation of funds. Eventually I turned to the Hungarian criminal code [§319(1)] and there I found a definition. Someone can be accused of "hűtlen kezelés" if he is entrusted with handling the property of others and he does not follow the rules and regulations. In reality one can read about scores of people who were in one way or the other involved in state property transactions, who didn't demonstrate the necessary caution, and who agreed to a sale disadvantageous to the Hungarian state. This accusation is usually based on some assessor's  decision about the value of the property.

The latest case is a building in Moscow owned by the Hungarian government and used by the commercial arm of the Hungarian Foreign Ministry. The building, erected sometime in the 1980s, was built in the typical shoddy Soviet style of the day. Half of the building couldn't really be used for offices. And there was another drawback: either the City of Moscow or the Soviet government owned the land on which the building stood. In the last twenty years or so the size of Russian-Hungarian trade didn't warrant the upkeep of a large building and thus for a number of years the building stood empty. For years the Hungarian government wanted to sell the property but it couldn't be done without the agreement of the Russian government.

Let me state at the very beginning that the "seller" wasn't the Foreign Ministry because any transaction involving state properties is handled by the Magyar Nemzeti Vagyonkezelő (MNV). Until recently the head of MNV was Miklós Tátrai, about whom I wrote already last December in connection with the Surokó entertainment center. He was accused of "hűtlen kezelés" in connection with that land transaction. Tátrai was barely out of jail when he was arrested again, this time in connection with the sale of the Moscow office building. But Miklós Tátrai wasn't the only alleged culprit. Also cited in the case were Márta Fekszi, earlier undersecretary for foreign affairs, Árpád Székely, former ambassador to Russia, and today the prosecutors even questioned Kinga Göncz, foreign minister at the time. Magyar Nemzet was delighted to hear that they questioned her for three hours.

According to people who know something about the case there is the strong suspicion that this criminal investigation is once again no more than a political witch hunt. One way to direct attention away from current problems (for instance, the ill conceived tax code) is to point to the alleged corruption of former politicians. We are still in the middle of the Moscow affair, but today there was a new "hűtlen kezelés" involving the sale of the post office headquarters. The charge is always the same: they sold under value.

As the former Hungarian ambassador to Moscow explained in Népszabdság, the Russian government pretty well insisted that the Hungarians sell the building to Air Diamond registered in Luxembourg. (The Russian oligarch Viktor Vekselberg, who has close ties to the Kremlin, is in some way involved with Air Diamond.) Earlier the Hungarians tried to negotiate with the Russian government about buying the land on which the building is situated, but to no avail. The Russians weren't selling although they own the land in Budapest on which the Russian embassy stands. As for the choice of the assessor the Hungarians made sure that it was neither a Russian nor a Hungarian firm. Eventually the American (with a huge global presence) Cushman & Wakefield did the assessment; it assessed the property's value at $20 million. In the end Air Diamond paid $23.3 million for the building.

So far so good, one could say. Ah, but here comes the Orbán government's desire to find criminals. The Kormányzati Ellenörzési Hivatal (Government Audit Office) found a Hungarian assessor who was sent to Moscow in the last few months. He announced that the building was sold way below its true market value of $52 million.

Meanwhile Russian newspapers unearthed the fact that if there was corruption it wasn't on the Hungarian side but on the Russian. Viktor Vekselberg in no time sold the building to the Russian government for seven times what he paid for it. Regnum.ru, an online paper close to President Dmitry Medvedev, a few days ago accused the Orbán government of creating the case against the Hungarian foreign ministry officials in order to put pressure on the Russian government just before Viktor Orbán's visit to Moscow.

Perhaps Regnum.ru exaggerates and the current investigation has no foreign policy implications, but the very fact that several Russian papers accuse the Hungarian government of creating a case in order to pressure the Russian government tells us something about the current state of Russian-Hungarian relations.

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GDF
Guest

It’ hard to understand the logic of these cases. Real estate prices are determined by the market and by the urgency or lack thereof of the seller to sell.
If there was no exchange of money or other favors between the buyer and the officials involved in the sale, where is the problem?
Were the re any competing offers that were refused?Is that the seller’s problem that someone (maybe the Russian government maffia) is willing to buy the property immediately for much more?

Joseph Simon
Guest

There is a legal term in English, fiduciary duties, holding something in trust or the abuse thereof.

Member

Well, yes the law says: “A fiduciary will be liable to account if proven to have acquired a profit, benefit or gain from the relationship”
My appraiser is smarter then yours isn’t enough. Unless OV’s goons prove that somebody has gained profit from the alleged lower sale price this is just another lame propaganda stunt.

Sandor
Guest

Eva: “hűtlen kezelés” is best described as the breach of fiduciary responsibility.

Eva S. Balogh
Guest

Sandor: “”hűtlen kezelés” is best described as the breach of fiduciary responsibility.”
Thank you but I’m afraid I will forget the word again because the whole legal vocabulary is so alien to me.

Eva S. Balogh
Guest

There is one more thing that is wrong here with this breach of fiduciary responsibility about which Mutt Damon is talking about. If I understand the Hungarian cases right one doesn’t even have to profit or benefit from the transaction personally. He/she just didn’t “follow rules or procedures.” Or even more awful: someone decides that the property was sold for less than it was worth. The whole thing is a sham.

Johnny Boy
Guest

I’m sure it is purely coincidental, but you carefully “forgot” to mention the most important aspects of the case.
1. The original value assessment took only one third of the territory where the building is standing into account.
2. The money transfer took place in March 2008, BEFORE the selling contract was signed on November 2008. On the private tender that was put out, how come, the same off-shore firm won – this Air Diamond from Luxembourg – that had already transferred the money more than half a year earlier. This was clearly a feign contract to cover up the bribed transaction.
How come you always “forget” the tell-tale factors that determine a case, in order to depict a corruption case as a propaganda stunt?
Dear readers, come on, label me a troll immediately so you can skip answering anything specific.

Member

Hmmm.
Where did you get these?

Johnny Boy
Guest

It is published everywhere, just one example: http://www.origo.hu/itthon/20110209-a-moszkvai-ingatlanugy-fobb-szereploi.html
Anyone who posts on this case with a minimal knowledge can skip mentioning these on purpose only.
But no matter how many links I provide here with the same info, I’ll be a troll again and it’ll be OV and his political witch hunt again.

GW
Guest

Was the chartered surveyor assessment for the building or for the piece of land or some combination of the above? What were the terms — duration and use restrictions — of the Hungarian leasehold? What was actually sold by the Hungarians — the building, the building with the full lease-hold, or the building with some fraction of the lease-hold?

Öcsi
Guest

Johnny Boy wrote: “But no matter how many links I provide here with the same info, I’ll be a troll again and it’ll be OV and his political witch hunt again.”
If you stopped lying about what Orbán’s government is doing to Hungary, folks here would stop telling the truth about him.
Deal?

Sandor
Guest

Johnny Boy’s assertion about the corrupt deal is nothing but bunk. The money was transferred to the Hungarian state, no private dipping or greasing has been proven so far.
If the seller set the condition of the contract that the money had to be transferred first, and the parties were trusting one an other to do so, then there is nothing wrong. The contract was fulfilled, both parties received what they agreed upon.
All the fidesz is doing is cranking up righteous hysteria about corruption, whereas the still haven’t accounted for the Vaci Utca building panama, they so mysteriously got their wealth from, the famous phantom company scandal and how much taxes they cheated there, the supply contract of Dunaferr and many other clearly corrupt tricks of the last twenty years.
What I read so far about the Moscow affair, all I can see is tendentious conjecture and righteous zeal fomented by corrupt crusaders to their own political benefit.

Johnny Boy
Guest

Sandor: “Johnny Boy’s assertion about the corrupt deal is nothing but bunk. The money was transferred to the Hungarian state, no private dipping or greasing has been proven so far.”
Either you didn’t manage to understand my post or you lie.

Odin's lost eye
Guest
Johnny Boy how was the payment made? Sandor – If the money was transferred by a Bill of Exchange called a ‘Sight Draft’ then the receiving bank holds that draft until the vendor produces the ‘Invoices/Bills of Sale/Contract of Purchase/Ocean Weigh bills etc. ‘Sight drafts’ are usually ‘dated’ and if the document is not actioned by that date the draft expires and the purchaser’s bank returns the money to the purchaser. By doing this the Vendor retains title to the goods but has sight of the money. Johnny Boy this seems to have been a ‘Leased property’. As GW asks what was actually sold? Do the Hungarian Government retain any part of the property/lease or interest in it? How long has the lease to run? What is to happen when the lease expires and who is to pay for that? The purchasers’ lawyers would have to sift through the lease with much too-ing and fro-ing between Luxembourg and Moscow. They would be looking at all the ‘lets’ and ‘hindrances’ it contains, the Russian laws associated with the foreign ownership of leased property. There are so many problems that I doubt that the second valuer could have got any way near… Read more »
Johnny Boy
Guest

Odin: the money was transferred via bank transaction. I know of no details but the Hungarian state reportedly received the money many months before the contract was actually signed. This is not a difficult case.
What was actually sold? The building. No property remains at the Hungarian state.

Member

Today I read about two other new investigations that will take place regarding the previous government. But this time, this new investigation will enable the current government to lay criminal charges against the Gyurcsany Government. Can please somebody start an investigation about how much these investigations cost to the Orban Government, and who is benefiting from them financially or otherwise. Some people must be making a killing just filing the new charges left and right. We should start a list about all the investigations.

Kirsten
Guest

Is it only my impression or are there a number of areas where the rules or procedures are rather vague so that accusations of “mismanagement”, “misappropriation” etc. can be made rather easily…?
I have of course no idea how correct an accusation of misappropriation is in this case, but how much someone gained by this deal cannot be judged from the (officially) paid sum. If it is true that the Russian firm got seven times as much as the Hungarian state, any side-payment (of which there appears to be now information) could still also be a gain for the seller (in that case not the Republic of Hungary but whoever who fixed that deal). That an American firm was involved need not be a guarantee of a completely “clean deal”. But as I said I cannot judge this case, the difference in the two sums is however striking.

Member

I have the impression that we Hungarians cry corruption all the time even when it isn’t the case. It’s easier then admitting the we were clueless and blew it again.
It seems that Cushman & Wakefield also dropped the ball on this so the lesson is probably using more the one appraiser service.
I’m wondering how much of these “investigations” cost to the Hungarian taxpayers? Kenneth Star wasted $50 million to prove that Clinton and Monica had a cozy deal so to speak.

Odin's lost eye
Guest

Johnny Boy. When you buy a building there may be (in the deeds) limitations of use. The building you are buying can only be used within those limitations. For example my old house could be used for business purposes but I was not allowed to boil fish in commercial quantities, nor could I have a commercial smoke house there. There were others, including restrictions on the number of horses you could stable there etc. The point is that we do not know what restrictions were originally imposed on the use of the building. That is how it has to be sold, because that is what Hungary owned. If it was bought and later sold back to the authority, which imposed those restrictions, the- authority has the right to vary those restrictions before it resold the place. This could easily change its value.
All movements of money are called ‘’Bank Transactions’ it depends what type of ‘Banker’s Instrument’ was used.

Johnny Boy
Guest

Odin: how do all these factors influence the fact that the sum was paid before the contract was signed?

Johnny Boy
Guest

Mutt Damon: you are trying to dim the case. Why are you coming up with demagogue and nonsense like how much does the investigation cost? You pretend it’s not worth investigating. Very telling that when you have no arguments to defend your favorite crooks with, you start to circumvent the issue and try to depict the whole case as an insignificant matter not even worthy of dealing with.

Member

It is like the Boy Who Cried Wolf. WIth dozens of investigation going on they will find something at last somewhere, and then finally, the pure existence of the new AVO, oh I mean sub-committees. So far they did not have to much success with Gyurcsany, the philosophers, etc.. I am sure they will score one somewhere, and then they can again try to point their finger at Gyurcsany. As the new government started to spread the wealth for their busy buddies, they are taking away the “bread” from the rest and the only thing that remains is the “circus” to satisfy those who are still in their shrinking circle of groupies.

Member

oops to my previous comment: “and then finally, the pure existence of the new AVO, oh I mean sub-committees” will be justified.

Member

@Johnny Don’t kid yourself. Such a widespread inquisition campaign requires a large staff. Only their wages will be hundreds of millions (HUF) yearly plus legal costs even more.
Don’t pretend this is the last cleanup we have to do and then all be good. The FIDESZ bunch didn’t waste time either. They are already stuffing their pockets. The number “exceptions to the rule” as you put it is growing. Here is another doozy: Zulglo’s mayor, Papcsak and his “consultants” (HVG, sorry it’s Hungarian): http://bit.ly/hBysi5