Property swindle in Budapest’s District V

The revelations that surfaced about NET Holding in the last few days, thanks to 444.hu, exposed an intricate network of affiliated companies and described the complicated international trading in natural gas. The corruption case I will be talking about today is a lot simpler. Admittedly, the loss to the taxpayers is also a lot less, about four to ten billion forints over the last eight years. Small potatoes, you might say. But keep in mind that we are talking about the sale of one-third of all real estate owned by the municipality of District V, where property prices are the highest in the country. Moreover, these shady deals occurred during the mayoralty of Antal Rogán, considered to be the third most important politician in Hungary after Viktor Orbán and János Lázár.

Stories of corruption in District V, downtown Budapest, have been circulating for almost a year. Népszava learned in April 2014 that a city official demanded a bribe from a businessman who had just successfully competed for a site to open a restaurant. The brave man refused and went straight to the police, naming names. As is typical in Fidesz country, the deputy mayor who was most likely implicated in the affair did not end up in court but was simply removed from the scene and transferred to the ministry of foreign affairs where an “urgent” job was waiting for him. His replacement was Péter Szentgyörgyvölgyi, who became the district mayor last October. Soon enough it became known that Szentgyörgyvölgyi himself was a beneficiary of the shady real estate deals of the past few years. Under pressure, he decided to give his apartment back because “he just got tired of all the attacks against him.” Details of these revelations can be found in a post I wrote in December.

The force behind the investigations is Péter Juhász (Együtt), who was Szentgyörgyvölgyi’s opponent in the municipal election and who subsequently became a member of the city council of District V. He thus has access to documents that shed light on the means by which expensive apartments or business sites were passed on to political friends for a fraction of their real value. Juhász is a former human rights activist with vast experience as an investigator of corruption cases.

So, how was it done? The key concept in these transactions is preemption, the right of a tenant to purchase something, especially public property, ahead of anyone else. Ever since the 1990s a law has been on the books that allows the state or the municipality to sell its properties to tenants at a reduced price. The rationale behind this practice was that every year the tenants of these public properties were obligated to pay higher and higher rents and received no equity in return. The price abatement thus assumed a long-standing contract between owners and tenants. Moreover, as Antónia Rádi of Átlátszó.hu pointed out, three persons are needed for such a transaction: the owner, the person who intends to buy the property, and the current tenant. Apparently, in practice this particular rule is often dispensed with. That is, no outside buyer is necessary for the transaction. What happened in District V, however, went beyond both the law as it was written and the law as it was practiced. The transactions were, quite simply, illegal.

Let’s say an apartment or store front became vacant. The city officials notified their friends, political or otherwise, that these sites were available for rent. After a few months the happy tenants announced their desire to buy the property. The price was determined by two “independent” appraisers. One of the appraisal firms was owned in part by György Rubovszky, a Christian Democratic member of parliament and father of Csilla Rubovszky, deputy mayor of District V. In addition, Rubovszky, a lawyer, was employed by the district as an “expert” assisting the committee in dealing with properties owned by the district. The assessed prices were very low. They always agreed with the prices on the district’s books, most likely thanks to inside information by Rubovszky. Then came the bonus: a 30% reduction in the price.

Among the many cases Péter Juhász is pursuing, he found a tenant turned owner who within a few months sold his newly acquired property for double what he had paid for it.

Juhász is not only digging through property files. He also organized a walk through the streets where most of the questionable property transfers took place.

And how much did Fidesz steal from you? Péter Juhász leading the walk in District V

“And how much did Fidesz steal from you?” Péter Juhász leading the walk in District V

Rubovszky is just one of several people with Fidesz or government connections to surface in these real estate swindles. Péter Heim also handled some of the deals. He is now head of Századvég and as such may be on the list of individuals banned from entering the United States because of their involvement in corruption cases affecting U.S. businesses operating in Hungary. András Giró-Szász, undersecretary in the prime minister’s office, is also indirectly involved through his brother-in-law and business partner, Péter Serfőző.

Juhász is convinced that the city officials undertook these real estate deals as part of a private business venture and did so in a conspiratorial manner. Between 2008 and 2013 277 pieces of real estate changed hands in District V. The appraisers low-balled the value of these properties at a half or a third of their real worth. On top of that came the 30% abatement. If Juhász, who since then pressed charges against District V, can prove his claim, the people involved might end up in jail for years. Or, they should but, judging from other earlier cases, they most likely won’t.

Sort by:   newest | oldest | most voted
Zsolt
Guest

“circulating for almost a year.” – Nop; a bit more.

However; from this article I am missing a statement of Antal Rogán who said some days ago on -almost every TV-, news and etc… “There is no case at all”, together with this was already explained “the fact”; 2/3 of the Hungarian Nation expressed they wish to carry on what we have started in 2010.

Member

Back last year I made a comment regarding the parking permits that business owners must buy form the districts. The payment for 2-3 or even more parking spaces were demeaned to be paid to an “independent” law firm.
An other story that I know form those who were directly involved goes like this. (This is not only a District V. issue by the way). Commercial property is up for lease by the district but for months no-one shows interest. Finally an independent organization bids for the property with a low price, hoping to get a great deal as no one is interested. Suddenly there is an other bidder. Bids must be submitted in sealed envelope. The winning bid is a few thousand forints higher than the bid submitted by bidder number one. Property is leased to the highest bidder, then goes on sale shortly with the privilege to buy for the bidder of the lease.

Member

I think for most of us, who lived most of our life in democracy and in a constitutional state, understanding the people who living idly and inert in the midst of constant and wide ranging corruption is nearly impossible. Yet, on the other hand, a lots of people loose sensitivity, somewhat as we do about senseless killings, drug dealings, robbery, break-ins in some of the large city’s poor neighborhoods. It does not bother us very much on the daily basis, until it happens to us.

buddy
Guest

I’m glad that Juhász is sticking his neck out on exposing this issue, but I think it needs to be mentioned that Átlátszó looked in Juhász’s own business dealings last year and found several, shall we say… irregularities. He has been involved in numerous companies in the past few years, most of which appear to have disappeared into thin air, possibly owing money to the government.

I realize that the scale we’re talking about here is nowhere near the extent of theft that Rogán et al are perpetuating, but still, this looks awfully sketchy for someone who is purportedly campaigning against corruption. And Juhász’s excuses, that he moved around a lot over the past 10 years and didn’t get official letters, aren’t exactly convincing either (at least not to me).

Maybe there’s a good explanation for all of this…

http://blog.atlatszo.hu/2014/10/utananeztunk-juhasz-peter-fantomcegeinek/

regime-critique
Guest

What is the reality behind the conversion of the SF indexed mortgages?
If the conversion was completed, Orban became untouchable.
We will never get a divorce from him.

gdfxx
Guest
gdfxx
Guest

“How ironic.” says Financial Times.

“Let’s be honest,” says Tatha Ghose at Commerzbank. “It’s just luck. Everyone [in central and eastern Europe] knew there was a problem. It was a question of how autocratic you are prepared to be with the banks.”

http://blogs.ft.com/beyond-brics/2015/01/16/hungarys-great-swiss-franc-escape/

ruppo
Guest
The conversion of Swiss francs was already completed so the Hungarian economy avoided a 700 billion HUF worth of hit. This would have hit the population directly so the avoidance will not only boost Hungarian GDP in an enormous amount it will impact the ability of households to spend and will have ramifications for decades to come. It was really an exceptional moment in history. But there is another issue that is a cause for great concern. In France a comedian was arrested (!!) over a joke posted on Facebook that was a word play on the Je suis Charlie slogan. Even if someone does not like a joke to arrest a comic for a joke is an outrageous violation of not only free speech but really horrible as well. But the problem is not the arrest itself. It is the reaction within Hungary. Nobody is standing up for free speech nobody is standing up against this arrest (the arrested person was black skinned, so racism against blacks might have also played a part). So Hungarian society is only concerned with free speech until they agree with the speech. If they don’t like a joke, then the comic might as… Read more »
Member
ruppo: You are dead wrong and there is really no need for false Fidesz propaganda. The exchange of SFr debt of the population to Forints have absolutely no effect on the Hungarian GDP. The statistics given out by the KSH are doctored and false anyway, ordered by the Fidesz, as the hamburgers and french fries at McDonalds. As to the additional money remaining in the pockets of the people, that is not going to alter the GDP. First of all, the taxes are higher this year. Then there are new road taxes, which will be built into the prices of consumables. Inflation is running at 10%, but the gas prices and the KSH distorts everything, so it will be a small negative number at year end. This way they may not raise the retirement benefits next year, but only nominally, because retired people are the backbone of the Fidesz voting population. Very little, if any extra money will be realized by the people and with no reserves left, most of it will be kept under the mattress and pillows at home, so they don’t have to pay fees for getting it back from their bank account. As to any positive… Read more »
városi
Guest
This post is about Rogan’s mini-mafia in district 5, not FX speculation. By the way I heard already in 2010, when Rogan had been a mayor in district V for 4 years already that Orban threatened him with jailing him. Of course that was then, and this is now. Although Rogan was close to the top even then he is an indispensible member of Orban’s innermost circle and best friends (co-conspirator with) Arpad Habony, who actually stands closest to Orban. Anyway, the point is Orban new already in 2010 very well how many pieces of real estate Rogan and friends sold below prices, how they extracted what amounted to protection money and so on. But Orban did nothing of course, because this was a good incentive for Tóni to be super-loyal and he didn’t disappoint. Also remember that Mr. Andras Puskas (the bagman and enforcer for Rogan) disappeared from his position as deputy mayor to Rogan in mid-2014. It is rumored that there was an investigation already underway in mid-2014 and there was wire-tapped conversation incriminating both Puskas and Rogan. This is an interesting story, and Juhash has a point, this is a mafia-like operation defrauding the public to the… Read more »
Viking
Guest
Thanks @gybognarjr. I did live most of my life in a democracy and in a constitutional state. I came here a few years before it all turned totally crazy. Very well described by you. To me unbelievable that in the 21st century, even in within the EU, someone is able to build up a criminal syndicate of these dimensions. I often have to bite my tongue not to offend those Fidesz followers i time to time meet on my way too much. A whole nation is used, and they just sit in apathy. As a normal human being, it’s sad to witness, it sometimes makes me angry but it always surprises me. I often hear all the excuses why the people don’t step up and do something about it. Since i was a teenager, i was always fascinated by this strange country in the middle of Europe. So fascinated, that i decided to once move here. So i did, many years after. While living here, i saw good things and bad things, just like in any other country, but i did love Hungary for what it was. What happened to Hungary while i was here is beyond my imagination. The… Read more »
LwiiH
Guest

OT, 82% support for labeling GMO products as such. http://jaysonlusk.com/blog/2015/1/15/food-demand-survey-foods-january-2015

Guest
@Viking: Yes, it seems Hungarians somehow didn’t find the way into democracy 25 years ago. Of course I came here as a tourist first so I didn’t see or hear about all those machinations – for visitors Hungary was and still is a nice place. Only in the last years (after I met my wife) did I become more interested in politics but still: What can/could I do? Any way we’re too old so we just try to enjoy the rest of our life – and help the younger ones in my wife’s family a bit … I’ve written about it before: The husband of one of my sisters spent around two and a half years in Budapest in the middle 90s working as a kind of financial controller for one of the big global players and he was so angry (on different levels) after that stay that he won’t come to visit again. Of course he enjoyed the good restaurants etc but business must have been crazy for him, dealing with those crooks! So only my sister visits us here regulary and enjoys the good life … A bit OT but maybe interesting: He wouldn’t tell me about those… Read more »
fusion
Guest

I think every Hungarian patriot can be happy that the mortgage loans were converted before the Swiss franc disaster. Not because it had anything to do with the government, but because it would have been Hungarian families that could have been ruined.

This event without the conversion would have created many collapsed house mortgages, leading to higher homlessness, decreasing house prices (bad for every property owner) and many other negative consequences for the country of Hungary.

This conversion will help Hungary as a country an enormous amount, the conversion issue will even help banks (the lenders) :

““Even though the government’s intention wasn’t to save local banks, the loan conversion is a huge relief for lenders as they would have seen their risk cost skyrocket had these measures not been put in place,” Zoltan Reczey, an analyst at Budapest-based brokerage Buda-Cash Zrt., said by phone. “There would’ve been mass hysteria.””

http://www.bloomberg.com/news/2015-01-16/hungary-s-orban-makes-world-s-best-trade-on-swiss-franc-loans.html

gdfxx
Guest

fusion:”I think every Hungarian patriot can be happy that the mortgage loans were converted before the Swiss franc disaster. Not because it had anything to do with the government, but because it would have been Hungarian families that could have been ruined. ”

This has nothing to do with patriotism. The FIDESZ government forced the banks to convert the Swiss Franc loans into HUF loans, thus eliminating the currency risk that every borrower assumed when they asked for and received Swiss Franc loans. The borrowers lucked out but had the process been the other way (that the forint gained value against the Swiss Franc), they would have lost money. In a free market economy the government has no business getting involved in contracts between individuals and banks (or other private institutions) if those contracts are lawful. When one signs a contract, one is responsible for all consequences resulting from that contract.

The Clash
Guest

@Viking
Hello, I have a few questions for you:
As a foreigner, who has lived in more then one country, what are your views of the future of Hungary? What do you suggest to a hungarian – who share your thoughts – thinking about leaving this country?

Viking
Guest
Thanks for the link Eva and thanks for your work. Very appreciated. To “Wolfi”, you do your duty already, by speaking up. Hungary is still a nice place for indeed tourists, that’s my business. To “The Clash”, i believe i’m needed in Hungary, so i’m not leaving. I also have son here now though, and if i experience, that his future and possibilities is at risk because of the conditions in Hungary, then it’s another thing. We speak three languages at home, preparing him for a globalized world, teaching him to distinguish, to be tolerant and to have a critical sense. If all this is threatened during his future education in Hungary, then we are out. Eva’s articles about Orbans crackdown on education is not too uplifting, but we don’t give up that easily. For the good people of Hungary, the first move should be to put the fear away. I always hear, that people are scared of loosing their job and therefore just have to accept the situation. Those who fear have to realize, that things will only get worse, and the longer they keep quiet, the more there is to fear about. I’m fully aware, it’s easier said… Read more »
Istvan
Guest

Interesting post about the corruption in district 5 as it relates to property sales. Here in Chicago American Hungarians got sucked into what they thought was cheap Hungarian property only to see the values collapse. There are numerous outfits marketing in our community again, here are two http://www.gatewayproperties.co.uk/node/why_budapest , http://www.tower-investments.com/ and there are many more including Capital Real Estate Budapest.

In general my community here is not being sold on the idea of a quick turn around in values, but rather in rental incomes. The expectation is a 6% rental yield which is a good amount for these small investors owning only one or two units. If Orban continues his hostility towards the EU the large number of ex-pats who work in Budapest for multinationals will drop and this rental market will crash.

luigi
Guest

@Istvan

Everything is being upended by Airbnb. It’s like Über for empty apartments for tourists. It’s tax free money and I hear up to 10,000 Budapest apartments are already on Airbnb.

You advertize your apartment on Airbnb and rent it in 3-4 day instalments for tourists. Actually the prices are not much cheaper than hotel room rates.

Airbnb works and brings in a much higher yield on your investment than normal rentals do.

It’s actually such a phenomenon that in district VII prices went up 20-30% last year and even the smallest, darkest, coldest apartments overlooking the inner yard could be sold quickly. The low-wage tourists coming to Budapest for a few days to get drunk cheaply (district VII is famous for its bars) just don’t care.

District V has also tons of these apartments, but arguably the bigger apartments are very expensive. The sellers are waiting for rich Russia and Italian investors who tend to like the district and have money to invest in real estate.

Member

@ruppo: Thank you that is great! Now, if you have the time can you explain to my parents why did their pension only rise about 1% when their medication cost almost doubled on the same stock since last year? Why do they have to pay extra fees to drive on the highway? Why did the line at the Blaha is getting longer and longer for free food? Can you explain this spreadsheet by the Hungarian Central Statistics Office on Household income and Consumption? It looks to me that the “best time” Hungarians had was under Gyurcsany. THey made more money, they purchased more items, etc. But that is just me, I am sure you can tell us the truth. Here we go https://www.ksh.hu/docs/eng/xstadat/xstadat_long/h_zhc001.html

Please use facts to prove your point. I am not sure why but the not to smart people who come here and throw in things like “Hungarians never had it better” without any factual support just rub me the worn way. You sound so smart, so in your next post please reply to the other questions, so people on this board would not think that you are shill.

petofi
Guest

@gybognarjr

Your points are spot on, but you have yet to bring the cosmic reality of what Orban is doing into focus. To do this, one has to accept this reality: Orban is not a goof or an ignoramus who knows not what he is doing: Orban is fully intent on his two purposes, one grandly more important him than the other–

a) To rob the country for as much as he can, mostly for himself;

b) To ruin Hungary and Hungarians.

I’ll let you work out which is more important to him…

Member
Dear Petofi. At the end of my comment, I listed the interview with József Forgács professor, political sociologist with Egon Rónai on atv. http://www.atv.hu/videok/video-20150116-orban-viktor-politikai-kommunikacioja Mr. Forgács delineates the two possibilities, for the motivations of Viktor Orbán. He is ruining Hungary, either consciously with knowledge, simply for maintaining his power and amassing wealth, or he does not understand democracy, the western culture, hates free enterprise and free markets, since he never lived in democracy and western culture and he is isolated and fed false news by his cronies. At any rate, Mr. Forgács gives a perfect analysis of the Orbán Government and the Hungarian society. It is not a pretty picture and it does not provide much hope for the near future. The underlying problem is not only the Government, which is made up of gross criminals, but the Hungarian people, their lack of democratic culture and behavior, their lack of self reliance, self assurance, ability to behave with authority and individualism and unite for good causes. Hungarians rather stay in self pity and boast of non-existent achievements and will not accept teaching from foreigners, they will not imitate good examples from nations which are very successful. Hungarians will rather sideline… Read more »
styrofoam kitty
Guest

The Russian (Rosatom et al) and the jewish lobbies working hand in hand.

I guess some jews are up for sale, so their support is worth a little for smart Russian investors.

It’s a grand coalition: Russia supported by Jobbik and the jews.

http://cink.hu/a-dohany-utcai-zsinagogaban-enekel-holnap-az-orosz-vida-1680121617

MusicLover
Guest
I lived in the Fifth District for much of the 2000’s. Even in the 90s, it had a dreadful reputation for corruption with all political sides collaborating behind the scenes. There was a time when the Fifth District had a great many inexplicably empty shops and it was explained to me that in order to secure a rental contract, 10 millions forints had to be delivered to the council in an envelope. Which naturally had an inhibiting effect on people opening new shops. This was confirmed to me by several shopkeepers when I moved there in 2001. So I’m not at all surprised to see names quoted whose tenures have spanned both MSZP and Fidesz led councils. It truly is a “rotten borough” and I’d like to see not only Antal Rogan in jail, but also the egregious Pál Steiner (MSZP). Underneath where we lived, we discovered an enormous unused hall that extended through an entire block (100 meters by 20 by 20 high.) I persuaded the monument crusader, Mihály Ráday to come and make a TV report about it, in the hope of getting it used and known about. He was staggered by it. And yet we found out… Read more »
Guest

Very harsh words from József Forgács it seems – is anything from him available in English (or German for me …)?
Oh, is this him?
http://en.wikipedia.org/wiki/Joseph_Paul_Forgas
http://forgas.socialpsychology.org/

Guest

Thanks, Éva!
A bit OT:
His work is quite impressive – here’s something about his work in “experimental psychology”
http://scholar.harvard.edu/jenniferlerner/announcements/financialtimescom-why-sadness-good-you

Guest

And here’s what he thinks about democracy in today’s Hungary – I’ll have to read and digest this myself first …
http://www.sydneysymposium.unsw.edu.au/2014/chapters/ForgasSSSP2014.pdf
The introduction looks promising already:
” However, the transition from dictatorship to democracy has been far from simple, and in some countries, such as in Hungary, there are worrying recent signs of popular support for a newly emerging autocratic system. “

Guest

From the document p.16:
“This empirical analysis is confirmed by Bibo (1991), a prominent Hungarian political thinker .
He argued that repeated historical traumatisation and the permanent threat to national existence lead to pervasive fear which in turn produced cognitive and emotional regression. Traumatic collective experiences produce distorted perceptions of reality and political illusions resulting in a psychological state resembling characterized by collective victimhood and ‘political hysteria’”
That doesn’t sound so good …

petofi
Guest
@gybognarjr Thanks for the link: I just watched the interview. Of course, you know that no Hungarian living in Hungary would have had the nerve to say what the professor said. (In fact, the future might hold a law where such foreigners will be branded as undermining the state and be barred altogether.) Inspite of his outspokenness, I might suggest that the Professor was not strong enough–he might well have suggested that Hungarians suffer from a mass psychosis and a fundamental inferiority complex which can only receive succor or relief in lies detailing Hungarian ‘exceptionalism’ and the various conspiracies by outsiders to sideline the ‘Great Hungarian’ potential. Truth is no longer a factor: the average persons mental stability depends on being fed lies to maintain the veneer of supremacy. Of course, Hitler not too long ago had done the same. What I find damning in all this is that the ‘good’ and ‘decent’ have gone underground. They’re not to be seen or heard. And of course, what can be said about the Fidesz underlings who may know what is happening but disregard it for their own advancement. The country, in time, will pay for all this. I hope that those… Read more »
Member
Petofi: We agree on all points. Thank you. Éva put up a link about a PBS documentary on Putin’s carrier. (Thanks Eva, I already watched it twice, will watch again and make notes) Orban is copying Putin’s kleptocracy as close as he can, and he is almost completed the task. I fear, that the gypsies will be Hungary’s Chechens and Orbán will do the same as Putin did against the Chechens, (and as Hitler did against Poland) to stage a fake gypsy uprising or a very bad, bloody incident, blaming the gypsies for it and make war on them, raising his popularity even within the ultra-right wing Jobbik voters and be elected, when otherwise he would have lost even an election full of cheating. Orban had lost all humanity completely, megalomaniac and just amassing wealth, robbing everyone he can. He is not as talented for deceit and international political intrigue his timing is lousy not as good as the reigning Grand Master of dictators, Mr. Putin. It is a fact, that few Hungarians in Hungary reach World class status in anything but sports. The good professionals, artists go abroad and achieve their success there. Unless there is a bloody uprising… Read more »
wpDiscuz