The Quaestor scandal

I have been remiss in the last few weeks in not following up on the collapse of a number of Hungarian financial institutions. I did write about the bankruptcy of the Buda-Cash Group, which owned several credit unions that were shuttered as well as a brokerage firm. But I said nothing about Hungaria Értékpapír (Hungaria Securities), which declared bankruptcy soon after Buda-Cash’s announcement. And then on March 9 came the collapse of the Quaestor Group. In the case of Buda-Cash, Fidesz politicians and officials of the Hungarian National Bank claimed that its problems started at least fifteen years ago and therefore the socialists were responsible for its financial demise. The same trick couldn’t be used to explain away Quaestor’s problems because the CEO of the Quaestor Group, Csaba Tarsoly, had for years worked closely with the Fidesz government and people close to Viktor Orbán himself. Tarsoly also had a role to play in the government’s “eastern opening” and all the corruption cases that surfaced there.

I’m not even going to try to map out the complicated business arrangement that will most likely enable Tarsoly to save his skin and keep the money he stole from his unsuspecting customers. After all, the Quaestor Group had 68 affiliated companies, among which large sums of money changed hands.

At the center of the current controversy is the sale of billions of forints worth of Quaestor bonds. Hrurira, one of the Quaestor Group companies, handled the issuance–60 billion of bonds that were approved by the National Bank and 150 billion that were “fictive.” Quaestor Értékpapír Zrt. sold the bonds to unsuspecting clients. The money that came from the sale of the bonds was transferred to Quaestor Pénzügyi Tanácsadó/Quaestor Financial Consulting, the parent company, in the form of a loan. The company that is now under scrutiny, Quaestor Hrurira, has no assets. It could repay the customers that bought bonds from Quaestor Értékpapír Zrt. only if it could collect money from the Quaestor Pénzügyi Tanácsadó, from which Csaba Tarsoly departed. On March 16 he named a new CEO–Béla Orgován, a penniless, unemployed man with a prison record. Déjà vu all over again. Josip Tot, Kaya Ibrahim, and the halcyon days of Fidesz.

There is a strong indication that the Hungarian government has been lending a helping hand to Tarsoly so he can keep at least part of his ill-gotten money. While business associates of Buda-Cash and Hungaria are in custody, Csaba Tarsoly is free and, according to neighbors, is in the process of packing. Over the last few days we kept hearing that he will be arrested soon, but he hasn’t even been questioned by the police.

And who is Béla Orgován? 444.hu found the man who will have to face the music when Quaestor’s customers demand their nonexistent money. And, according to some sources, a lot is at stake: 150 billion forints, presumably the amount earned from the sale of the “fictive” bonds, disappeared on Csaba Tarsoly’s watch. Orgován is a 38-year-old unemployed man who lives in the village of Tápióság in Pest county. He apparently has been in jail several times, mostly for robbery but once for attempted murder. His children are already grown, and he and his wife have several grandchildren. I would say he is a perfect person for the job. In the last twenty some years there have been several down-and-out, often homeless people who for a few thousand forints were tapped to serve as CEOs of bankrupt companies.

The Hungarian government’s less than rigorous pursuit of the Quaestor case and its generosity toward Tarsoly most likely has something to do with the fact that the government and Quaestor had some joint business deals. As we just found out yesterday, the Hungarian National Trading House that functions under the ministry of foreign affairs and trade had an account at Quaestor. (In Hungary, where hometowns often matter, it may not have been irrelevant that both Foreign Minister Péter Szijjártó and Csaba Tarsoly are from Győr. Moreover, until March 9, 2015, Tarsoly was the owner of the Győr ETO FC team, which is a good recommendation in today’s Hungary.) For the Trading House to have money invested with Quaestor or any other brokerage firm is against the law. All state money must be kept in treasury bonds. The amount of money involved is unclear. Some people talk about 25 billion forints. According to Tamás Katona, former undersecretary of the ministry of finance, for such a large amount of money to have landed at Quaestor must have had the blessing of Szijjártó himself.

Csaba Tarsoly and Péter Szijjártó at the opening of the Moscow Trading House in 2013

Csaba Tarsoly and Péter Szijjártó at the opening of the Moscow Trading House in 2013

So, we have the illegal deposit of a large amount of government money at a private firm, which is bad enough, but what follows is truly outrageous. A day before the collapse of the firm an official of the Trading House decided to take out its money, thereby saving the taxpayers’ money. What a coincidence! What fantastic financial acumen! It will be hard to deny the likelihood of insider information.

Apparently, the Trading House was not the only one that had large amounts of money at Tarsoly’s firm. There were other state companies as well, and it seems that they were all affiliated with Szijjártó’s ministry. We don’t know whether they suffered losses or whether Tarsoly warned his friend from Győr ahead of time, thereby protecting the accounts of such institutions as the Hungarian Export-Import Bank and Hungarian Export Credit Insurance.

Naturally, the ministry spokesman denies any wrongdoing. First of all, he claims that these state companies had a right to place their capital with an outside firm. The spokesman also claims that they chose Quaestor because it was the only firm that provided its services without any charge whatsoever. Well, yes, I scratch your back, you scratch mine. We all know how it goes. And if there’s a problem, Quaestor may offer a lifeboat to the government while individual bondholders are left to sink.

Sort by:   newest | oldest | most voted
petofi
Guest

It is symptomatic of the Hungarian Way, that there can be no judicial action which would, or should, give a binding judgement for equal treatment of all bondholders, be they individuals or an office of the government.

Hajra Magyarok!

Are we PROUD yet, folks?

Guest

Picture analysis. To the detriment of their credibility Hungarian politicians always dress like stockbrokers.

Lokk
Guest

It’s ridiculous that weeks (!) after the bankruptcy of, publication of the looting, fraud and stealing at Questor, the mastermind, main shareholder, CEO has not even been questioned (!) by the police/prosecution let alone put into pretrial detention (in order to prevent him from eliminating evidence and complicating the investigation, which is exactly what he did).

I would like to know also who had the idea to sign up Béla Orgovany from a small village to be a front (Strohmann) at Questor. It’s unlikely that Tarsoly knew him before transferring his positions to Mr. Orgovany.

We have to assume that Tarsoly knows people from the security branches who can select somebody with prior convictions (probably already operating as a petty police informant), who will not talk to the media or out his instructors. Essentially either the prosecution or the secret services helped Tarsoly.

Tarsoly knows so much about Szijjárto, Szilard Kiss, Russian deals that it’s almost inconceivable that he is going to be convicted.

We talk about tens of billions which he stole and gave to fidesznik (secret service, prosecution) causes, that’s a big enough insurance policy in Hungary.

Bitstream Fractalized
Guest

@Lokk: yes it is ridiculous, but is also not untypical for white collar crime. The first trial of the Enrol scandal in 2001 took place five years later in 2006.

Galiba
Guest

But in the Enron case all the documents were saved and protected. Here essentially Tarsoly has been free to make any investigation difficult (impossible) and make evidence disappear, temper with the witnesses, transfer his assets safely.

Moreover the Hungarian prison terms – unlike the American ones – are so low even in such giant gases of fraud that the longer the process goes on (investigation, trial, retrial) that by the end the court cannot even issue high (ie. 5-6-year-long) sentences, but at most suspended ones.

What’s been happening is that high-politics gave some weeks to Tarsoly to protect himself so even if there’s gonna be a trial, there will be no usable, reliable evidence, witnesses will be prepared etc.

Bitstream Fractalized
Guest

How do you know, what has been saved and what has been hidden. Nobody here knows it.

petofi
Guest

Hungary is setting ever new records for a country’s abject regression–politically, socially, psychologically. The other EUs must be holding their heads: it’s a toss-up which country they’d like to boot out of the EU first–Hungary or Greece…

But Hungarians need fear not–the open arms of the generous, orthodox, Russia awaits them. No doubt, the Catholic hierarchy will make the necessary adjustments…And, as the cavalcade marches on, the Hungarian government will up the alcohol allotment and reduce costs another magnanimous 3 %…

Gold
Guest

By the way, from the pictures about Szilard Kiss, the arrested “business partner” of Questor it seemed to me that he was gay and his Russian lady friend/partner was only assigned to him in exchange for allowing him to operate in Russia. Just a thought.

Guest

A bit OT – but not too much:
Strohmann was obviously loaned from German/Austrian – I just found out that it’s an old expression. The German wiki says that already in 1750 the French used the expression “homme de paille”!
http://de.wikipedia.org/wiki/Strohmann

Webber
Guest

Wolfi – you are right, and of course the spelling some are using above is German. In Hungarian it’s spelled stróman. I don’t know why they’re using German spelling on a blog about Hungary written in English, but it doesn’t much matter.

Member

We are talking about some money here but visa is an European/ Schengen issue. The story cannot/ should not end here: http://nol.hu/belfold/nagyon-gyorsan-kimentett-kormanyzati-kotvenyek-1524073

pilar
Guest

Laszlo Szily of cink.hu (owned by gawker.com) used to be a privatization/business beat reported back in the 1990’s so at least he understand the situation clearly.

This is a clear account of the main scandalous issues.

And nothing will happen.

http://cink.hu/en-meg-soha-nem-lattam-ekkora-benazast-orban-viktortol-1693549235

Webber
Guest

So, Quaestor’s bankruptcy may have been caused by government through its sudden withdrawal of billions (a summary of the above article). Brings to mind Buda-Cash and the banks it owned that the government wanted to nationalize – well, they’ve been nationalized now. I wonder if the government had any funds in Buda-Cash? If it did, I wonder when the government withdrew those funds?
“a konkrét csődöt ennek fényében maga a kormány is okozhatta azzal, hogy hirtelen milliárdokat vont ki – a hosszabb távon amúgy fenntarthatatlan – rendszerből.”

Fehérfekete
Guest
Questor (all of its entities and as a group) – in effect – was a giant Ponzi-scheme. The minimal assets, the subsidiaries and sister-entities are worth effectively nothing and in any case their assets, such as the ETO Stadium, are mortgaged to banks which have naturally priority in the case of a liquidation procedure. These companies only served the purpose of misleading people, making people believe that Questor was a real business empire when in fact it was a glorified pyramid scheme. So it could have collapsed at any time. The money the government placed at Questor only prolonged the length of the scheme and yes probably it was one of the main causes of its collapse when it wanted its assets back. Most likely in order to pay back the government Questor’s officials — who by that time must have been acting in the interest of the creditors — had to loot (embezzle) assets held under the names of other clients who were slower to react and who assumed that while Questor Hruria (which issued the bonds) was bankrupt, Questor Broker was compliant and had its client assets. These transactions with the government must be voided by the liquidator… Read more »
Webber
Guest

It is now clear from statements from both Orbán and Szijjártó that the government knew that Quaestor was going bankrupt before it withdrew its funds. It’s possible the governement intentionally hurried the bankruptcy along. When the government withdrew its funds, it also got the interest that accrued to those funds – quite a nice interest rate it was, too. The subsequent bankruptcy demolished small investors who not only didn’t get the interest they were promised, but lost their capital.
The government is guilty of insider trading, quite probably of assisting in the Ponzi scheme, and then hurrying the bankruptcy along.
I’ll suggest the following again in a more open way: Is it not possible that the government/governing party played a similar trick with Buda-Cash? If it did, I find it a very odd coincidence that it was precisely the banks owned by Buda-Cash that the government tried (unsuccessfully) to nationalize not long ago. It is no surprise that Buda-Cash people are in prison, while Quaestor people are still free.

Member

Isn’t funny how Orban very much started a riot in 2006 because of Oszod, where Gyurcsany honestly called on the government to be honest and come clean from now on versus “do not listen to what I say”. We have our spills here always denting what Gyurcsany said, and I wonder where are they now?
Where is the crowd that demanded Gyurcsany to resign? Where is the crowd to demand Orban to resign for insider trading, for ordering withdrawal of funds that directly contributed to the collapse of a bank, and the loss of huge amounts of money for every day citizens.

spectator
Guest

But I hope that you know that the crowd did’t started the uprising all by themshelves, do you?
They have had “a little help” from their friends – in that case from Orbán and his henchmen – “and nothing else mattered” – just to keep the style.

Then everything was carefully crafted and manpulated to fullfill the task – worked wonderfully, mind you – while now we have ‘some’ opposition with no balls and no communication skills worth to mention – so, what are we expecting to happen, for Gods sake?

Think about it: today I heard when Orbán declared – as an answer to how could the Foreign Ministry get rid of their assets invested by Questor in time – “Yes, I ordered it, because…” – and here came the explanation.
If it would ever happened in an “Öszöd” situation the broadcast certainly would have ended by the ” Yes, I ordered it…” point, and the populace would have left there wondering for awhile, and organized to act upon it.

Treat a pig as a genleman usually a grave mistake.
As we’ve seen it happens.

Member

Yes. “Orban very much started a riot in 2006 ” I hoped that everyone understand that the same crowd is still behind Orban. It was never about justice, it was about who Orban could paid off or deceive. It is note a coincidence that members of that crowd ended up on Fidesz’ payroll, or ended up “protecting” Fidesz from a sit down strike crowd. One of their leader is a murderer, but did not stop Fidesz to hire him, just like it does not stop Fidesz to hire anyone with a criminal background.

Tetthely
Guest

That’s Penal Code section 420, ie. bid rigging in public procurement matters punishable by up to 5 years of imprisonment. Of course, nothing will happen.

http://index.hu/belfold/2015/03/25/kartellgyanu_miatt_beintett_az_eu_az_m4-es_110_milliardos_szakaszara/

Guest

Don’t know if this has been posted before – portfolio has a very scathing report on Quaestor:
http://www.portfolio.hu/en/equity/hungary_quaestor_has_been_committing_fraud_since_1998_paper.29357.html
The (in)famous mayor of Felcsút (Orbán’s buddy) is also implicated – the whole story is unbelievable!

Guest

And here are even more details – horrible!
http://budapestsentinel.com/articles/hungarian-consulate-in-moscow-supplied-eu-visas-to-prostitutes-criminals/
500 000 Schengen visas to Russians and …

trackback

[…] effect” at other similar brokerages in Hungary. (The Hungarian Spectrum published an excellent English-language overview of how Questor sold billions of forints worth of fictitious […]

wpDiscuz