Medián came out with a new poll. This time the company wanted to find out how much Hungarians know about the scandal that followed the collapse of several brokerage firms and what they think about it. One of Medián’s conclusions is that people see a connection between the failures of the brokerage firms and the unpopularity of the government. More failures will only increase people’s distrust of the government. The majority of those questioned, despite the government’s best efforts, think that Fidesz bears a greater responsibility for the lack of proper oversight of these financial institutions than the earlier administrations. It is becoming increasingly difficult to blame the socialists for events that happen after five years of Fidesz governance.
One finding of the poll, which may have important repercussions for the future of the Orbán government, is that the Quaestor affair made the greatest impression on those surveyed. Over 70% of the people asked could name the firm without any help, and another 17% recognized the name from a list of brokerage firms. The other two companies, Buda-Cash and Hungária, are considerably less well known. And this is bad news for the government, because every day, it seems, more details about the close ties between the government and Csaba Tarsoly, CEO of Quaestor, are revealed.
Two recent discoveries further support the suspicion that the Quaestor-Orbán government connection was very close indeed. One of the latest revelations is that the Nemzeti Befektetési Ügynökség, known as HIPA (Hungarian Investment Promotion Agency), which is a government office attached to the ministry of foreign ministry and trade, worked hard to find investors for a Quaestor project called Dunacity. As it turned out, the idea of a “city within the city” was first floated in 2006. It was supposed to be an entirely new building complex in the Soroksár area of Budapest, close to the present National Theater and the Palace of Arts, but not surprisingly, given the 2008 financial crisis, nothing came of it. It seems, however, that in the fall of 2014 HIPA began promoting the idea of Dunacity and published a pamphlet trying to recruit investors for the one billion euro project, along with some other desirable investments. In fact, 444.hu learned that shortly before the March 9 collapse of Quaestor, Levente Magyar, undersecretary in charge of foreign trade, escorted Arab businessmen to the planned future site of Dunacity. The English-language brochure spoke in glowing terms about the “new type of living, where the harmony of apartments, workplace, commerce, entertainment and relaxation is provided.” The government promised a new bridge across the Danube, a free port, and a new metro line. But what was perhaps most telling was that investors were guaranteed a 9-10% return.
The second revelation might be even more damaging, at least indirectly, to the Orbán government. Today János Lázár, who holds lengthy press conferences every Thursday, released the list of 24 municipalities that had purchased Quaestor bonds, which includes the city of Győr, whose football team Csaba Tarsoly owned. Győr’s loss–1,004,505,299 forints–doesn’t top the list. Százhalombatta lost 3,591,830,000 forints. But then why is Győr in the limelight? The reason is that the city of Győr wired this amount to Quaestor’s account on January 16, a day after the National Bank of Switzerland allowed the Swiss franc to strengthen some 20% against the euro. This unexpected currency decision hit large banks and brokerages hard, since most of them were net short the Swiss franc. For instance, Citigroup lost between $150 and $200 million, Interactive Brokers $120 million, and Deutsche Bank $150 million. The Swiss decision also had a negative impact on Hungarian banks, forex dealers, and brokerages. We know that Buda-Cash lost about $22-29 million. Most likely Quaestor was in the same predicament.
It was on April 3 that 444.hu first reported on this “strange coincidence.” Although one of the Győr city officials insisted that the only reason for investing the money with Quaestor was the attractively high yield, the reporter was not convinced. Something was wrong. If Győr purchased government bonds, their yield wouldn’t fluctuate from broker to broker. Therefore, the reporter justifiably suspected that the sudden decision to place that large sum of money with Quaestor, whose owner has invested billions in Győr, was not a coincidence. Moreover, 444.hu checked the city council minutes, where there was no sign of any approval of the money transfer. It was, the reporter concluded, most likely the decision of Győr’s mayor, Zsolt Borkai, a former Olympic champion and currently the president of the Hungarian National Olympic Committee. Let me add that Borkai is a favorite of Viktor Orbán. The prime minister even changed a law to make sure that Borkai could become a member of parliament in 2010. Borkai, before becoming a politician, was the principal of a military school with the rank of colonel. And there was a law on the books that said that a policeman or soldier can become a candidate for or serve as a member of parliament only five years after his departure from the military or the police force. The opposition jokingly called the legislation “Lex Borkai,” something Borkai was actually proud of.
Győr promptly denied the charge, claiming that they made the decision to transfer the money to Quaestor earlier and signed the papers already on January 13. Since no one had seen the contract that the city signed, suspicion lingered on.
Today there was another twist in the story. János Lázár, during his press conference, talked about municipalities purchasing Quaestor and not government bonds. He specifically pointed to the city of Győr as “one of those municipalities that invested money in unsecured Quaestor bonds.” Borkai, whose nerves must be frayed by now, snapped back. Győr bought government bonds, and anyone who says otherwise is a liar. It is his duty, he said, “to protest in the name of all 130,000 inhabitants of the city.” This time Borkai arrived with the original copy of the January 13 contract and a document that allegedly proved that the city had purchased government bonds.
So, who is telling the truth? Is it possible that Borkai thought he was buying government bonds but that Quaestor, hard pressed by the events of January 15, used the money to fill some holes in its own portfolio? Yes, it is possible.
The constant barrage of Quaestor stories is further damaging the waning reputation of the Orbán government. And the clashes between prominent members of the Fidesz hierarchy, like Borkai and Lázár, don’t help the cause either. One is just waiting for the next bomb to explode.