It was in 2013 that the Hungarian government introduced a program aimed at boosting investment in government bonds. Like many other countries, they embarked on “selling” Hungarian citizenship to well-heeled foreign businessmen. In the Hungarian scheme, foreigners had to buy €300,000 worth of five-year government bonds. This was a cheap way of becoming a Hungarian citizen within six months of the bond purchase and of thereby gaining free access to all the EU member states. In other countries that “sell” citizenship, the bar is set higher. In the United States, for example, in order to qualify for a EB-5 visa, a foreigner must invest $500,000 in a project or business that will create at least ten new jobs in a high unemployment or rural area.
Yes, Hungarian citizenship is in fact dirt cheap, even when a handling fee of €40,000-50,000 is added. Who profits from this program? Not the government, as I will show below. The beneficiaries are the foreigners who gets the citizenship and, more worrisomely, private companies that handle the transactions. The task of granting citizenship was handed over to intermediaries that make a fabulous profit. Not only do they receive a handling fee, but the government sells them these special government bonds worth €300,000 for only €271,000. Thus on each bond the intermediary makes about €70,000. According to Magyar Nemzet, between 2013 and 2015 3,358 such settlement bonds were sold.
The Hungarian government entrusted the sale of these bonds to six companies, each assigned a geographically defined area. The luckiest of all is the Hungary State Special Debt Fund (HSSDF), which is responsible for applications from Russia and China. In last three years it sold almost 3,000 settlement bonds for a very handsome profit of 2 billion euros. VolDan Investments (former Soviet republics) sold 233, Arton Capital (Islamic countries) 176, Discus Holdings (Azerbaijan, Kazakhstan, Thailand, Indonesia) 45, Euro-Asia Investment (Singapore) 50, and Innozone Holdings (India) 22. All of these companies are registered offshore–in the Cayman Islands, Liechtenstein, Cyprus, Singapore, and Malta.
It doesn’t matter how you look at this arrangement, it is a bum deal for the government. Instead of encouraging direct investment of the sort the United States introduced about 30 years ago, in the Hungarian scheme the future citizen merely lends some money for five years which will have to be paid back with interest. It is almost as if the whole scheme was designed to siphon off public money and pass it on to select individuals. After all, the government gives a 10% discount on the bonds to the intermediaries, who also receive the very steep handling fee. The loss to the Hungarian treasury (assuming the government processed the applications) is about €70,000, or 23% on each bond. The explanation at the time the scheme was introduced was that the Hungarian government needs local people who know the lay of the land.
Although the issuance of settlement bonds is certainly not a new story, it came to light recently that Viktor Orbán’s mystery advisor, Árpád Habony, may be connected to the three most profitable companies involved with the government bond business: HSSDF, Arton Capital, and VolDan Investments. The owners of the first two are known, but we know practically nothing about VolDan. According to Heti Válasz, the owners of VolDan are Shabtai Micheli, a Georgian-Israeli businessman, and Michael Gagel, owner of a chain of bakeries located at Budapest metro stations. Heti Válasz discovered that these two people have close connections to Andy Vajna, Árpád Habony, and their families. It also looks as if Habony has something to do with Arton Capital through his lawyer. Finally, HSSDF’s Chinese management back in 2013 wanted to acquire the coveted TV2 television channel from the German owner with the assistance of the influential advisor to Viktor Orbán, Árpád Habony.
Of course, Heti Válasz is grasping at straws. Hungary is a small country, and it is quite possible that businessmen with ties to Fidesz and Viktor Orbán are in close contact with one another. But the question of how Habony earns a living has been an intriguing puzzle for the Hungarian media.
We know very little about Habony’s background, and the little that is available is not very believable. Here is one example. According to the bits and pieces of biographical fragments about him, his grandfather was a high-ranking officer in Miklós Horthy’s army. But this fact couldn’t possibly explain why his parents in 1982 wanted to take him out of school after eight-grades to become an auto mechanic. By then the days were long gone when the grandson of a high-ranking officer couldn’t attend gymnasium or receive a university degree. The story doesn’t ring right. At the end he attended a high school, specializing in fine arts, at night. By the end of the first Orbán government he worked in a museum restoring works of art. It is not known how, but after the municipal elections of 2002 he became a communication and campaign strategist for Fidesz. He was the one who came up with the 2006 Fidesz slogan that “We live worse” than in 2002. Since it was a blatant lie, the whole campaign became an object of scorn. And yet, after the lost election, he became the “personal strategic chief advisor” of Viktor Orbán.
Árpád Habony is known for his extravagant life style despite no sign of any legitimate income. He has a small business called “Color Inks,” which in 2011 and 2012 made no profit and in 2013 actually lost money. Yet in 2015 he established a political advisory company, Danube Business Consulting Ltd. in London, along with Arthur Finkelstein, the strategic advisor to such Republicans as Richard Nixon and Ronald Reagan. The man has money, but no one knows from where. Or, to put it differently, most people are convinced that his money comes from the Hungarian government through some secret channel which has yet to be discovered. It is possible that Habony is one of the beneficiaries of the settlement bonds scheme. He may have been instrumental in the final selection of the lucky companies that sell bonds for Hungarian citizenship, companies that may in turn return a portion of their profits to their facilitators. So far this is mere speculation.