The siphoning of public funds in Hungary

Today I will outline two cases where public money appears to have ended up in the pockets of favored individuals or in Fidesz coffers. The first case involves the Hungarian National Bank and Századvég; the second, the so-called “settlement bond program” devised by Antal Rogán.

It seems that the scandals swirling around the Hungarian National Bank are never-ending. The current scandal is the award of a tender worth 1.8 billion forints to Századvég. The loser was Koping-Tárki Konjunktúrakutató Zrt. The tender specifically stipulated that the purpose of the project was to study “economic recovery” (or konjunktúra in Hungarian) and its components. Koping-Tárki, as its name indicates, specializes in research into this particular aspect of economic activity.

Századvég’s offer was 1.8 billion forints, while Koping-Tárki would have done the job for 1.12 billion. The contract involved a working relationship with the National Bank for three years, which included monitoring world economic trends and their effects on Hungarian economic conditions. Applicants, as part of their tender, had to submit a sample study based on information released between the time the tender was issued and the time they submitted their bids.

Koping-Tárki chose to analyze the effect of lower oil prices on domestic prices of goods, economic growth, the balance of trade, inflation and, in turn, the Hungarian Central Bank’s decisions on interest rates. The maximum number of points that could be awarded for this sample study was 10. The bank’s “experts” decided that Koping-Tárki’s analysis was worth only 1 point and that Századvég’s deserved a 10. Moreover, Koping-Tárki ended up second in all the other categories, so it roundly lost the bid to Századvég.

At this point Koping-Tárki was entitled to take a look at Századvég’s winning study. In a case like this, the company that loses the bid cannot receive a copy of the document but can take notes. Even a quick glance revealed that the competitor’s work had absolutely nothing to do with monetary policy or even the Hungarian economy. It was about three innovations in the practice of medicine that were introduced in two counties of the United Kingdom: Telestroke, electronic record keeping, and tele-medicine. As for sources, Századvég ignored the demand of the bank for up-to-date data. The few sources that appeared in the study were at least two or three years old. Koping-Tárki asked for a review, which the Hungarian National Bank refused.

When the details came to light in April 2015, atlatszo.hu moved into action, asking for a copy of the public tender submitted by Századvég. Again, the National Bank refused, claiming that it enjoyed some special form of protection. The next step was to turn to the office responsible for freedom of information (NAIH). It, in agreement with atlatszo.hu, called on the National Bank to turn over the material. Meanwhile, Transparency International (TI) filed a complaint, and the Court of the Capital City (Fővárosi Törvényszék) ruled in favor of the NGO. At this point the National Bank attached a declaration by the director of Századvég claiming that the surrender of material would hurt the business interests of the National Bank. The court wasn’t impressed. Initially, it simply asked for the study. When its request was denied, it obligated the bank to turn over the material.

György Matolcsy obviously didn’t want that study to see the light of day. He decided to appeal. By that time more than a year had gone by and the affair was still not over. In mid-June 2016 the case moved on to the appellate court, which ruled on July 30 that the Hungarian National Bank must turn over copies of the documents to Transparency International within 15 days. The whole affair has taken a year and a half. This is typical of the incredible amount of effort it takes to get government agencies to release documents that according to law are public.

As we know, Századvég has the reputation of being a money launderer. Mainly through the award of government grants and contracts, billions of forints move from the government budget into the coffers of Fidesz or the pockets of individuals in high positions. But Századvég is not the only conduit for the creation of private wealth from public funds. The so-called “settlement bonds” (letelepedési kötvények) are another egregious example. As I pointed out in an earlier post, well-heeled foreign businessmen can “buy” Hungarian citizenship for about €300,000. They get €300,000 worth of five-year government bonds and pay a handling fee of €40,000-€50,000, not to government agencies but to private companies. I estimated at the time that on each bond packet the intermediary makes about €70,000. Meanwhile the Hungarian government’s only gain is the purchase price of the bonds, minus the €20,000 or so it pays to the private companies. And in selling these bonds the government incurs a debt, which must be paid back with interest. Such a “business deal” is obviously not favorable to the government. The transaction makes sense only if its primary purpose is the enrichment of chosen individuals at the expense of the state.

According to the latest information, the situation with the “settlement bonds” may be even worse than I outlined in March. The program, it turns out, was designed in such a way that those companies that receive the handling fee also act as representatives of the prospective citizens. They are the ones who actually purchase and hold the bonds. This arrangement offers plenty of room for monkey business.

Hungarian settlements bond / Source: Átlátszó

Hungarian settlement bonds / Source: Átlátszó

Some time ago 444.hu was approached by an informant who claimed that there are more bond buyers than bonds purchased. The online paper asked for details from the Államadósság Kezelő Központ (AKK), the office that is involved in matters connected to the national debt. Surprisingly, AKK obliged fairly promptly and released details of the program. During 2013-2014, 2,347 people received permission from the ministry of interior to settle in Hungary as a result of the bond buying program, but AKK sold only 2,213 packets. That is, 134 packets are missing. That is a lot of money because each bond packet costs €250,000, which means the disappearance of 33.5 million euros. Did the friends of Antal Rogán and Árpád Habony, who buy and hold the bonds on behalf of their clients, stiff 134 foreign businessmen? I don’t know, but somebody has a lot of explaining to do.

August 2, 2016
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Member
Excellent article, Éva. OT: Chris Adam reports in Hungarian Free Press that DK’s Mátyás Eörsi has accepted Orbán’s nomination as General Secretary of the Community of Democracies. On the face of it, this certainly sounds like a sell-out. If so, it means Eörsi is just an aimless windbag, like TGM. Another possibility is that DK has a plan to use the General Secretaryship of the Community of Democracies as a platform to subvert the Orban regime. But it’s hard to imagine that Orban — who is not very intelligent, but very suspicious — would not anticipate that. (Another reason it is unlikely is that Eörsi has always been more mincing than decisive.) An important bellwether will be Ferenc Gyrurcsány’s public reaction. If he dissociates from, disavows and condemns Eörsi, then DK is saved. If he minces, DK is lost. (If it’s subversion, then the condemnation itself might be a subterfuge. So I vote for that, rather than the mincing. It would show that DK is capable not only of integrity but of strategy.) In an unrelated matter, Chris Adam also reports a conjecture that the MSzP threat to take the referendum commission to court for invalidating an unbelievable percentage of… Read more »
Ron
Guest

Mátyás Eörsi made a statement on Facebook in Hungarian.

https://www.facebook.com/Mátyás-EÖRSI-54708717890/

Alex Kuli
Guest

Thanks for pointing that out, Ron.
I have read Eörsi’s explanation and I find it entirely unpersuasive.
No matter how you cut the pie, Eörsi is legitimizing the Orbanites’ rule by accepting the omination. In so doing, he is aligning himself with the relative majority of Hungarian voters — the very people he should be persuading to change their misguided ways.
I am disappointed.

Member

Collaboration or Subversion?

“I shall continue to express my opinion.” Not at all convincing, nor reassuring.

It’s not impotent, self-important opining (or whining) that is needed to oust Orbán, whether from Mátyás Eörsi or from Tamás Gáspár Miklós. On the contrary, more of that would suit Orbán and his mobster state just fine.

I’ve not read Gyurcsàny’s official reaction yet. The best would be if he formally ousts Eörsi from DK but there is a secret strategic plan for DK to continue covertly to support Eörsi in subverting the Orbán regime.

To collaborate in any way is to endorse the colossal Orbán abominations Éva describes in her article.

Hence an endorsement from Gyurcsàny would be odious, and would mirror Chris Adam’s suspicions about the rumours of MSzP collaboration.

What worries me, though, is that, either way, this is all so obvious, even to a malign midget like Orbán…

Member

Pannonian Pavane…

Or maybe Orbàn is nominating Eörsi with the dual motive of discreding him and getting him turned down? (That duplicity has a more familiar orbanian odour…)

Member

Today’s ATV interview of Mátyás Eörsi (in Hungarian) was a bit reassuring. He declared (and it sounded true) that he needed the government nomination for this post, but he didn’t ask for it or expect it, nor will he do Orban any favours for it. He still sounds too soft and wishy-washy to me, but Orban wouldn’t have done it if there weren’t a hefty quid pro quo. That’s unlikely to be fealty or favours from Mátyás Eörsi, so more likely it is that Eörsi’s sectretaryship, and perhaps the Community of Democracies itself, are too anodyne and ineffectual to hamper Orban’s depredations in any way, so it just gives him a succès d’estime to use for propaganda purposes, just as he did in hosting the World Jewish Congress or the Holocaust commemorations. Orban’s usual pannonian pavane: creating the appearance of doing something positive, while he is in reality doing exactly the opposite.

e-2016
Guest

Russian and Palestinian plotters are also successful in siphoning funds from worldwide donations to anti-Western terror groups.

http://www.ynetnews.com/articles/0,7340,L-4837539,00.html

dos929
Guest

In a real democracy if corruption occurs (and it does too…) the politicians involved cannot escape the judiciary process and end up in jail. And even in communist China they are prosecuted and if the corruption is at a scale that is happening in Hungary they are executed… Food for thought…

Matt
Guest

Dear Éva,
I would strongly recommend that you take a few seconds to look at the following page: http://london.gov.hu/a-nagykovet
There has not been much publicity around this, although it is an interesting piece of information. Isn’t it?

Jean P.
Guest

Why don´t you just tell what ist is? The language here is English.

Observer
Guest

Matt,

1. This is a gov site, definitely a source of objective and reliable information, to pu tin mildly.
2. What’s interesting there now? I read Hungarian, but don’t see anything.

Observer
Guest

Sorry

” ..definitely NOT the source of objective and reliable information, to put it mildly “

Matt
Guest

Here is the same page in English: http://london.gov.hu/ambassadors-corner
Kristóf Szalay-Bobrovniczky is no more no less than the Hungarian Ambassador in the UK and… a co-owner of Századvég!

Observer
Guest

Matt,

What are you excited about? What we call corruption and nepotism, is policy in Hungary, it is the purpose of the Orban regime.
Let me add some sticks to the fire:

Kristof SzB is not only cashing in by way of Századvég, he is also a buddy of Arpád Habony which suggests Kristof is milking other cows as well.

Kristof’s brother was ambassador to Vi

Kristof’s wife Alexandra started with Fidelitas and except for a year in the Vendor Relations of the Bud Stock Ex her whole career has been along party lines. She is now deputy mayor of Budapest.

Mafia state par excellence.

Guest

These are the goals of the Community for Democracies:

*support democratic transition and consolidation worldwide,
*help in the implementation of principles of democracy and human rights,
*assist in the development and strengthening of democratic institutions,
*defend civil society,
*advance broad-based participation,
*give a voice to those working for democracy.

It beggars belief that a mafia state which is a pathological one can have the wherewithal to carry out these goals. Magyarorszag appears to bend over backwards to represent itself as one of Europe and following democratic traditions. All the while railing hysterically at the ‘other’ while noting it is a ‘sober’ country on the issues affecting itself and Europe. If democracy represents ‘diversity’ in all its facets the country’s approach relative to that is a fail. They play the game well with Europe and cheat. And at the last it has to be evident of the direction of one country when we look at democracies ‘in transition’.

Observer
Guest

Many countries offer examples how they act on corruption, investigate/prosecute or force to resign even the highest level politicians: Romania, Croatia, USA, Czech Republic, Brazil, etc. where sitting and former PMs and presidents fall in disgrace.
In Hungary the orgy of loot and pillage is actually a policy.

While Transparency Int. reports an average corruption occurrence rate of 20% in state procurement contracts, I bet anyone that this rate is close to 100%, including those, otherwise “normal” conditions contracts, which are awarded on the basis of political or personal connections, not merit. There are no gov tenders where the subjective criteria points are less than 40% and recently there was a 60% one.
Not that the objective criteria are properly implemented either.

A substantial part of gov “projects” are designed primarily for siphoning of public funds and have little other utility.

Both cases above mentioned perfectly exemplify the workings of the mafia state, where many accessories to the crime are state institutions.

bimbi
Guest
The government does not know much about making the Hungarian economy grow but, as noted earlier, it sure has a specialty in theft. Rent-to-Buy Rogan and Me-an’-Me-Mates Matolcsy and let us not forget Mr. Lazar who claimed to have driven his government expenses car 2 ½ times round the world in a year and so on. Theft is our business.… This is all bound up with Mr. Orban’s support of Trump and grows out of the view “Me first and screw everyone else”. What is government supposed to do? It should act as custodian for the people, guiding the ‘ship of state’ with wisdom for the benefit of all. But here, Orban and Fidesz think they somehow “own” the country. Everything the state has can be disposed of for the sole benefit of Orban and his cronies, land, state buildings, EU grants and funds. How does Rogan dare to sell Hungarian residences for his own massive benefit? That permission belongs to the people and the state has to be the beneficiary if such sales are to take place. Now? The thick cream off the top goes to the Rogan/Habony thieves. Same crap with Matolcsy. He doesn’t own the money he… Read more »
Jean P.
Guest

“The man is a disgrace to his profession.”

This is expression is far too mild. We are talking about criminal negligence in high office.

Observer
Guest

MAFIA STATE, here it is.

petofi
Guest

Orban’s support for Trump is purely on the basis of orders from the basement brigade…

petofi
Guest

(I’m fond of ‘P’s, too…)

tappanch
Guest

From today’s tiny bits of news:

Police are not willing to investigate loads of corruption cases connected to the ruling party Fidesz.

http://444.hu/2016/08/03/milyen-kreativak-a-magyar-hatosagok-ha-feljelentest-kell-elutasitaniuk

The Hungarian secret services can watch any digital communication since July 17. A July 13 government decree made this legal. They can demand your passwords from the internet providers as well.

http://index.hu/tech/2016/08/03/itt_a_magyar_nagy_testver_torveny_ont_is_megfigyelhetik_a_titkosszolgalatok_a_neten/

tappanch
Guest

Propaganda minister Rogan is also above investigations:

http://index.hu/belfold/2016/08/02/rogan_fougyeszseg_feljelentes_nyomozas/

Referendum against the further fideszization of agricultural land:

The all Fidesz “National Election Bureau” declared almost exactly 20% of the signatures demanding the referendum invalid. (19.998%)

The sheet accepted “valid” had only 6.6 valid signatures on them.

http://nol.hu/belfold/nepszavazas-a-foldrol-ujabb-ervenyes-alairasokat-talaltak-1626251

tappanch
Guest

OLAF, attention !

How many times were the same tramway lines renovated from EU money in the last 5 years? (main boulevard, small boulevard, Bela Bartok street at the Technical university)

Why will the Csepel HEV (suburban railway) be rebuilt as tramway (meaning longer commute for the people of Csepel) ?

tappanch
Guest
tappanch
Guest

Orban as the pig [ace] of bells:

comment image

tappanch
Guest

An ace of spades signed by Saddam himself

comment image

tappanch
Guest

“detainees signed 39 of the 52 cards. Hussein signed “Victor” in red ink on his card, a reference to the guards’ code name for him.”

http://nypost.com/2013/09/22/soldier-selling-iraqs-most-wanted-card-signed-by-saddam-hussein/

Observer
Guest
HUNGARIAN WORLD RECORD in CORRUPTION 90% of the funds were to be siphoned out, according to the evidence. “Instead of the usual 50% only 10% of the awarded EU grant would have remained with a group of social cooperatives network (i.e. instead of half, 90% of the funds would have been stolen along the way), another charge was to be a five million “constitutional expense” payable to Fidesz MP in advance. In this criminal investigation of corruption the transcriptions of several telephone conversations were declassified, and in these the speakers involved in the business seem to refer to Janos Lazar, and his deputy, Nandor Csepreghy. The first victim of the affair was the dismissed Tamás Köpeczi Bócz, State Secretary for EU development policy in the Ministry of Human Resources, and the next may be Roland Mengyi, Fidesz MP. According to the testimonies, he was to be referred to as Lord Voldemort. On the basis of these tapped calls, the weekly “168 hours” presents the eventful account of this attempt to siphon EU.” For details, In Hungarian: http://www.168ora.hu/itthon/otmillios-alkotmanyos-koltseg-elore-147697.html As the Orban mafia state is on the roll, the news of corruption grand and and plain are coming so thick and fast… Read more »
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