Tag Archives: Buda-Cash Group

The chairman of the Hungarian central bank discovered a U.S. plot to topple the Orbán government

The independent media outlets have a jolly good time every time György Matolcsy, the chairman of Hungary’s Central Bank, opens his mouth. Well, he spoke again today. By now even usually polite politicians have gotten to the point that they openly say that Matolcsy is not quite of sound mind and suggest that the chairman of the National Bank seek medical help.

So what happened to prompt such a response? The bank chairman delivered his report to parliament on the performance of the Hungarian National Bank in the last two years. As expected, he said that the institution under his direction had performed superbly. Under his excellent stewardship the bank’s monetary strategy added at least 1.5 percentage points to Hungary’s already respectable economic growth.

Not too many members of parliament were interested in Matolcsy’s self-praise. Only four or five MPs, just those who had to attend, were sitting in the huge chamber. I must say that those who were absent missed a great performance and a by and large incoherent speech about “a very grave shadow, a very dark shadow, a deep grey shadow” that darkened the otherwise sparklingly sunny Hungarian sky. This shadow was a treacherous ally’s attempt to topple the Orbán government with the help—you won’t believe it—of Hungary’s National Bank. But thanks to Matolcsy’s vigilance, the coup was averted.

I believe that for readers to truly appreciate Matolcsy’s muddled, rambling speech I must translate the relevant passages:

Here we should stop for a minute because there was a shadow on the year 2015, right at the beginning, in the first four months. That shadow had been visible already from August 2014 on. In 2015 one brokerage firm after another went belly up. First it was the deceitful Buda-Cash, then the deceitful Hungária Insurance Company, and finally the even more deceitful Quaestor failed; it failed because the central bank with its new methods of investigation found all the tricks this company had used in the last 10-15 years.

However, this shadow was actually good tidings. It was a good piece of news, something the whole country can be happy about, because we cleansed the Hungarian financial system by removing these robber barons. . . . But this good news was overshadowed by the fact that a large country which is a NATO ally via its embassy in Budapest began activities aimed at toppling the government and the central bank in the fall of 2014. . . . The central bank naturally would have found the deceitful brokerage firms, but it mattered when we found them: in January, February, and March. Why did we find them in January, February, and March?

Because some people wanted to use the Hungarian National Bank to create a bank panic in Hungary in April. And this bank panic actually occurred. It lasted for four hours in four different cities. We could say that this isn’t much. But it was shocking that some people, our allies and friends, wanted to use the Hungarian National Bank to topple the government by methods using the military and intelligence services.

This is a very grave shadow, a very dark shadow, a deep grey shadow. It has no different shades: it is just dark.

The few people in the chamber were stunned. It was immediately clear to everybody that Matolcsy was talking about the United States.

This muddle is full of unanswered questions. In what way did the United States want to influence either the brokerage firms or the central bank? Why was the so-called coup timed for April? How did Matolcsy manage to foil the Americans’ plans?

Source: 444.hu

The opposition politicians who had gathered to engage in the usual parliamentary debate after such a report were stunned. They were simply not prepared for such astonishing nonsense and concentrated instead on refuting the glowing report presented to them by the chairman of the central bank. János Volner of Jobbik pointed out that the bank did nothing until Quaestor actually went under although it had been known ever since April 2010 that Quaestor was misleading its customers. LMP’s Erzsébet Schmuck also questioned the success story reported by Matolcsy and commented on the unorthodox way the central bank operates nowadays. It was only Attila Mesterházy who had recovered enough from the shock to question Matolcsy’s accusations against the United States. He even managed to inquire whether the bank chairman had reported his knowledge of a foreign power’s meddling in Hungary’s internal affairs to the competent authorities. He called on the appropriate politicians to convene the parliamentary committee on national security to ask the Hungarian intelligence services to clarify the situation.

Well, I have a few questions of my own. My very first one would be whether Matolcsy shared the information he received about this alleged American plot with Viktor Orbán. I suspect he did and that, for one reason or another, Orbán decided that the so-called revelation was useful at this time. I wouldn’t be surprised if Orbán, banking on Donald Trump’s extremely low opinion of his predecessor’s “democracy export,” thinks that this kind of news, coming from the chairman of the Hungarian National Bank, will float in Donald Trump’s Washington.

The U.S. Embassy rarely gets engaged in arguments with the Hungarian government, but Matolcsy’s accusation was too much even for the normally calm American diplomats in Budapest. Both Népszava and Index wanted to know the U.S. reaction to Matolcsy’s garbled nonsense. The Embassy spokesman, Richard Damstra, released the following statement: “Hungary and the United States are partners and NATO allies. The United States didn’t attempt to overthrow the Hungarian government either in 2014 or at any other time and we can’t find it credible that any other NATO member state would attempt such a move.” Perhaps this will convince the Hungarian government that American diplomacy, at least for the time being, hasn’t changed all that much and that even the Trump State Department, such as it is, won’t believe that the Obama administration was planning to stage a coup in Hungary.

February 23, 2017

A crime in search of a more coherent cover-up

Today being Friday, Prime Minister Viktor Orbán gave another interview on Magyar Rádió’s Kossuth channel. Naturally, the Quaestor scandal was the first topic to be discussed. After a close reading of the text, I decided that it was worth spending a post on how the story line of this whole sordid affair has been changing from day to day.

Last night I watched an interview with László Kéri, a political science professor who has known Viktor Orbán and his friends ever since their college days. He expressed his total disgust that “in three weeks [Viktor Orbán] could only come up with such an infantile, obvious, and slapdash story.” And that interview took place before yet another version of the government’s involvement with Quaestor was presented today.

So, let me try to summarize what kinds of stories were fed to the unsuspecting public in the last two days. You may recall that yesterday morning Viktor Orbán admitted his personal involvement. He was the one who instructed all ministries at one of the cabinet meetings to check whether they had any assets at certain brokerage firms and, if yes, to withdraw them immediately. He didn’t mention the date of the cabinet meeting, but journalists suspected that March 4th was the most likely date, which was indirectly confirmed by János Lázár, who at a press conference yesterday talked about Orbán’s instruction “only at the beginning of March.” But by today the story changed, most likely because the early March date was too close to the collapse of Quaestor and lent credence to the charge of insider trading.

András Giró-Szász and János Lázár at yesterday's press conference

András Giró-Szász and János Lázár at yesterday’s press conference

Therefore, in his interview this morning, again without mentioning an exact date, Orbán said that his decision to withdraw government monies from brokerage firms “was made immediately after the collapse of Buda-Cash, at the time when there was no sign of any other bankruptcies” and not in early March, as János Lázár claimed only yesterday.

At this point, the reporter asked whether it was at a cabinet meeting that “this instruction was uttered,” and more importantly, whether minutes of the meeting are available. The answer to this question was curious. “There must be [biztosan]. We took a look at the situation after the bankruptcy of Buda-Cash and decided that I will call together the leaders of the municipalities, some 60 of them, to the parliament for a meeting. At that [cabinet] meeting we looked at the situation and decided that we couldn’t take such a risk.”

My problems begin with the very first word which, in my opinion, in this context does not carry the meaning of absolute certainty, although the literal English equivalent of “biztosan” is “sure, surely.” I believe that my rendition as “there must be” is more accurate. An unequivocally positive answer in Hungarian would be something like “persze” (of course), or “természeten” (naturally). So, in my interpretation Orbán did not want to give the impression that he could actually come up with a transcript of what took place at this cabinet meeting.

The sentences that I just quoted do not support Viktor Orbán’s assertion that he explicitly instructed the ministers to withdraw government assets from questionable brokerage firms. If you read the text carefully, the only thing that he claims happened at that cabinet meeting was a discussion of the problems of 68 municipalities that kept their assets in one of the four small banks belonging to the Buda-Cash Group. If there is a transcript at all, which I doubt, I suspect one would find a discussion of these municipalities’ plight and absolutely no instructions concerning government assets at Quaestor.

But that was not the only lie that Orbán told in this interview about the Quaestor case. A second concerned the nature of the assets in which the ministry of foreign affairs and trade invested 3.5 billion forints. Again, a word-for-word translation is necessary. “As things stand now, what I know now is that we are talking about government bonds, so it is money that comes from the budget. These state institutions kept their money in government bonds which they purchased from the brokerage firms. So, if I understand it correctly, they didn’t gamble with the money of the taxpayers. They put it into secure paper, but these bonds were at the wrong place.” This story is most likely the brainchild of the last 24 hours because the first time we heard about secure government bonds was at János Lázár’s press conference yesterday afternoon. But then how it is possible that Quaestor didn’t simply return the secure government bonds worth 3.5 billion forints but decided instead to send the 3.5 billion in cash? A reporter actually asked Lázár about the anomaly, but Lázár’s only answer was that the ministry might press charges against the brokerage firm and that this just shows that a bunch of crooks ran Quaestor.

And this was not the end of the lies Viktor Orbán managed to put together for this Friday. The third one concerned a letter that Csaba Tarsoly, CEO of Quaestor, sent to Viktor Orbán. The first story was that Tarsoly’s letter was sent to Péter Szijjártó, Tarsoly’s buddy, with a request for help. He asked Szijjártó to pass the letter on to Orbán. According to Lázár, the letter in which Tarsoly announced the impending bankruptcy of Quaestor reached Orbán “at the beginning of March.” That date sounds plausible because, according to earlier information, it was on March 5th that Péter Szijjártó decided to withdraw the ministry’s money from the firm. But that date is terribly inconvenient for Orbán because it would indicate that he instructed Szijjártó to withdraw the ministry’s assets based on insider information. That must be avoided. So, the letter got postdated to March 9th, the day of Quaestor’s official bankruptcy announcement. Viktor Orbán learned about Tarsoly’s problems on the same day that the Hungarian National Bank was informed of the firm’s collapse.

Today we at last found out that the cabinet meeting at which Orbán allegedly warned the ministers of the impending doom took place on February 25, a day after the collapse of Buda-Cash. But, if this story is true, Szijjártó’s ministry was in no hurry to save the taxpayers’ money. Szijjártó waited nine solid days before he allegedly followed the prime minister’s instructions and demanded a return of their billions. Something doesn’t add up here. But then we know that most crime novelists write several drafts before all the pieces fall into place. Eventually the Orbán government may craft a coherent story.

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.

What’s happening at the Buda-Cash Group? No one knows

On the evening of February 22, an entire police squad arrived at the headquarters of the Buda-Cash Group, a financial institution established in 1995. Despite its unfortunate name, it is not a payday lender. Among other things, Buda-Cash (BC) owns a network of eleven brokerage firms with 200 employees and about 20,000 customers and engages in financial advising and portfolio management. It also owns four small banks that formerly functioned as credit unions and that managed to remain independent at the time other credit unions were nationalized in 2013-2014.

The following day, February 23, László Windisch, one of the deputies of György Matolcsy, head of Hungary’s central bank (Magyar Nemzeti Bank), described in dramatic terms what he considers to be the greatest financial scandal in Hungary. The National Bank suspects that over the last fifteen years the top management of BC siphoned off as much as 100 billion forints of its customers’ money.

The National Bank is new to the business of supervision. Until about a year and a half ago a separate governmental body, Pénzügyi Szervezetek Állami Felügyelete (PSZÁF), supervised the financial sector. The last time there was a thorough inspection of BC was in May 2010, when some small irregularities were discovered but nothing substantial. By that time, PSZÁF had a Fidesz-appointed chairman, Károly Szász.

From day one people who know something about the world of finance in general and Hungarian finance in particular had their doubts about some of the details of the case. First of all, it soon became evident that the Hungarian National Bank, into which PSZÁF was incorporated, has not yet done any investigation. The police were gathering documents even as Windisch’s press conference was in progress. The second fact that bothered financial experts was the size of the alleged loss, as much as 100 billion forints. The sum total of securities currently held in Hungary is only 250 billion forints. To steal almost half of this amount without anyone realizing it is hard to imagine. Moreover, there were in Windisch’s announcement several indications that the Hungarian National Bank knows very little about the whole case. He talked about a “suspicion of possible wrong doing.” And when he referred to the size of the loss, he cautiously noted that “it may even be 100 billion.” Clearly, he was groping in the dark.


The following day came a new announcement. All four small banks owned by the Buda-Cash Group had to be closed. The response to this announcement was understandable panic. After all, the four banks have roughly 120,000 customers, among them about 80 municipalities which now can’t even pay their employees. Eventually, the National Bank decided to reopen some of these banks but limited withdrawals to 60,000 forints. Well, the municipalities won’t be able to do much with that amount of money.

Why were these banks closed? One theory is that the government through the Hungarian National Bank wanted to punish BC for managing to save its four credit unions from nationalization. Those holding this view are convinced that the four banks are in fact in good financial shape. They claim that in the last few months the Hungarian National Bank checked one of these banks at least six times and found everything to be in good order. Others are not so sure. They believe that the banks are in trouble and should be closed after their customers are fully compensated, as guaranteed by the bank law. And since the fund (Országos Betétbiztosítási Alap = OBA) that is supposed to make all depositors whole is financially strapped because of an earlier bank failure, the Hungarian National Bank would most likely have to come to the rescue. Therefore, according to those who dismiss the conspiracy theory, it is not in the interest of the National Bank to create a case out of thin air.

It remains unclear what’s going on with the Buda-Cash Group and its affiliates. Is the scandal real or imagined? The suspicion that it may be imagined was heightened this afternoon when Antal Rogán, head of the Fidesz parliamentary delegation, called the BC case a “socialist brokerage scandal.” Rogán claimed to know the details of the case. According to him, the owners of BC stole the money deposited in its banks by people of modest means. And BC had to be closely linked to the socialist-liberal government because, for example, Gordon Bajnai asked the chairman of BC’s board to become government commissioner in charge of the restructuring of MÁV (Hungarian State Railways). Bajnai also appointed Miklós Andrási, former manager of BC, to be the CEO of MÁV. Rogán added that Andrási was one of the founders of Fidesz, but once they discovered that he was “Bajnai’s man” the party broke all ties to him.

Fidesz is trying to make political capital out of a case we know practically nothing about. Understandably so. The top leadership of Fidesz was badly shaken by the loss the party suffered in Veszprém, a defeat that came less than two months before another by-election will be held in the same county. Moreover, there is the rapid loss in popularity of Viktor Orbán, his government, and his party. Orbán’s attack on refugees and migrants was allegedly devised to counter this trend. Some people are convinced that the idea came straight from the most important spin doctor of Fidesz, the American Arthur J. Finkelstein. Admittedly, it’s a clever move since Hungarians are not at all keen on immigrants. If the government can also show that its opponents are linked to an egregious financial scandal, so much the better.

Late this evening the Budapest Stock Exchange restored Buda-Cash’s right to continue its activities, admittedly with major restrictions. They can trade only in derivatives (currencies), not stocks, and can only close out positions they hold, not initiate new positions. This might be intended to be an orderly liquidation of the firm or simply a way to buy time for the investigation to play out. We’ll have to wait to see what the National Bank comes up with. I don’t expect any quick answers. As we know, the Orbán government is skilled in dragging things out.