Tag Archives: corruption

The Orbán government’s corruption unveiled by investigative journalists

Index published an extraordinary piece of investigative journalism on November 11, written by András Dezső, Szabolcs Panyi, and Nikita Hava. The first two reporters are well known for their hard-hitting stories about Jobbik and Fidesz. The third person, who appears on Facebook as Hava Nikita Vladimirovics, calls himself “egy ruszki Magyarországon.” He is well versed in Russian-Hungarian affairs.

The team has been looking into Antal Rogán’s shady business ventures for about a year. As we know, investigative journalism is an expensive affair and Hungarian media outlets are far too poor to undertake such ambitious projects on their own. But thanks to the financial assistance of Transparency International Magyarország and Független Médiaközpont (Independent Media Center), plus of course a lot of hard work, these three young journalists did a bang-up job. I should add that for the Georgian aspects of this complicated corruption case Tazo Kupreishvili, editor-in-chief of News.On.ge, assisted the Hungarian team.

The article is a detailed account of the close working relationship between Balázs Kertész, a lawyer who has been making a concerted effort to stay out of public view, and Antal Rogán, currently the number 3 man in the Orbán government. His job title, minister in charge of the prime minister’s cabinet office, is intentionally meaningless. His real task is to spend government money on Fidesz propaganda. He was responsible for funding the anti-immigrant campaign, including staging the referendum. Rogán has long been suspected of being corrupt. But between 2006 and 2014, when he was mayor of Budapest’s posh District V, he gained the reputation of being one of the most corrupt officials in the Orbán administration.

If the relationship between Lőrinc Mészáros and Viktor Orbán is often described as that of a mafia boss and his front man and if the Simicska-Orbán alliance was more like a business partnership, with Simicska acting as a financial adviser, the Kertész-Rogán alliance is a combination of the two. According to the authors, Balázs Kertész is the person who came up with all the schemes that made Rogán (and I assume Kertész as well) a very rich man.

Balázs Kertész at Antal Rogán's inauguration of minister

Balázs Kertész at Antal Rogán’s inauguration as minister

Although stories about Rogán’s more than shady real estate deals have been circulating for only a few years, he began his unsavory career much earlier. His and Kertész’s names first came up in 2003 when the K&H Equities scandal surfaced. A stockbroker named Attila Kulcsár was running a Ponzi scheme. Fidesz, then in opposition, tried to dump the whole scandal on the socialists, but it turned out that several people close to Fidesz were also involved. Among them, Antal Rogán (age 29) and Balázs Kertész (age 27), whose names were found in Kulcsár’s VIP list. Although the members of the parliamentary committee that investigated the case had questions about the two men, thanks to Péter Polt, the chief prosecutor, their names were dropped from the list of suspects.

This early brush with the law was nothing in comparison to what happened in District V. Balázs Kertész was the first to become a member of the district council. Soon enough he was followed by two of his friends from Fidelitas days, Antal Rogán and András Puskás. (Fidelitas is Fidesz’s youth organization, a place where aspiring young politicians learn the tools of the trade.) In no time the trio was running the show, despite the fact that the mayor was a socialist. In 2006 Rogán decided to run for district mayor against the socialist Pál Steiner and won easily. By that time Kertész was deeply involved in the district’s finances. Apparently he was the one who came up with the idea of selling expensive pieces of real estate at below market prices. He designed the transactions in such a way that neither he nor Rogán would suffer any legal consequences from cheating the district. The buyers, of course, had to pay a “surcharge”/kickback, apparently thousands of euros. How much of this money went to Kertész we don’t know.

Kertész also seems to be behind Rogán’s lucrative residency bond business. After Kertész left politics in 2010, he returned to the prestigious law firm where he began his legal career. A couple of years later, most likely in 2013, he joined a much less distinguished law firm. It was this firm that got the job of handling the administrative work for the applicants for residency bonds. Their fee was €5,000, and we are talking about 2,000-3,000 applicants so far. Of course, we don’t know whether, in addition, the Kertész-Rogán duo received kickbacks from the intermediaries abroad who got €50,000 per transaction. I suspect yes.

The most spectacular achievement of the Index team was the discovery of two videos. One proved that Balázs Kertész, Antal Rogán, and Árpád Habony met, despite Rogán’s denial. The other showed three highly-placed Georgian businessmen discussing a power plant to be financed by the Hungarian Eximbank. The parties to this discussion were the representative of the Bank of Georgia in Hungary, a Georgian-Israeli businessman, and the former prime minister of Georgia (2009-2012), Nika Gilauri, who earlier had served as minister of energy and minister of finance.

Unfortunately the meeting took place on a very noisy street, so not everything is audible. It is, however, clear that 5% of the Eximbank loan for the power plant has to be paid to Balázs Kertész. It is also obvious from the partial transcript that the money should be paid in advance in order “for them to start working.” I assume the work entails convincing Eximbank to grant the loan. The man who most likely has that job is András Puskás, deputy CEO of business operations at Eximbank, who used to be Rogán’s right-hand man and deputy in District V. So far no decision has been reached on the Georgians’ request for $68 million. And after these revelations, I doubt that they will see a penny of the promised loan. Whether Kertész has already banked over $3 million on this deal is unknown.

From Index’s article as well as some other commentaries we get a sense of how Kertész and Rogán have reacted to the probe. First, Kertész must have known for some time that journalists were after him. As the investigative team noted, “the closer we got to him, the more evidence of his existence disappeared.”

Second, there is a very good possibility that Kertész and Rogán laid a trap to discredit whatever Péter Juhász, Együtt’s sleuth, and the journalists might uncover. They enlisted a couple of “reliable” Fidesz sources to claim, independently of one another, that Balázs Kertész had been arrested by TEK and that many hundreds of forints were also impounded. The story was, of course, a hoax. If newspapers reported a false story, it would cast doubt on any subsequent stories about Kertész they might publish. At least one Hungarian newspaper fell into the trap.

Third, it is hard to believe how stupidly Antal Rogán tries to cover up his misdeeds. He thinks that if he denies that something ever happened it will simply go away. He denied his helicopter trip (documented by Népszabadság) and in this instance denied his meetings with Habony and Kertész (where again, hard evidence proves the contrary).

Fourth, perhaps his stupidest move once the Index story broke was to remove the recent picture showing Kertész at his inauguration as minister. For such an occasion a politician can normally invite his family members and a very small number of his closest friends. By removing the picture he practically admitted his guilt.

The most important question still remains. How much does Viktor Orbán know about all this? He has stuck with Rogán through thick and thin in the last couple of years, so my suspicion is that he is privy to everything.

November 13, 2016

When a love affair is no private matter: The case of György Matolcsy

Until very recently the Hungarian media had left politicians’ private lives alone. In the last few months, however, there has been a decided change in attitude. I think it was 888.hu, a government-inspired internet site that was supposed to be hip and capture the imagination of the younger generation of right-wingers, that broke with this hands-off policy. The editor-in-chief, the notorious Gábor G. Fodor of Nézőpont Intézet, decided to publish nude photos of the wife of MSZP party chairman József Tóbiás. A few weeks later Ripost.hu, also a government-sponsored tabloid site, came out with a juicy story about János Volner, a Jobbik MP, who was found behind some bushes with a woman friend in Pécel, a suburb of Budapest. What the two were doing in the bushes was widely discussed at the time, especially in the pro-government media. So, thanks to the newly created pro-government tabloids, the taboo has been broken.

The story of György Matolcsy’s divorce and his liaison with a 31-year-old woman, Zita Vajda, has been garnering a lot of attention. The media isn’t interested in their romantic attachment. Rather, they view the story as further proof of the incredible corruption that surrounds the Hungarian National Bank (MNB) under the leadership of György Matolcsy.

Regular readers of Hungarian Spectrum are only too familiar with Matolcsy’s generosity toward his friends and family—and his family is large since there are a lot of Matolcsys. He is especially generous toward his lover, for whom he is divorcing his wife of thirty years. In fact, Matolcsy is taking care of Zita’s mother as well. It is easy to be generous with someone else’s money, especially when that money comes straight from Hungary’s central bank. Matolcsy has a track record of using bank funds for questionable purposes. The bank bought some very expensive real estate, and it transferred an incredible amount of public money from the bank to private foundations it set up, which I described as a perfect money laundering device.

Népszabadság stumbled upon the case of Matolcsy’s liaison with Zita Vajda by accident. What the paper was investigating was her fabulously high salary. She was making more money than a department head, and her job was merely to prepare and organize Matolcsy’s foreign travel and negotiations. When Matolcsy became chairman of the central bank in 2013, he fired a number of staff members, including well-qualified economists, and replaced them with his favorite associates from the ministry of the national economy. Zita Vajda was among them. Vajda’s very high salary (1,730,000 ft.) was undoubtedly the subject of gossip, and I assume that one of the employees convinced Népszabadság to investigate. It took a little while because the bank tried to stall, but eventually the paper got the information with the following sentence tacked on at the end: “György Matolcsy’s personal life and his divorce is a private matter.” Was this a mistake or was the information about his divorce, which was not publicly known, intentionally leaked? I don’t know, but it supplied another incentive to pursue the matter. And the deeper Népszabadság dug, the more dirt it uncovered.

In addition to her job at the bank, in 2014 Zita Vajda was made a board member of the bank’s Pallas Athene Domus Innovationis (PADI) foundation. A year later she became a member of the board of a corporation created by the same PADI. Népszabadság calculates that the salary of a board member of one of these foundations is 555,000 ft./month. Soon enough it became known that Zita Vajda’s mother, Mrs. Péter Vajda, an employee of a public accounting firm, takes care of the accounts of all six foundations. The company, thanks to Zita Vajda’s relationship to Matolcsy, received approximately 27 million forints from the foundations in 2015 alone. The company’s total revenue that year was only 62 million forints. Thus, almost half of the public accounting firm’s revenue came from the bank’s foundations.

Just to keep the record straight, Zita Vajda no longer works for the bank. I guess it was deemed advisable to remove her from the limelight because of the divorce and impending marriage. Ripost recently reported that the Matolcsys separated months ago and that divorce papers had already been filed. After Vajda’s departure from the bank, Matolcsy made sure that she would not suffer any financial loss. Thus, in addition to her two board member jobs, she became deputy director of the Pallas Athene Geopolitikai Alapítvány (PAGEO) and also a “researcher” in the PAGEO Research Institute. Her income from these two new jobs amounts to 1.2 million ft. /month, which doesn’t quite match the money she made at the bank. But if you add up her income from the four different sources, her salary may be as high as 2.3 million forints a month.

Of these four jobs the most intriguing is her “research position” at PAGEO to the tune of 600,000 ft. /month. As far as we know, she spent two months in India where she studied yoga. In fact, in her spare time as “international secretary” to Matolcsy, she gave yoga lessons to interested bank employees. Her knowledge of India certainly doesn’t merit 600,000 ft. per month. The top expert on India, a university professor, makes only 380,000 ft. Népszabadság discovered one short article online that she wrote about Dharavit, one of the largest slums in Mumbai. But she is no India expert. The job was created for her because of her relationship to Matolcsy. After all, the happy new couple will need plenty of money to maintain a life style becoming the Hungarian central bank chairman and his wife.

The lady seems talented--in yoga

The lady may be talented–in yoga

Matolcsy, we know, is attracted to certain Eastern beliefs/superstitions. For instance, it seems that Matolcsy believes in the ill effects of certain numbers. The number 8 has ominous consequences, and therefore he changed the official address of the bank from Szabadság tér 8-9 to Szabadság tér 9. People claim that certain rooms inside the building had to be renumbered to avoid the number 8.

Another hypothesis that’s floating about in Budapest is that Hungary’s central bank is run by a man who accepts the Tibetan Buddhist belief that there are four days in the year when positive or negative actions can be multiplied ten million times. The best description I could find of this belief came from the Kopan Monastery in Nepal. Since these days are calculated on the basis of the lunar calendar, the dates vary from year to year.

Upon hearing stories about Matolcsy and the Buddhist ten-million multiplier days, the journalists at Népszabadság began checking the calendar of important bank announcements and came to the conclusion that there might be something to the story. The article correlated these special days with important bank announcements. It is hard to know, without going over all the important decisions that have been made in the last three years, whether there is any truth to this hypothesis. I did check the dates to ascertain what day of the week we are talking about, and I found two announcements that had been made on Saturday, an odd day to pick.

Buddha stature from Sarnath / 4th century

Buddha statue from Sarnath / 4th century

Soon after the article on the strange happenings in the central bank was published, the bank’s spokesman denied the allegations and called it absurd, pointing out that since March 2013 the Hungarian National Bank has published 818 news bulletins and 455 publications. Therefore there has been hardly a day when the bank didn’t make some kind of a statement. Yes, the hypothesis may sound strange, but by now one can imagine almost anything about the affairs of the bank under the leadership of Matolcsy, who some years ago claimed that all Hungarian children, just like the Japanese, are born with a red spot on their fannies which, of course, was nonsense.

In the wake of the revelations of Népszabadság, the pro-government papers have been silent. Matolcsy and his girlfriend have disappeared from sight, and Zita shut down her yoga blog in a great hurry. The supervisory board headed by a Fidesz politician claims that it has no jurisdiction over Zita Vajda’s salary. We can be pretty sure that everything will go on as if it nothing happened in MNB, which the author of an editorial renamed Magyar Nemzeti Budoár (Hungarian National Boudoir). Another editorial, which appeared in Magyar Nemzet titled “Sötét verem” (Dark pit), emphasized that although the paper is not fond of tabloid stories and the romance between Zita Vajda and György Matolcsy is a private matter, there are times when a love affair loses its private quality. This happens when public money is involved. According to the author, “Matolcsy for a very long time has owed the public an explanation of his sundry questionable affairs.” And if he misses the opportunity to do so, “he shouldn’t be surprised if many people think that love is not only a dark pit but might also hide corruption.”

Perhaps the best line came from Zoltán Bodnár, former deputy chairman of the central bank, who has a good sense of humor. At the time of the upheaval over the establishment of private foundations by the Hungarian National Bank, Matolcsy steadfastly maintained that with the transfer of the money to private foundations “it had lost its public character.” So, when a few days ago a reporter asked Bodnár what he thought about the national bank under Matolcsy, Bodnár quipped: “it has lost its character as a central bank.”

September 15, 2016

The Orbán government’s colossal swindle: the residency bonds

It’s time to return to one of the largest scams the Orbán government has come up with to date: the sale of “residency bonds.” The project was launched in 2013. It allowed a citizen of a non-European Union country to “buy” a resident permit for a duration of five years by purchasing €250,000 worth of Hungarian government bonds. In 2015 that amount was raised to €300,000.

Many countries, including the United States, offer residency permits to foreigners willing to invest substantial amounts of money. Such an arrangement might be justified on such economic grounds as job creation and an incentive for the influx of foreign capital.

The Hungarian scheme bears no resemblance to the practices of other countries. The sale of residency bonds creates “instant cash” that is spent as soon as it is received and that will have to be paid back, together with the accrued interest, in five years. The sale of 3,874 residency bonds over the last two and a half years has brought at best a minimal benefit to the national economy, at worst a loss. That Hungary has sold so many residency bonds is understandable because this is about the cheapest way for a person to become a lawful resident of one of the member states of the European Union, and hence to be able to conduct business anywhere in the EU.

Hungarian residency bond purchases have another unusual feature. The prospective buyers of the bonds do not manage the transaction directly by dealing with the Hungarian administration. Their only contact is an agent designated by the government. And on paper at least these agents seem to be the only real financial beneficiaries of the sale of the bonds. For every bond package they sell they receive between €45,000 and €60,000 as a processing fee, charged to the purchaser. The other peculiarity of this transaction is that agents don’t pass on the full €300,000 to the Államadósság Kezelő Központ (Center for the Management of Government Debt) because they receive the bonds from the government at a discount of no less than 2%. So between the processing fee they charge and the discount they receive, agents get between €74,000 and €80,000 per bond package. As Népszabadság rightly pointed out, after five years the purchaser of the bonds will gain about as much on the deal as the agent does within a few weeks.

The whole scheme smacks of corruption. Most likely the people who were chosen to be agents were ready to share these incredible sums of money with members of the Hungarian government or Fidesz party leaders. Currently there are four such agents, of whom only one is registered in Budapest. The others operate out of Malta, Cyprus, and Singapore.

Source: Index

Source: Index

Also on the receiving end is a Budapest law firm which, according to Tamás Wiedemann of Magyar Nemzet, must have made almost five billion forints in the last three years. Heading the firm is Kristóf Kosik, who is a close acquaintance of Antal Rogán, who as the chairman of the parliamentary committee on the economy is the mastermind behind the whole scheme. Kosik’s law firm is the only one that can represent the foreign applicants at the Bevándorlási és Állampolgársági Hivatal (Office of Immigration and Citizenship). The Kosik Ügyvédi Iroda receives €5,000 per application. Since 3,784 applications have been approved since 2013, Kosik’s law firm must have earned €18,920,000 in three years from this little business.

Népszabadság also calculated the amount of money the Hungarian government is losing on these residency bonds. The economists who looked at the numbers came up with the figure of €17.4 million to date. The reason for the loss is that in 2013 the government fixed the interest rate they would pay on the bonds at 2.46%. In the beginning the Hungarian government did okay because the interest rate in the open market was almost 5%. So they were getting cheap instant cash. But by June 2014 the interest rate on euro bonds had dropped to under 2.4%, which was lower than the guaranteed rate on the residency bonds. By now the interest rate in the open market is around 0.5%, while the Hungarian government is still paying the rate fixed in 2013.

While the Hungarian government just declared a “total mobilization” in preparation for a referendum against the refugees and has been carrying out a massive campaign against outsiders, it has quietly allowed 3,784 individuals and their families to settle in Hungary. That may mean close to 16,000 individuals, who come mostly from China, Russia, and the rich Middle Eastern countries. Vetting these individuals is extremely superficial. An applicant makes an appearance before one of the agents and gives details about himself and his past activities. On the basis of this information the Hungarian authorities have 30 days to conduct an investigation. Once that is done, the happy new resident and family can settle in Hungary and travel and conduct business throughout the European Union.

As the result, it is likely that some unsavory characters have managed to settle in the European Union through the Hungarian residency program. The same Tamás Wiedemann who found out about the monopoly Kristóf Kosik’s law firm has on handling applications at the Office of Immigration also learned of at least one Russian, who had been convicted of tax fraud and was most likely a fugitive from justice, who easily managed to get permission to settle in Hungary. It was done in the following manner. Each applicant must produce an “erkölcsi bizonyítvány” (certificate of good conduct). But the Office of Immigration accepts the certificate of good conduct even if it comes from a third country. Thus the Russian fugitive from justice first went to Saint Kitts and Nevis, where he obtained the necessary document attesting to his good conduct and stating that he had had no run-in with the law.

Naturally, the government’s reaction was denial. Csaba Dömötör, undersecretary in Antal Rogán’s Cabinet Office of the Prime Minister or, as people on the street call it, the propaganda ministry, announced that the article “is based on frivolous suppositions and calumnies.” He added that it is difficult to take the story seriously because Wiedemann didn’t give the name of the individual. Magyar Nemzet’s journalist pointed out in an interview on ATV yesterday that he is forbidden by law to reveal the name of the individual, and he would also have transgressed the law on securities if he had given details.

Rogán’s propaganda ministry might be cocky but Mihály Varga, minister of the national economy, was much more cautious and told ATV that perhaps the law governing the rules of residency requirements can be changed “if necessary.”

September 7, 2016

 

Plans for a system of Fidesz party courts?

The tightening political stranglehold of the Fidesz government on Hungarian institutions and society in general leads many people to the conclusion that this regime cannot be defeated in a democratic election. Even if the opposition were united, the whole system has been so devilishly designed that one cannot escape its deadly embrace. But occasionally there are rays of hope. Here and there the Hungarian judicial system hands down decisions that allow opposition politicians and independent journalists to at least uncover some illegal financial transactions, shady business practices, or obvious corruption cases. These revelations rarely gain traction because Fidesz’s very own prosecution office makes sure that there will be no consequences. Still, the publicity surrounding these cases greatly annoys the powers that be. And so they decided to do something to remedy the situation.

One of the first acts of the Orbán government was a total reorganization of the judiciary system, about which I wrote extensively in 2011 and after. In April 2011 the government lowered the retirement age of judges from 70 to 62, a decision that affected about 10% of all judges. These vacant positions could then be filled with judges who would presumably be grateful to the government that assisted in their promotion. Then, by renaming the Supreme Court Kúria, they managed to get rid of the chief justice and replace him with one of their own. Finally, they set up an entirely new body called Országos Bírósági Hivatal (OBH) whose head, appointed for nine years, is Tünde Handó, a good friend of the Orbáns and the wife of József Szájer, Fidesz EP MP and one of the original founders of Fidesz. She alone decides on appointments and also on the venues of “delicate” cases against former politicians or government officials.

Yet it seems that Orbán didn’t do a thorough enough job. The remaining judges are not all puppets, and occasionally they rule against the government. For example, when the Hungarian National Bank had to hand over all the information about the expenditures of the five or six “foundations” György Matolcsy established. Or, when the court ruled against the government for not allowing Lajos Simicska’s Közgép to bid on government projects. Such interference in the affairs of the government is something Orbán cannot tolerate.

So, here is a new idea: to set up an entirely separate judicial system that would deal exclusively with matters pertaining to the various branches of the administration. Not that there were no judges who specialized in such cases. In fact, in 2013 special courts were set up to handle labor disputes and cases brought against the government or one of its related institutions. But these courts were part of the traditional court system.

What makes this new “reform” especially suspect is that, according to current plans, half of the “judges” would be “instant judges” who have at least ten years of experience in public service. Most real judges, after working for years in the judicial system, have been socialized as independent arbiters responsible only to their own consciences. On the other hand, a civil servant is by definition an obedient employee who is anything but an independent actor. The two mindsets can hardly be reconciled.

As you can imagine, the reaction was one of outrage. When the question of political motive was raised at János Lázár’s regular Thursday press conference, he naturally denied it and added that Tünde Handó’s OBH supports the idea. Not so. A day later 444.hu summarized a 32-page letter written by Handó in which she severely criticized the idea of setting up a separate court system for administrative cases.

As 444.hu pointed out, Handó cannot be accused of being overly critical of the Orbán government, which she has faithfully served for the last six years. Yet she seems to have sensed the political intent behind the move when she noted that “especially important economic and political cases” will end up in these courts. She announced that “there is no need to set up a separate administrative judicial system” with its own high court. She considers “the large number of professionals coming from the executive branch” to be a threat to the independence of the judiciary. In fact, Handó sees constitutional problems with the proposed legislation. Bertalan Tóth, leader of the MSZP parliamentary delegation, expressed the same objection, though a bit more forcefully. He compared these new administrative courts to a case in which “the accused could pick the members of the jury from among his family members.” I think this is an apt description of the situation.

László Trócsányi, minister of justice since 2014, is leading the government’s fight for a separate administrative court system. In an interview with Népszabadság, he insisted that setting up such a system has been in the works ever since 2014 when he became minister. He and his ministry have been working on this system for the last two years, a claim that, if true, would undermine the position that the government decided to act as a result of the embarrassing setbacks it suffered at the hands of regular judges. Considering that the administration wants to introduce the new system only in the spring of 2018, I suspect that Trócsányi is not telling the truth. If he and his ministry had been working on the project for the last two years, it’s unlikely that the government would need another year and a half to launch it. He also tried to lull suspicions that most of the 100 judges who work on cases involving the administration would be fired by saying that they would remain. Eighty people will be added to their ranks. Since the government wants half of the judges to come from the civil service, I assume all 80 will be “instant judges” whose job will be to save the government from further embarrassments.

Trocsanyi2

Trócsányi’s interview with Népszabadság took place on September 2, and by now I see a slight change in his attitude. He is no longer as combative as he was four days ago. Today, talking to Inforádió, a conservative radio station specializing in politics, he kept repeating that it is not important to set up these courts as soon as possible. What is important is that “thinking begins about administrative procedure.” There can be discussions about the details, like structural solutions, but “as long as he is the minister he will not allow any backtracking on the control over the administration,” a statement that sounds ominous even if it’s not very clear.

To change the law Fidesz needs the support of two-thirds of the members of parliament. The government indicated that it would like to talk matters over with the leaders of the five parliamentary parties: Fidesz, KDNP (Christian Democrats), Jobbik, MSZP, and LMP. MSZP already indicated that they will not attend the meeting. Jobbik and LMP will be there, but they refuse to support the bill in its present form. Let’s hope they remain steadfast through all the bill’s eventual iterations. Otherwise they will endorse a Fidesz judiciary system designed to cover up the government’s criminal activities.

September 6, 2016

The latest revelations in the Roland Mengyi case

People unfamiliar with Viktor Orbán’s Hungary might think that I’m spending far too much time on the case of Roland Mengyi, a Fidesz MP. So what, they might say. They caught a politician who is a crook. Happens in the best of countries. What’s the big fuss?

Well, that’s not how things work in Hungary. The Orbán government has been in power for more than six years, during which the independent media reported on a raft of suspicious cases. Not once did the “independent” prosecutor’s office ask the president of the parliament to initiate proceedings to suspend a Fidesz MP’s immunity, even when such a request was warranted.

Yes, Hungary’s chief prosecutor is independent in the sense that he and his office are not subordinated to the ministry of justice, unlike in most European countries or the United States. That was not the case between 1867 and 1949. The prosecutor’s office was the judicial arm of the state. After 1990 a restoration of the old system was briefly discussed and rejected, for fear of government interference in the judiciary. Thus, Chief Prosecutor Péter Polt, an important ally of Viktor Orbán, is responsible to no one except, of course unofficially, the prime minister. He is a man of immense responsibility and power. He could theoretically topple Orbán’s corrupt regime or, being a faithful servant, keep it in power by burying all the embarrassing and even politically lethal cases.

Very often the prosecutor’s office doesn’t even start an investigation of cases reported to the police. In a few bigger cases they begin an investigation but the prosecutors find the cases too weak to go any further and drop them. Then, there are those cases when the prosecutor’s allegations are so poorly worded that the judges have no recourse but to acquit the accused.

The Mengyi case is testing the “see no evil” prosecutorial system. Péter Polt was forced to act. He had no choice once 168 Óra released the third installment of the story of Roland Mengyi and his accomplices. It reported that the National Tax and Customs Administration has a video on which one can see two of the accused men handing Mengyi a small plastic bag that might have contained the 5 million forints Mengyi demanded from them. An hour after this information hit the newsstands Polt wrote to László Kövér requesting that Mengyi’s immunity be lifted.

Mama Rosa, Italian restaurant, where the Roland Mengyi allegedly received the money

Mama Rosa, the Italian restaurant in Tiszaújváros, where Roland Mengyi allegedly received 5 million forints in cash

In this post I will concentrate on what we learned from the third installment of Attila Rajnai’s series on the Mengyi case, but before that I will try to clarify why the National Tax and Customs Administration/NAV is involved in this case since it has nothing whatsoever to do with tax fraud.

Initially, NAV was not investigating Mengyi but Márta F. of Tiszaújváros, an accountant whom the NAV investigators suspected of being involved in tax fraud by gaming the special tax status of employees of social cooperatives. These employees, who are disadvantaged, pay lower taxes and have lower social benefits payroll deductions than employees of ordinary businesses. Márta F.’s scheme was to change the status of employees of ordinary businesses to social cooperative employees. The scheme worked this way. The worker was let go by his employer and immediately hired by one of the social cooperatives, but in reality he worked in his old workplace except that his employer now hired him as a social cooperative worker with a reduced tax burden. Márta F. was apparently arranging these switches in status in such huge numbers that NAV investigators became suspicious and began their surveillance of her activities. Mengyi’s bad luck was that Tibor B. and Zsolt E., the two friends who turned to Mengyi for help, got in touch with Márta F., who was known as an expert in setting up social cooperatives. Thus their conversations with Márta F. were also recorded. These conversations prompted a second investigation that led to Mengyi.

So, what did the public learn from 168 Óra’s third installment? Plenty. One important piece of information is that if NAV investigators find a political thread in the course of their investigation, they have to report the case immediately to the prosecutor’s office. The prosecutor’s office can then, if the chief prosecutor so desires, stop the investigation altogether. In fact, Rajnai is aware of an earlier case where an important business partner of one of Viktor Orbán’s oligarchs was in trouble with NAV but the prosecutor’s office stopped the investigation. It is quite possible that the same thing happened in the Mengyi case because just when the investigators were ready to arrest the Fidesz MP, their superiors refused to give them permission to proceed.

Of course, the newly appointed NAV president, András Tállai, might have put an end to the investigation, especially since in one of the conversations Péter K., the middle man between Mengyi and the two applicants for the grant, tries to quell their fears by telling them not to worry because András Tállai and Roland Mengyi are “on very good terms.”

The other revelation of this third installment is that last fall someone in the ministry of human resources told Péter K. that NAV investigators had paid a visit to the ministry and that they should be careful because their telephone calls are being monitored. At the moment we don’t know who that person was, but Rajnai suspects that his name is known to the prosecutors. Because revealing such information to subjects of an investigation is a crime, this person is probably also in trouble.

As the network of corruption expands, another possible culprit is the owner of Public Sector Consulting Kft. (KSC), Sándor Holbok, whom I described earlier as an “ősfideszes” or “primordial member” of the party. Although at the moment only Szilvia B., an employee of the company, is in jail, Holbok was most likely fully aware of what was going on in the firm. In one of the conversations one can hear that Mengyi is in negotiation with the owner of KSC, discussing the financial details, meaning who will receive what portion of the 600 million.

Whoever interfered at the level of the ministry saved Mengyi from a much more serious charge. The tender was rewritten, and therefore the deal couldn’t proceed. As it stands, Mengyi and his co-conspirators are accused only of attempted fraud.

Now it is up to Péter Polt to contain the investigation to the smallest possible circle. If the investigation goes much further, it could reach high officials in the ministry of human resources and perhaps even in the prime minister’s office. After all, there are rumors that even undersecretaries might be part of the conspiracy to illegally acquire EU money. Szilvia B. talked about her close relationship with Nándor Csepreghy, deputy of János Lázár. I’m sure that Polt will do his best as usual. Maybe the whole thing will peter out and Roland Mengyi will be the only one who is charged. And if Mengyi is deemed to be critically important to the party, the prosecutor’s office will probably prepare a case so full of holes that he will get off.

August 20, 2016

Roland Mengyi, the Fidesz Voldemort: from billionaire’s front man to politician

This is the story of Roland Mengyi’s sudden appearance, out of total obscurity, in high politics. The original article titled “Egy milliárdos táskahordójából lett politikus a fideszes Voldemort” (The Fidesz Voldemort went from being the bag carrier of a billionaire to a politician) originally appeared in index.hu and was translated by the staff of The Budapest Sentinel.

Earlier I reported on the findings of Attila Rajnai, an investigative journalist, who in two installments published details of the scandal in the weekly 168 Óra. Since then another installment has appeared, which strongly suggests that officers of the Nemzeti Adó- és Vámhivatal (National Tax and Customs Administration/NAV) were ready to arrest Mengyi when he was negotiating with the two tender applicants from Tiszaújvár about a year ago. The officers’ superior, however, wouldn’t give them permission to act. Rajnai suspects that it was either András Tállai, president of NAV, or Péter Polt, the country’s chief prosecutor, who, for a while at least, saved Mengyi’s skin.

Tállai is a member of parliament, undersecretary in the ministry of interior, and, in his spare time, head of NAV, a huge organization. For one reason or other, Tállai’s appointment was of special importance to Viktor Orbán. But, at the same time, he didn’t want Tállai to relinquish his parliamentary seat in case Fidesz loses a third seat at a by-election. Hence Tállai’s multitasking challenge.

Another development in the case is a unique move by Péter Polt. He asked László Kövér, president of parliament, to initiate proceedings which might lead to the suspension of Ronald Mengyi’s immunity. In the past, the Fidesz majority of the parliamentary committee in charge of immunity cases always denied requests to suspend Fidesz members. This time, I believe, they will oblige. Tomorrow I will outline one possible way Fidesz might handle the case.

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Mengyi2

Official résumé: We know almost nothing about what the Fidesz parliamentary representative Roland Mengyi did prior to becoming a politician in 2010. He is not answering any questions about his earlier life. Nor is he talking about an ugly corruption scandal to which he has been connected. For this reason we looked into his past. It turns out that, while it does not appear on his résumé, he worked first for the Republican Guard, later as a driver for the front man of a billionaire entrepreneur.

Apart from his enterprising wife, an influential Fidesz city politician may have played an important part in his suddenly becoming a politician.

A typical political entrepreneur—based on his previous life this would be the best way to characterize Roland Mengyi, although his previous life is the thing about which it is possible to know virtually nothing, at least on the basis of what the politician has disclosed about himself.

When Mengyi became a Fidesz member of parliament in 2009, he wasn’t only completely unknown to voters but also within his party as well. He just appeared out of nowhere. As to what Mengyi did prior to 2010, the only thing appearing on his official résumé uploaded to parlament.hu is that, and we quote, “Public administration, free market. Former president of a public foundation, (sic).

Although we tried to ask Mengyi about the period before his career in politics, he was not willing to say anything. The Fidesz press office wasn’t able to help us learn anything about his past. For this reason we had no choice but to investigate where the Fidesz politician came from and whom he has to thank for his political career. We spoke with those who knew him from the past and had either a business or personal relationship with him. Finally the picture became clear. Mengyi was born in Tiszaújváros in 1975. He was still a child when his parents moved to neighboring Sajóörös. He attended school in Tiszaújváros where he obtained his high school diploma. He liked to do sports and in 1994 placed 10th in the junior body building tournament in the 90 kg category where he represented Tiszaújváros. Later he moved to Budapest.

His résumé doesn’t mention this either, but we know from other sources that at the end of the 1990s during the first Orbán government he worked in parliament as a member of the Republican Guard. Mengyi did not answer questions relating to this. The Ministry of the Interior, on the other hand, indicated that it could not release information about this.

One of his former colleagues told Index that he served as a security guard, and we spoke with another acquaintance of his who said he was a personal bodyguard.

One source close to him told us that he was in fact with the Republican Guard and later became the personal bodyguard of Pál Solt, then president of the Hungarian Supreme Court. At that time he was proud of the fact that he appeared in the background of a photograph of Viktor Orbán and Pál Solt.

How the driver became a lawyer

The turning point in Mengyi’s career came when he got together with the daughter of a famous Budapest veterinarian. His acquaintances at that time believe that through his girlfriend he entered an intellectual world previously unknown to him and that this influenced his future career: the simple, less intellectual, country bumpkin began studying law at the Pázmány Péter Catholic College. However, a terrible tragedy turned his family life upside down. When he was down on his luck, the veterinarian’s cousin, the billionaire entrepreneur István Petrás, took Mengyi under his wing.

Those in the billionaire’s circle say that at the beginning Petrás did not especially like Mengyi. The persons in question recollect that those belonging to the circle felt the guy of humble origins was using the intellectual medical family as a kind of springboard. “Roland was a clever guy, he learned fast, and studied law at night, he was hard working,” says an old acquaintance. Another person says precisely the opposite. A person belonging to Petrás’s circle says he doesn’t remember Mengyi for his brilliant mind.

In any event, in time Mengyi became Petrás’s confidante.

At that time Petrás was doing well. With assets amounting to many billions of forints, he was listed as one of the 100 most affluent Hungarians. There must have been real trust between the two because, between 2006 and 2008, Mengyi was listed as an owner of one of the billionaire’s companies. However, Petrás’ acquaintances believe that the future politician was needed only as a kind of front man (stróman) for the wealthy entrepreneur, who was dealing primarily in real estate and who characteristically avoided the spotlight. In other words, although Petrás paid him well, he used Mengyi as a simple errand boy and bagman. This explains how Mengyi became the chairman of the board of trustees for the Biatorbágy Health House Foundation founded by Petrás in 2006. The foundation was created for a project belonging to a public private partnership (PPP) in which Petrás was interested along with the Biatorbágy local government. The health house was eventually christened in 2009 by Gordon Bajnai’s Minister for Health, Tamás Székely. According to the minutes that can be downloaded over the internet, by then Mengyi was already a Fidesz member of parliament and thus represented the foundation in the negotiations with the local government.

It wasn’t Petrás who played a key role in Mengyi’s political career but his wife, who dealt in real estate in the 2000s and who later developed a close working relationship with Petrás. In fact, the two met through the billionaire businessman. The woman belonged to a group of businessmen whose success was largely due to their political connections. The defining individual of this circle was Róbert Juharos, who had a joint company with Mengyi’s future wife in the 2000s.

Juharos, who at one time worked at the law firm of KDNP MP György Rubovszky, was one of the founders of the Budapest 8th district chapter of Fidesz and was a member of parliament between 1998 and 2002. But his real career took place in the 8th district. Everything having to do with district development or related to property development went through his hands. Many credit him with the fact that over time a rundown district became a more secure place attractive to investors. Mengyi’s wife also benefited from being connected to Juharos, since one of her real estate companies, for example, specialized in the property of the district government. Furthermore, she, alongside her former husband, had a stake in Juharos’ law office.

Mengyi’s wife was not a simple dealer in real estate. Earlier she worked together with her lawyer husband on the sale of industrial property and on re-zoning, and she dealt with municipal properties, including those slated for demolition. That was the time when companies and private individuals of dubious reputation were able to acquire real estate very inexpensively by promising phantom projects and improvements, even guaranteeing them, which never materialized. In many cases the real estate was sold based on loose interpretations of the terms of the public tender. Juharos did so well that, in time, his name was mentioned as one of the future Fidesz hotshots, although he severely jeopardized his party career when in the middle of the 2000s Lajos Simicska became upset with him. Regardless, to this day he has been able to preserve his influence in the district under Máté Kocsis, Fidesz mayor. He is the president of the district chapter of Fidesz, is Kocsis’ adviser, and his law office contracted with the district government between 2011 and 2014.

Took up politics in secrecy

Not long after Mengyi and his future wife got together, Petrás and Mengyi had a falling out. According to acquaintances, Petrás had a very ugly quarrel with Mengyi because Mengyi concealed things from him which the billionaire believed he should have known. For example, that his protégé was getting into big politics. He only found out when Mengyi wanted to quit. “Roland wanted to leave Petrás. He asked from him his money and the promised percentages, to which Petrás reacted by telling him he was not entitled to them because the projects were not yet completed and money had yet to come in. They had an ugly quarrel, but I believe that since then they’ve patched up their relationship,” a source with a vantage point on both individuals told Index.

Those close to Mengyi believe that Juharos did a lot to help him go from being an errand boy to a politician. Many believe it was the president of the District 8 chapter of Fidesz who introduced Mengyi to how things worked in the party, and how to advance. This helped Mengyi obtain a position even though he was completely unknown within Fidesz.

It was not only Juharos who helped him, but also the lawyer who introduced him to Petrás in the first place. The lawyer personally knew one of the leading Fidesz politicians who had the final word on nominating candidates. Suddenly, out of nowhere, Mengyi became the Fidesz candidate for parliament for Tiszaújváros even though he did not reside there and played no role in the life of the party in Borsod County. Apart from the fact that he was born there and went to school there, he had nothing to do with Tiszaújváros. As we wrote in an earlier article, after the 2010 parliamentary elections, the political career of the previously unknown Mengyi began to rise. By summer it was decided that he would be the Fidesz candidate for chairman of the Borsod County Assembly in the autumn election after it was determined that the current president, Ferenc Ódor, was leaving. Mengyi was nominated by the head of the Fidesz delegation, Dezső Török, to be Ódor’s successor. We tried to ask Török about Mengyi, but he was on vacation. At the same time he indicated that, in his opinion, he was not qualified to speak about his fellow politicians.

After becoming a politician, Mengyi’s self-confidence grew. According to his acquaintances, it is entirely believable that Mengyi referred to himself as Lord Voldemort according to the wiretap records leaked by 168 Óra, because at a family event held in Tiszaújváros in 2010 the waiters called him “My Lord Lieutenant” (“Főispán uram”), and those in attendance said that wasn’t supposed to be a joke.

Poor rich people

If we look at Mengyi’s declaration of assets, the politician does not rank among the more affluent Hungarians. According to his 2011 financial statement, he already had HUF 10 million ($40,000) in savings, that is he was able to put aside 9.2 million in under a year, which means that he must have made an average of HUF 760,000 a month at minimum. One year later he inherited a house and a flat (he became the half owner), but he was no longer an owner in his company, and his savings had decreased by half. According to his most recent financial statement (2015), he bought neither a car nor a flat last year, and his savings do not amount to even HUF 4 million ($12,000). His children don’t have their own assets either. Nevertheless, his acquaintances believe that his wife owned many Budapest properties when they met her. Moreover, one of the politician’s previous companies, Park Consulting, lets out property that it owns. According to them, the Mengyi family purchased a number of pieces of property since 2010 that are not registered in the politician’s name.

Scandalous affairs

Since entering politics in 2010, his name has come up in connection with two scandals. The most memorable one was when Blikk published a list of Fidesz politicians who spent a few pleasant days in the Azores on the occasion of the European Regional Assembly. Mengyi’s name appeared on this list. In fact, it turned out that he played a central role in the scandal because the Fidesz politicians taking part in the holiday on the islands justified their trip on the basis of Mengyi’s being the county chairman of the Roma strategy.

He was once again in the spotlight in the fall of 2013 in connection with an unusual matter involving the tendering of state lands, which was uncovered by Népszabadság. The 2011 land tender was interesting because the tender was withdrawn after the deadline due to pressure from above so that the land could be awarded to people close to Fidesz.

At the time Népszabadság wrote that Mengyi played a role in the revocation of the tender. Allegedly, he was the one who ordered the head of the Bükki National Park Directorate to withdraw the tender. Among those who won the land was Mengyi’s former campaign manager, who had absolutely no previous experience cultivating land.

The biggest scandal of Mengyi’s political career, one that might even cost him his freedom, was revealed recently by 168 Óra. The crux of the matter is that social cooperatives wanted to apply last year for EU money. They claim that Mengyi would have helped in the disbursement if they gave back at first 50 percent and finally 90 percent of the money won. Instead of offering to help with an existing tender, a separate HUF 500 million ($1.8 million) tender was written for the cooperative that sought Mengyi’s help. Mengyi asked for a bribe which he referred to as “constitutional costs” (“alkotmányos költségek”) and, according to the wiretape transcripts, received HUF 5 million ($18,000), referring to himself as Lord Voldemort throughout. Roland Mengyi denies the whole Voldemort story and said he is prepared to undergo any investigation. Barnabás Futó, Mengyi’s lawyer, claims that the transcripts only refer to Mengyi, but that he himself never spoke. However, according to 168 Óra’s latest article, Mengyi participated in one of the telephone conversations.

August 18, 2016

Another Fidesz scandal: Hunguard and Antal Rogán, the inventor

Scandal after scandal in Fidesz circles. Following on the heels of the revelations about the alleged bribery case involving Roland Mengyi, here is a new one. This time a much more important person is being implicated: the #3 man in the Fidesz hierarchy, Antal Rogán. The propaganda minister’s “financial affairs” are far too numerous and, although he is currently being shielded by his benefactor and boss, Prime Minister Viktor Orbán, and Chief Prosecutor Péter Polt, I wonder how long he can remain in his post without inflicting serious political damage on the Orbán government.

I have often complained about the incomprehensibility of Hungarian investigative journalism when the case under scrutiny has something to do with business. This latest scandal, Antal Rogán’s involvement with Hunguard, is a case in point. Admittedly, the corporate structures some Hungarian entrepreneurs come up with are byzantine by design.

Hunguard Kft., an information technology company, is not new. It was established in 1990 by four mathematicians. It was in the news a lot during the summer of 2014 in connection with the infamous utility rate reduction program. In conjunction with this program, the invoices of every utility company had to be audited by a professional auditor to ascertain that the bills the customers received were calculated accurately. That requirement was suspect from the first, but further amendments raised the suspicion that certain people in the government wanted to guarantee that only Hunguard Kft. could have the job. For some bizarre reason the company entrusted with this task had to have national security clearance. Behold, among the three or four companies that could have been in contention for the contract only Hunguard had the requisite clearance.

A year later Népszabadság reported that Hunguard most likely did exceedingly well with its auditing of 67 different utility companies with an estimated combined earnings of one billion forints. Interestingly enough, all the utility companies passed with flying colors, which only strengthened the suspicion that the audit was superfluous in the first place. It was also more than suspicious that while in the original bill auditors had to rotate yearly, Szilárd Németh, the politician in charge of the propaganda campaign, took this provision out of the final version of the bill.

So, from the very beginning it was clear that Hunguard’s fortunes were closely tied to certain leading members of Fidesz. They even included János Lázár, who when one of Hunguard’s competitors managed to get national security clearance eliminated that particular requirement and introduced something called “telephely-biztonsági engedély,” which I believe is a permit the company gives to those who can safely enter its premises. This was a simple solution to keep Hunguard as the only auditor of state utility companies. They would give permission to Hunguard, not to its competitors. Easy.

This was all we knew about Hunguard Kft. until yesterday when Népszabadság, after doing some further research, returned to the topic. Their research led them to Cyprus where, after paying a fee, they received details about the business activities of Hunguard. And here things become complicated, but I will cut to the chase. The owners of Hunguard Kft. wanted to be certain that their ownership was well hidden, so they engaged the services of the Kinanis Fiduciaries Ltd. in Malta, described by a Hungarian lawyer specializing in international business activities as a well-known “bizalmi vagyonkezelő” or a kind of trustee who for a certain fee becomes the owner of the company on paper. Behind the deal is a secret legal agreement which allows only the true owners to make business decisions. The graph below shows the more complicated structure of the arrangement.

Hunguard

Népszabadság notes that only the bank handling the two owners’ finances and the lawyer who represents them vis-à-vis the “trustee” in Malta know the identity of the real owners. And here is the clue. The lawyer in this case is Katalin Karafiát’s law firm, which has for years been in a close business relation with Antal Rogán. Népszabadság was told by people familiar with the business activities of Hunguard that the man behind the whole complicated business structure “is none other than the Fidesz leader who has been much attacked lately for shady business activities.” He is described by the paper as “a master at operating such company networks.” Well, I guess it is not terribly difficult to figure out whom the paper’s informers have in mind.

At this point a commenter to Népszabadság’s August 9th article came to the paper’s help with another clue. The commenter, who wittily called himself “nokiás kamion” (Nokia truck), called attention to something he found on the internet: a patent was registered for “the method of digitally signing an electronic file, and authenticating method.” The inventors were listed as “Balázs Csík, Csaba Lengyel, and Antal Rogán.”

There are several oddities regarding this patent. The original, which was registered at the World Intellectual Property Organization with headquarters in Geneva, listed the three men as the inventors. But when it came to the registration in the Hungarian patent office (Szellemi Tulajdon Nemzeti Hivatala) the trio didn’t want to be called “inventors” (feltalálók) but only “jogosultak,” i.e. someone who holds the rights. Népszabadság correctly points out that inventors are normally proud of their invention and rarely hide their role in creating a new product. Perhaps Rogán’s presence among the inventors had something to do with their modesty.

In February the three owners of the patent sold their rights to MobilSign Kft., which now markets the product “MobilSign” as “a system capable of recording the dynamics of a handwritten signature, it produces the advanced electronic signature and assigns it to PDF documents.” Until December MobilSign Kft. was owned by Balázs Csík and Csaba Lengyel. Now the owner is someone called Petra Pozsgai.

Once discovered, Rogán with a straight face claimed that he had an active role in the invention of this electronic signature which, let’s face it, is most unlikely. Rogán has a degree in economics and has no information technology experience. Moreover, he is one of the busiest Fidesz politicians around. He couldn’t possibly have spent three years developing a software program, as he claims, even if he knew something about programming.

The most plausible conclusion one can draw is that Csík and Lengyel paid off Rogán for his good offices over the years by forking over a third of the profits from their invention.

August 10, 2016