Tag Archives: Csaba Tarsoly

A small but close circle: the Orbán family and Arab businessmen

The Pharaon affair simply doesn’t want to disappear.

In the first place, it is not an everyday occurrence that the prime minister of a country and his close family are caught doing business with a man, Saudi businessman Ghaith Pharaon, who is being sought by the FBI and Interpol.

Second, once the story broke Viktor Orbán and several high-level members of his government managed to get themselves entangled in a web of contradictory statements. Analyzing and comparing every statement they made has kept reporters and commentators busy for several days.

Third, since the pressure on the government refused to let up, it seems that the decision was made to change tactics. A couple of days ago Magyar Idők, the government’s mouthpiece, began accusing the United States of being responsible for the problems that plague Hungary, and specifically its prime minister, as a result of Pharaon’s presence and business dealings in Hungary. Soon enough, Pharaon was portrayed as an agent of the CIA who tried to blacken the good name of Viktor Orbán. That was bizarre enough, but for good measure Hungarian intelligence sources complicated matters by adding another twist to the Pharaon story: it was Russian and Israeli intelligence agencies that revealed Orbán’s secret dealings with Pharaon and other Arab businessmen. These stories gave rise to a new round of speculative articles in the Hungarian media.

Finally, Csaba Tarsoly, the CEO of Quaestor, the brokerage firm that for at least a decade if not longer was engaged in a Ponzi scheme, gave an interview to Magyar Narancs the other day from which the Hungarian public learned that shortly before the collapse of Quaestor in March 2015 Foreign Minister Szijjártó arranged a meeting between Tarsoly and Pharaon.

Let’s start with the conspiracy theories. “The ugly American” version comes from Magyar Idők, which on November 23 published information that was allegedly obtained from the Hungarian intelligence services. The gist of the story is that, although the Americans consider Pharaon “very dangerous,” they were so careless that they were searching for him under 11 different names, four different birth dates, and two different birthplaces. The Pharaon who entered Hungary was none of those 11 Pharaons, claimed the Hungarian authorities. Surely, the story continues, if Pharaon were so dangerous and the Americans really want to capture him, they wouldn’t be doing business with the man in Georgia, Pakistan, Afghanistan, and elsewhere. As for Pharaon’s fingerprints, the FBI didn’t pass them on to Interpol. “One wonders why,” Magyar Idők adds mysteriously. To add insult to injury, the fingerprints the Hungarians got from the FBI were useless. So clearly, it is not Hungary’s fault that a visa was issued to Pharaon.

pharaon3

Ghaith Pharaon

Armed with the above information, Magyar Idők apparently confronted the U.S. Embassy in Budapest but said they “haven’t received substantive answers” to their questions. On the other hand, the paper received information from “government sources,” according to which “the idea of Pharaon as a national security risk for our country came directly from the United States” because “with this information the U.S. can strike a blow against the Hungarian government.” This story was then embellished by János Lázár, who at one of his press conferences claimed that at the time the visa was issued in October-November 2014 the Hungarian government asked the U.S. Embassy whether there was any objection to allowing Pharaon to enter Hungary. If this is true, says 444.hu, the Americans tricked the Hungarians, knowing full well that greedy Hungarian businessmen with close connections to the government would make sure that the government issued a visa without any vetting. I find this version of the story most unlikely. And I disregard Lázár’s story altogether. I’m sure that his story about getting in touch with the U.S. Embassy is one of his many fabrications.

While some Hungarian intelligence sources were whispering into the ears of the reporters of Magyar Idők, others were busy dropping stories about Russian and Israeli involvement to Hetek, the publication of the Assembly of Faith. According to this version, Israel is concerned about the very large investments by Arab businessmen in Hungary, which they consider to be “indirect Islamization of the region, which is especially dangerous in a country with the largest Jewish population in the region.” And the Russians? They are worried about Hungary’s close relations with Pharaon because of his reputation as a CIA agent. He must be an agent because there is no other explanation for the fact the United States has been unable to arrest him in the last 25 years. I disregard this version as well.

One doesn’t need to concoct stories about intelligence and counterintelligence to understand a simple story that was made purposely complicated by officials of the Hungarian government. Indeed, greedy Hungarian politicians and businessmen would make deals with the devil himself. They cared not who Pharaon was or what the FBI and Interpol thought of him. National security experts whom I trust are certain that the Hungarian intelligence agencies were fully aware of Pharaon’s past and the dangers that close relations with him would pose but that the prime minister of Hungary overruled them. Yes, I think the story is that simple.

Finally, here is the latest development in the career of Pharaon in Hungary. According to Csaba Tarsoly of Quaestor, a few days before the collapse of his brokerage firm he had a chance to meet a wealthy Saudi businessman who was interested in investing some money in a huge project that was extremely important to the firm. Quaestor owned 50% of a large tract of land (33 hectares) on the northern side of Csepel Island. The plan included the erection of a large conference center with a hotel and several apartment houses and commercial buildings. Tarsoly and his business associates needed about 300 billion forints to erect Duna City, as the future project was named. According to Tarsoly, “at the beginning of 2015 the foreign ministry brought a Saudi investor called Ghaith Pharaon to me. There was a big dinner at the Buddha Bar where I was introduced to him and his secretary; later I returned the invitation. It was after these two meetings that the investors met in my office and told me they would be willing to invest in the development of Duna City. I found the amount offered insufficient, and therefore the Saudi investor told me that if I give him 5% he will take care of the financing.”

Foreign Minister Szijjártó readily admitted that the Befektetési Ügynökség (Hungarian Investment Promotion Agency/HIPA) that functions under the aegis of the foreign ministry did suggest Tarsoly’s Duna City project to Pharaon. After all, it is HIPA’s job to encourage foreigners to invest in Hungarian projects, and therefore it was practically the agency’s duty to hook Tarsoly up with Pharaon. When Magyar Narancs asked him outright whether he himself was in any way involved in the negotiations, Szijjártó denied any participation. But again, something is not quite right with the story. The director of HIPA told Hír TV that he had nothing to do with either Ghaith Pharaon or the Duna City project. I suspect that this particular business deal was so important to the circle around Viktor Orbán that they sidestepped HIPA and that the negotiations with Pharaon were conducted at the highest level, with Szijjártó or perhaps even Viktor Orbán.

And here’s an interesting footnote to the story of the meeting of Pharaon and Tarsoly in the Buddha Bar. It was on June 14, 2012 that Budapest’s newest luxury hotel, Buddha Bar Hotel, owned by two Jordanian investors, opened in the Klotild Palace in downtown Budapest. It was no ordinary opening. Almost all the foreign ambassadors attended in addition to former president Pál Schmitt and, of all people, Cardinal Péter Erdős. But the most surprising guest was the prime minister himself. While reading Origo’s description of the opening ceremony a name caught my eye: Zaid Naffa, honorary Jordanian consul in Budapest. Sharp-eyed readers of the Hungarian press or Hungarian Spectrum will immediately recognize the name. He is the man who requested a Hungarian visa for Ghaith Pharaon at the Hungarian consulate in Beirut.

Viktor Orbán was the guest of honor at the opening of the hotel. He delivered a speech which revealed the close ties between the Jordanian businessmen and the Hungarian government. It turned out that the two investors had spent their student days in Hungary and that their company, Mellow Mood Group, owns nine more hotels in Budapest. As usual, Viktor Orbán was expansive in his praise of Hungary’s Arab friends and called attention to the common traits of Arabs and Hungarians. They are both hospitable, open people. And, he said, it is obvious from the example of the owners of the hotel that Arabs understand that “not even profit gives satisfaction if there is no friendship and soul.”  Viktor Orbán was, and I suspect continues to be, friends with this small group of people, to whom, I think, Ghaith Pharaon also belongs.

November 25, 2016

Letting the fox guard the henhouse: Hungarian prosecutors undermine justice

The thread that connects today’s topics is the state of the Hungarian legal system. As it stands, Hungary has a thoroughly corrupt prosecutorial system and a judiciary that at times shows itself to be truly independent despite considerable pressure from the executive branch. All three topics I’m addressing today are in one way or the other connected to these two branches of the legal system.

Let me start with a surprising verdict handed down today by the Budapest Court of Justice. Altus Zrt., Ferenc Gyurcsány’s company, sued Viktor Orbán because in May 2015 Orbán claimed that Altus is a bogus company created for the sole purpose of generating revenue from the European Union to finance Gyurcsány’s party, the Demokratikus Koalíció. Altus is actually managed by Gyurcsány’s wife, Klára Dobrev, an economist and law professor who teaches banking and financial law. The firm received, in an open bid process, a large contract from the European Union to evaluate the use of subsidies by member states and to suggest solutions for their more effective use. Given the political atmosphere in Hungary, Altus, regardless of the quality of its associates, can’t get jobs in the country and must offer its consulting services abroad.

Altus decided to sue Viktor Orbán for slander. Today the Budapest Court of Justice declared that Viktor Orbán’s claim was false and ordered the prime minister to refrain in the future from similar libelous statements. He will have to pay Altus 270,000 forints for court costs. And finally, and this is the one that must hurt Orbán the most, he has to openly express his regret for ever having made such a statement. I don’t know who that brave judge was, but the verdict is simply breathtaking. No one remembers such a verdict against a sitting Hungarian prime minister. Of course, this decision is not final. I’m sure it will be appealed.

Viktor Orbán must be livid. Fidesz immediately released a statement which, in total disregard of the verdict of the court, declared that “even a blind man can see that Ferenc Gyurcsány is financed from Brussels.” Fidesz’s spokesman quickly segued into Péter Medgyessy’s business transaction with Alstom, the French company that provided cars for the new Budapest metro line, the M4. “On the left only the companies and the size of the bribes change, the essence remains. Both Gyurcsány and the other socialist prime minister [meaning Medgyessy] conducted business through their wives. We are looking forward to Gyurcsány’s answer about how much money he received from the bribe of Alstom because, after all, it was during his premiership that the Alstom contract was signed.” Well, it is time for Gyurcsány, who a few years back swore that he would sue anybody who falsely accuses him of anything, to start proceedings again, this time against Fidesz.

That takes us back to the Medgyessy case, which I already mentioned in a post. Since then ten articles dealing with Medgyessy’s involvement with Alstom have appeared in Magyar Idők. The government obviously finds the case extremely useful politically. But how did Magyar Idők get hold of the story in the first place? The articles that appeared in the government paper are based on detailed information, including individual bank transactions. It is unlikely that the source of the information is the Medgyessy couple’s bank. We mustn’t forget that in the last couple of years the Hungarian prosecutor’s office has been investigating Alstom’s possibly illegal activities in Hungary in connection with the metro cars. So it is highly probable that Magyar Idők, just like its predecessor Magyar Nemzet, received the documents directly from the prosecutor’s office, headed by Péter Polt, chief prosecutor of Hungary and an old friend and protector of the prime minister. And this is a crime.

Marianna Polt-Palásthy

Marianna Polt-Palásthy

One cannot overemphasize the importance of Polt to Orbán’s system. It is no exaggeration to say that without Polt, or someone as crooked and loyal as he is, Orbán’s mafia state would have collapsed a long time ago. He is the one who stands between Viktor Orbán and justice and ultimately jail. So, it’s no wonder that Polt receives special treatment. A few months ago we heard that TEK, Orbán’s private bodyguard, will also guard this precious man, who is not entitled to such protection by law. And a few days ago, thanks to the documents released by the Hungarian National Bank’s foundations, we learned that Polt’s wife, Marianna Polt-Palásthy, personnel director of the bank, is also the chair of the board of Pallas Athéné Domus Scientiae, a member of the board of Pallas Athéné Domus Mentis, and a member of the Kecskeméti Duális Oktatás Zrt. She was hired by György Matolcsy in 2013, originally with a salary of 2.3 million a month, but by now she makes five million. Matolcsy’s salary was just raised to five million. So, while the chairman of the bank was making only two million, the director of the personnel department made five million. I wonder why. (Oh, those wives….) We also mustn’t forget about the extra remuneration for her jobs on the foundations’ boards.

And one more story about the Hungarian prosecutor’s office. It has something to do with the Quaestor scandal about which I wrote a year ago. The Quaestor affair is often described as Hungary’s Madoff case, except that here it is likely that the Orbán government itself was involved. Several ministries invested in Csaba Tarsoly’s pyramid scheme, and to the very last minute before the company collapsed Tarsoly was hoping for, and expecting, a government bailout. In brief, a thorough investigation of Csaba Tarsoly’s fraud case is not to the advantage of the Orbán government. And that takes us to our next story.

The victim's of Tarsoly's pyramid game The sign reads: "Orbán get lost and take your cronies along"

The victims of Tarsoly’s pyramid game
The sign reads: “Orbán get lost and take your cronies along”

It is becoming an everyday occurrence that the prosecution’s cases are so poorly prepared that cases that seem very strong even to outsiders are lost time and again. One of the worst offenders is Budapest Chief Prosecutor Tibor Ibolya who, contrary to his family name, is anything but a “violet.” In fact, he has gotten into all sorts of trouble with the courts and judges for speaking in ways the judges found unacceptable. In the Quaestor case Ibolya’s office dumped thousands of documents, absolutely unsorted, into the lap of the judge, not even indicating which documents supported what charge. Among the documents the judges found music, private documents, and photos that had nothing to do with the case. The court sent the whole mess back, asking Ibolya’s office to put their case together in a proper manner because what the court received was useless. Thus far Ibolya refuses to oblige. But the court isn’t budging either. If there is no action by May 31, the whole case against Tarsoly will be dropped. The suspicion is that this is exactly what the prosecutor’s office, with the active encouragement of the Orbán government, wants.

And one final word. It is Péter Polt’s office that is supposed to investigate the legality of the establishment of the Hungarian National Bank’s foundations even as his wife is deeply involved in and profits from the whole illegal scheme.

April 29, 2016

Fidesz can’t escape from the shadow of the Quaestor scandal

Medián came out with a new poll. This time the company wanted to find out how much Hungarians know about the scandal that followed the collapse of several brokerage firms and what they think about it. One of Medián’s conclusions is that people see a connection between the failures of the brokerage firms and the unpopularity of the government. More failures will only increase people’s distrust of the government. The majority of those questioned, despite the government’s best efforts, think that Fidesz bears a greater responsibility for the lack of proper oversight of these financial institutions than the earlier administrations. It is becoming increasingly difficult to blame the socialists for events that happen after five years of Fidesz governance.

One finding of the poll, which may have important repercussions for the future of the Orbán government, is that the Quaestor affair made the greatest impression on those surveyed. Over 70% of the people asked could name the firm without any help, and another 17% recognized the name from a list of brokerage firms. The other two companies, Buda-Cash and Hungária, are considerably less well known. And this is bad news for the government, because every day, it seems, more details about the close ties between the government and Csaba Tarsoly, CEO of Quaestor, are revealed.

birds

Two recent discoveries further support the suspicion that the Quaestor-Orbán government connection was very close indeed. One of the latest revelations is that the Nemzeti Befektetési Ügynökség, known as HIPA (Hungarian Investment Promotion Agency), which is a government office attached to the ministry of foreign ministry and trade, worked hard to find investors for a Quaestor project called Dunacity. As it turned out, the idea of a “city within the city” was first floated in 2006. It was supposed to be an entirely new building complex in the Soroksár area of Budapest, close to the present National Theater and the Palace of Arts, but not surprisingly, given the 2008 financial crisis, nothing came of it. It seems, however, that in the fall of 2014 HIPA began promoting the idea of Dunacity and published a pamphlet trying to recruit investors for the one billion euro project, along with some other desirable investments. In fact, 444.hu learned that shortly before the March 9 collapse of Quaestor, Levente Magyar, undersecretary in charge of foreign trade, escorted Arab businessmen to the planned future site of Dunacity. The English-language brochure spoke in glowing terms about the “new type of living, where the harmony of apartments, workplace, commerce, entertainment and relaxation is provided.” The government promised a new bridge across the Danube, a free port, and a new metro line. But what was perhaps most telling was that investors were guaranteed a 9-10% return.

The second revelation might be even more damaging, at least indirectly, to the Orbán government. Today János Lázár, who holds lengthy press conferences every Thursday, released the list of 24 municipalities that had purchased Quaestor bonds, which includes the city of Győr, whose football team Csaba Tarsoly owned. Győr’s loss–1,004,505,299 forints–doesn’t top the list. Százhalombatta lost 3,591,830,000 forints. But then why is Győr in the limelight? The reason is that the city of Győr wired this amount to Quaestor’s account on January 16, a day after the National Bank of Switzerland allowed the Swiss franc to strengthen some 20% against the euro. This unexpected currency decision hit large banks and brokerages hard, since most of them were net short the Swiss franc. For instance, Citigroup lost between $150 and $200 million, Interactive Brokers $120 million, and Deutsche Bank $150 million. The Swiss decision also had a negative impact on Hungarian banks, forex dealers, and brokerages. We know that Buda-Cash lost about $22-29 million. Most likely Quaestor was in the same predicament.

It was on April 3 that 444.hu first reported on this “strange coincidence.” Although one of the Győr city officials insisted that the only reason for investing the money with Quaestor was the attractively high yield, the reporter was not convinced. Something was wrong. If Győr purchased government bonds, their yield wouldn’t fluctuate from broker to broker. Therefore, the reporter justifiably suspected that the sudden decision to place that large sum of money with Quaestor, whose owner has invested billions in Győr, was not a coincidence. Moreover, 444.hu checked the city council minutes, where there was no sign of any approval of the money transfer. It was, the reporter concluded, most likely the decision of Győr’s mayor, Zsolt Borkai, a former Olympic champion and currently the president of the Hungarian National Olympic Committee. Let me add that Borkai is a favorite of Viktor Orbán. The prime minister even changed a law to make sure that Borkai could become a member of parliament in 2010. Borkai, before becoming a politician, was the principal of a military school with the rank of colonel. And there was a law on the books that said that a policeman or soldier can become a candidate for or serve as a member of parliament only five years after his departure from the military or the police force. The opposition jokingly called the legislation “Lex Borkai,” something Borkai was actually proud of.

Győr promptly denied the charge, claiming that they made the decision to transfer the money to Quaestor earlier and signed the papers already on January 13. Since no one had seen the contract that the city signed, suspicion lingered on.

Today there was another twist in the story. János Lázár, during his press conference, talked about municipalities purchasing Quaestor and not government bonds. He specifically pointed to the city of Győr as “one of those municipalities that invested money in unsecured Quaestor bonds.” Borkai, whose nerves must be frayed by now, snapped back. Győr bought government bonds, and anyone who says otherwise is a liar. It is his duty, he said, “to protest in the name of all 130,000 inhabitants of the city.” This time Borkai arrived with the original copy of the January 13 contract and a document that allegedly proved that the city had purchased government bonds.

So, who is telling the truth? Is it possible that Borkai thought he was buying government bonds but that Quaestor, hard pressed by the events of January 15, used the money to fill some holes in its own portfolio? Yes, it is possible.

The constant barrage of Quaestor stories is further damaging the waning reputation of the Orbán government. And the clashes between prominent members of the Fidesz hierarchy, like Borkai and Lázár, don’t help the cause either. One is just waiting for the next bomb to explode.

Fidesz as an enabler of financial corruption

It will not be easy to learn the truth in the maze of lies that have been fed to the public about the relationships between prominent politicians of Fidesz and Csaba Tarsoly, owner and CEO of the Quaestor Group.

Here I will concentrate on a single transaction, the loan extended to ETO Park, a subsidiary of the Quaestor Group. On April 4 I wrote a post with the title “The Quaestor scandal and football” in which I expressed my suspicion that Csaba Tarsoly’s ties to the current government had a lot to do with his interest in and support for Viktor Orbán’s mania, football. Today I return to Győr, where the ETO Park and Stadium are located.

Let me stress that the issue of the ETO Park and Stadium is unrelated to the scandal that recently engulfed another Quaestor subsidiary, a brokerage firm. The Orbán government has used ETO Park and Stadium to divert attention from its cozy relationship with Tarsoly. It’s trying to shift the story instead to a loan that was extended to the ETO project during socialist governments.

In my earlier post on the subject I made a fleeting reference to questions about this project that arose in the Magyar Fejlesztési Bank (MFB/Hungarian Development Bank) in 2010, after the newly elected government changed the top management of the bank and ordered an investigation of all loans that had been extended during the socialist period. Today’s post is about this investigation and its aftermath.

Orban hazug

War = Peace; Freedom = Slavery; Ignorance = Strength

On April 8 several papers reported that Kormányellenőrzési Hivatal (KEHI/Government Audit Office), after an investigation, is pressing charges against people involved with the 17 billion forint loan MFB extended to ETO Park in two installments, in 2005 and 2008. The reason for the police action, according to M1 TV, was that KEHI discovered that MFB had accepted a 900 million forint grant as collateral for the loan, which was against the law. We were not told when KEHI found this irregularity. Origo reported earlier that KEHI had already looked into the case back in 2010 and found enough evidence to proceed and that it had asked for a police investigation at the time. So why, then, a second investigation of the same case? And why did neither the Chief Prosecutor’s Office nor the Budapest police know anything about an earlier investigation or police action in the case?

KEHI, which functions under the supervision of the prime minister’s office, has been known to be a willing vehicle of the government’s political interests. It’s enough to think of its move against the Ökotárs Foundation, which is responsible for the distribution of grants from the Norwegian Civic Fund, that resulted in a heavy-handed police action. The police are an equally willing partner when the government wants results, and quickly. So why did the police do nothing after 2010 and swing into action only now? Because this time, in a couple of days the police began hauling in former high officials of MFB as witnesses.

It didn’t take long before an important, new piece of information surfaced regarding the original case. On April 9 Népszava was informed “by certain sources that László Baranyay, the CEO of MFB at the time, wanted to press charges but the Fidesz political leadership prevented him from doing so.” Apparently, the charges included fraud, embezzlement, and breach of fiduciary responsibility.

About a week later, on April 15, Zsolt Gréczy, spokesman of the Demokratikus Koalíció, gave a press conference with two documents in hand which were allegedly proof that KEHI in March 2012 stopped the investigation of the case by the new management of MFB. According to the first document, the investigation was supposed to have been conducted between July and September 2011, after which the MFB management would have gone to Győr to take a look at the project, which at that point wasn’t quite finished. The final report was to be ready by October 31, 2011. Gréczy also had a letter in which KEHI informed Deputy CEO Zoltán Urbán that the office had suspended the investigation into the circumstances of the loan to ETO Park.

Index on the very same day learned a few more tidbits about the case. During the 2011 investigation KEHI talked to practically all former top officials of the bank, in addition to lower-level officers who had anything to do with the case. There was one man, however, whom they never contacted: Csaba Tarsoly, CEO of Quaestor. One informant told Index that during the procedure “in an informal way Tarsoly was being told about the details of the investigation.”

So far we can piece together a pretty coherent story, but KEHI is working hard to muddle it. When HírTV first asked KEHI about the details of the earlier investigation of MFB and ETO Park, they were told that KEHI had pressed charges on six accounts. Later KEHI changed the story: no, they didn’t do anything except investigate. That investigation had to be darned thorough because they began it in 2010 and only five years later did they have enough evidence to proceed. After Zsolt Gréczy’s revelations, KEHI denied outright that it ever stopped the investigation.

And finally, here is the latest explanation of what happened in 2011 and 2012, this time from János Lázár. As far as he knows, “KEHI didn’t stop the investigation; it only interrupted [megszakította] it.” Moreover, KEHI asked MFB to change the contract with ETO Park in order to safeguard the interests of the bank. But if the government was aware of the precarious state of Tarsoly’s financial empire, why did it make a gift of 250 million forints for the ETO Park project? Lázár’s surprising answer was: “It was not our job to make the loan unpayable.” In brief, the government helped out the ailing Quaestor as early as 2011, hoping to avoid the firm’s collapse.

The bankruptcy of Quaestor’s brokerage firm is a separate issue from the ETO Park project, which admittedly was not exactly a success story but was not responsible for the brokerage firm’s collapse. On the contrary, one can read stories about contractors working on the project in Győr who often didn’t receive payment on time. The management blamed MFB for not releasing the necessary amount of money at specified intervals. As it turned out, this was a lie. Tarsoly was simply using the loan to cover his tracks in his pyramid scheme.

If the Orbán government had wanted to point the finger at Ferenc Gyurcsány and Gordon Bajnai for not properly vetting the loan for the ETO Park project, it could have done so in 2010 or 2011. Instead, it stopped the investigation and kept trying to prop up Quaestor’s business ventures. It became an enabler of financial corruption.

Our man in Moscow: Szilárd Kiss

The big news in Hungary is still the financial collapse of the Quaestor Group, which may involve the loss of 150-200 billion forints to those who used the companies’ services. The consequences of the bankruptcy might be far-reaching, including a loss of trust in Hungary’s financial institutions.

The more we hear about the details of Quaestor’s ventures the clearer it is that the Hungarian government was heavily involved in the business affairs of Csaba Tarsoly, the CEO of the firm. As the story unfolds, it looks as if two ministries in particular are implicated: the ministry of foreign affairs and trade and the ministry of agriculture. A closer look at the cast of characters reveals that there was one man who had a close working relationship with Tarsoly as well as the two ministers: Szilárd Kiss. Commonly described as an adventurer of dubious reputation, Kiss may have posed, and in fact still may pose, a national security threat to the country.

I wrote about Szilárd Kiss once, but here I would like to say a few words about the likely relationships between Kiss and Csaba Tarsoly; Péter Szijjártó, minister of foreign affairs and trade; and Sándor Fazekas, minister of agriculture. Today, a month after I wrote a post on Kiss, I believe that he had a much more important role to play in Viktor Orbán’s “eastern opening” than I suspected earlier.

As we know, Kiss has been living in Russia at least since 1990, where he moved in the hope of exploiting business opportunities. His specialty was agricultural products. Eventually, he worked as an unofficial lobbyist for Hungarians who wanted to do business in Russia. But how did Péter Szijjártó and Sándor Fazekas come to know Kiss? I suspect through Csaba Tarsoly, whom Kiss most likely tried to entice into some Russian business venture. Their relationship goes back to 2002 and 2003, way before Viktor Orbán ever dreamed of any “eastern opening.” Szilárd Kiss could be persuasive. As early as 2003 he was named to the board of Quaestor Financial Consulting. Three years later, in 2006, he became a board member and part owner of Quaestor Energetics. He resigned both positions in April 2011 when he became a civil servant.

After the 2010 Fidesz victory and the announcement of the “eastern opening,” Szilárd Kiss’s time arrived. It must have been Tarsoly who called the attention of Péter Szijjártó, an old friend from Győr and the key person in the new foreign policy introduced and directed by Prime Minister Viktor Orbán, to Szilárd Kiss, who allegedly had important connections in Russia with both businessmen and officials in the ministry of agriculture. Although at present Sándor Fazekas doesn’t want to remember anything about Szilárd Kiss, it had to have been the ministry of agriculture that named him agricultural attaché in the Hungarian Embassy in Moscow.

Szilárd Kiss / válasz.hu

Szilárd Kiss / válasz.hu

István Íjgyártó, the Hungarian ambassador to Russia between 2010 and 2014, knew about Kiss’s shady business dealings and even his brush with the law. And in September 2013 Kiss was about to be dismissed from his diplomatic post. What was behind this sudden decision when apparently both Fazekas and Szijjártó were satisfied with Kiss’s work? The foreign ministry, it seems, learned that Kiss had been vetted by the national security office and had failed the test. It had become evident during the investigation that Kiss had connections to the Russian mafia. His dismissal was not automatic, however, because the Orbán government had changed the law on the vetting of officials. An official’s superior can make his own decision about the dangers involved. Fazekas suggested to Kiss that he resign, thus avoiding the stigma of dismissal. In compensation, Fazekas immediately appointed Kiss commissioner of eastern economic relations. Why the change? Because the new appointment was based on a contractual agreement for which one didn’t need national security clearance.

Szilárd Kiss was also involved in a profitable “visa business” on the side, which he continued even while he was a member of the Hungarian diplomatic corps. All told, he was responsible for getting Hungarian visas for about 2,500 Russian citizens. Considering Kiss’s relations with the Russian underworld, it is very likely that some of his friends from the Russian mafia are today the happy owners of a Hungarian visa. Kiss was also known to be involved in human trafficking. Hundreds of prostitutes received visas through his good offices. How did he manage to acquire all these visas? It was fairly simple. He approached one of his influential Hungarian businessmen to invite Igor, Olga, or Natasha, and with this invitation he managed to convince the Hungarian consulate in Moscow to issue them visas. There was a 2011 case which came to light during a court proceeding against Kiss where a certain Yevgeny Dubrovin gave him 80,000 euros to acquire visas “for his friends.” At the exchange rate at the time, this transaction alone netted Kiss 20.8 million forints. Apparently Kiss had powerful backers in the government and the local officials could do nothing to stop his activities even if they wanted to.

Consulates in general are run quite independently from the foreign ministry, and the Moscow consulate was considered to be a hotbed of corruption. It was for that reason that some officials familiar with the situation in Moscow welcomed the idea of setting up a visa center. A lot of other countries had established such visa centers, all of them run by an Indian company, VFS Global. The Orbán government doesn’t like “orthodox” solutions, however, and therefore the Hungarian visa center in Moscow, VisaWorld-Center Szolgáltató, is owned by Csaba Tarsoly of Quaestor fame and Yelena Tsvetkova, wife or girlfriend of Szilárd Kiss. In addition, Index found out that Tsvetkova has a joint business venture with the same Yevgeny Dubrovin who earlier wanted to buy visas for his friends. There is a good possibility that both Kiss and Tsvetkova have friendly relations with the Russian secret service.

According to a well-informed source, the VisaWorld-Center in its present form may well be a hole in the “shield of Schengen.” In his opinion, it is impossible that the Russian secret service wouldn’t have a fair idea of what’s going on there. Altogether Hungarian consulates have issued more than two million visas since January 2008. The Russian share is staggeringly high: 400,000. That is, every fifth visa has been issued to a Russian citizen.

I think that even this brief description of the network that exists among politicians, businessmen, and the Russian and Hungarian underworld highlights the dangers the Hungarian government poses to the security of the European Union.

The Quaestor scandal and football

Perhaps if Prime Minister Viktor Orbán were not a crazed football fan his government wouldn’t be in such a pickle today. What does football have to do with the Quaestor scandal? A lot. Although the Orbán government is desperately trying to blame the socialist-liberal governments (2002-2010) for the collapse of Quaestor, the close relationship between Fidesz and Csaba Tarsoly, the CEO of Quaestor, dates back to 2001, during the first Orbán administration. And it was all about football.

In 2001 Tarsoly purchased the Győr football stadium and 17 acres of land for 650 million forints from Rába Rt. While he was at it, he also bought the ETO FC football team. With the purchases he assumed their heavy debt load, plus the stadium was no longer up to snuff. He needed cash and, knowing  the boundless interest in football among the Fidesz leadership, he approached Tamás Deutsch, then sports minister, who promised him 900 million forints. He also went to the socialist mayor of Győr for additional funds and got a promise of 500 million. The people of the city were thrilled that someone had bought the financially ailing football team that had seen better days, and therefore the mayor gladly offered help. Moreover, when Fidesz lost the election in 2002 he himself made sure that the new socialist-liberal government would fulfill the Fidesz government’s promise of financial help.

Back in 2001 Tarsoly had the support not only of the mayor but also of two Fidesz members of the city council, one of whom was the young political hopeful, Péter Szijjártó. Tarsoly may have been counting on a Fidesz victory in 2002 because three weeks before the election, in the presence of the Fidesz members of the city council, he laid the cornerstone of the new stadium although there was no valid building permit yet. I suspect that the cornerstone-laying ceremony was designed to help the Fidesz election campaign.

Fidesz’s loss at the national election must have been a blow to Tarsoly because he had only verbal promises of financial help, no cash in hand. So he rushed back to the socialist mayor asking for his continuing support, which he got. Moreover, the mayor promised to lobby on his behalf with the new sports minister, Ferenc Dénes, and later with Ferenc Gyurcsány, who held the post between May 2003 and September 2004.

Of course, the money that had been pledged was nowhere near enough to build a stadium that could seat 16,000 people. Moreover, as time went on, Tarsoly’s ambitions grew. He also wanted to have a hotel, a plaza, and a high school for the students of the football academy run by ETO FC. So, at the same time, Tarsoly applied for a series of loans from the state-owned Magyar Fejlesztési Bank [MFB] (Hungarian Development Bank), which eventually amounted to 16.9 billion forints. The actual construction and its financing had some setbacks, especially given the 2008 economic crisis, but the stadium and the plaza were finished in 2009. The hotel opened only in 2012.

Photo by Sándor H. Szabó

Photo by Sándor H. Szabó

Already in 2009, that is under socialist stewardship, MFB had worries about the way Quaestor was handling the project and two years later, when the Fidesz-appointed president took over the bank, he also considered the project to be one of twelve that were risky. He even asked for a police investigation, but the police or the prosecutors didn’t follow through. 444.hu suspects that the Orbán government didn’t want to make a fuss because of Tarsoly’s generous support of football. In fact, as time went on, both Viktor Orbán and Péter Szijjártó praised Tarsoly and his project at every turn. Orbán often visited the ETO Park in Győr, and the team became one of his favorites, especially since his own son was a member of ETO FC for a while. Apparently, when Audi moved its factory to Győr, Orbán’s only request in exchange for the generous government support extended to the German manufacturer was sponsorship of ETO FC. Indeed until a few days ago Audi gave 300 million forints every year to the local team.

Of course, Szijjártó, a Győr native, was thrilled. In 2012 when the four-star hotel opened, Szijjártó praised the project as the most modern sports complex in Central Europe. He went on and on about the “family-friendly plaza”and the stadium itself, which in his opinion is “the most precious gem” of all stadiums. Of course, this was before the tsunami of football stadiums thanks to Viktor Orbán’s insatiable appetite. The Győr stadium seats 16,000. A week ago only 3,800 fans were present.

As far as the plaza is concerned, it is an unmitigated disaster. It turned out that there was no need for a third shopping center in Győr. At present 44 stores out of a total of 80 are empty. The mall reminds people of the plaza in the film “Dawn of the Dead” except “not even the zombies come here.”

Some commentators speculated that the reason Tarsoly was optimistic about getting financial assistance from the government in early March was Viktor Orbán’s passion for football. Judging from the short note the prime minister sent to Tarsoly on March 9th, there might still have been a glimmer of hope as far as the owner of ETO FC was concerned. Orbán was ready to talk about Tarsoly’s proposal even at that late stage of the crisis. Of course, we have no idea what transpired in the afternoon of March 9th and the morning of the 10th when Mihály Varga’s deputy had a chat with Tarsoly, but it looks as if Orbán was unable to convince the ministry of national economy that saving Quaestor was economically and politically feasible. Even if Tarsoly owns ETO FC, Orbán’s favorite team.

The Quaestor story is becoming less transparent despite the release of documents

It was four days ago that I wrote an article titled “A Crime in Search of a More Coherent Cover-up.” Well, the Orbán government is still searching and the story, instead of becoming more coherent, is getting more confusing. It’s hard to know whether the government is intentionally obfuscating the issue or whether it simply can’t concoct a halfway believable plot in which nobody in the government is at fault. The prime minister, we have been told, misremembered. It seems that the buck didn’t stop with him after all. But at the same time he doesn’t want to implicate any of his colleagues. That wouldn’t be good for business.

Meanwhile the police twiddled their thumbs, presumably waiting for instructions from above. Although Quaestor collapsed on March 9 and rumor had it that Csaba Tarsoly, its CEO, was a flight risk, they did nothing until March 26. Finally, two days ago, they arrested Tarsoly.

The chief prosecutor of Budapest, Tibor Ibolya, tried to explain away the delay by saying that “he did not want to prejudice the case” by acting hastily. In order to bolster this claim he had the temerity to quote the guidelines of the European Court of Justice. It is hard to tell whether Ibolya is just incompetent or, more likely, an eager accomplice of the Orbán government like his boss, Péter Polt. To get a sense of the man, I recommend Olga Kálmán’s interview with him on Egyenes beszéd (Straight talk).

QuaestorAlthough we heard earlier that Csaba Tarsoly, CEO of Quaestor, had officially announced the firm’s bankruptcy, the revised account is that no such notification to the authorities ever took place. Tarsoly simply told the National Bank that the company had collapsed; he didn’t file any bankruptcy papers. As a result, Tarsoly and his associates had plenty of time to get rid of evidence, hide assets, and do all sorts of things that would obscure their allegedly illegal activities.

It is possible that a great deal more public money landed in the coffers of Quaestor than the 3.5 billion returned in the form of cash to the Magyar Nemzeti Kereskedőház (Hungarian National Trading House), which is under the jurisdiction of the ministry of foreign affairs and trade. Népszabadság received information that the ministry of agriculture lost millions, but the paper’s Fidesz sources said that its money was not at Quaestor. I, however, wouldn’t be at all surprised if this ministry also had money with Quaestor because of Tarsoly’s close business connections with Szilárd Kiss, the man accused not only of embezzlement but also of possible connections to the Russian Federal Security Service. Kiss was a special favorite of the minister of agriculture, Sándor Fazekas.

The Hungarian public was promised information about the extent of the loss of public funds by tomorrow. This will be a tricky document to put together.

By now the government seems to have realized that it has lost public confidence. Therefore in the last few days it released a number of documents to build a more believable story.

Among the documents the government released is the March 9th letter of Csaba Tarsoly to Viktor Orbán in which the Quaestor CEO asks for government help in saving his firm. He requested a 300 billion forint loan to protect 50,000 small investors, resulting in greater public trust in the Orbán government. The government even released Viktor Orbán’s answer as transmitted by his private secretary:

We gratefully acknowledge the receipt of your letter. The Prime Minister informed the minister of economics of its content. Mihály Varga will appoint a person to conduct the negotiations you suggest. He will most likely get in touch with you today.

It looks as if Hungary’s prime minister was prepared to make a deal with the man whom now he calls a crook.

One would assume, on the basis of these letters, that the man appointed by Mihály Varga actually had a conversation with Tarsoly on the evening of March 9th, which was unsuccessful. Therefore, Tarsoly had no choice but announce, albeit unofficially, the collapse of Quaestor to György Matolcsy, president of the Hungarian National Bank. Today, however, we learned that this sequence of events, however logical, is wrong.

VS.hu asked for additional information from the ministry of national economy, and it actually got what its reporter asked for. Yes, Mihály Varga did appoint Undersecretary Gábor Orbán (no relation to the prime minister), who met Tarsoly not on 9th but on the following day, March 10th. Apparently he didn’t like Tarsoly’s proposal. Undersecretary Orbán “found the plan unrealistic and unacceptable because it would have put the whole financial burden of restitution on the Hungarian government.” Another inexplicable twist in an already badly twisted story. What was the point of negotiation between Csaba Tarsoly and the Hungarian government a day after the unofficial announcement of Quaestor’s collapse? Why didn’t Tarsoly wait until he had a chance to talk to Gábor Orbán? Is it possible that Tarsoly was still hoping to make a deal, even after March 10th? That he viewed the collapse of Quaestor as remediable?

In this story of twists and turns, contradictions and memory lapses, Népszava noticed another oddity. While the prime minister office’s short e-mail to Csaba Tarsoly was written on March 9 at 17:24, Tarsoly’s letter to Orbán was logged in only on March 10th. Naturally, the Hungarian media immediately picked up this anomaly. Admittedly, it may be nothing more than the usual sloppiness that reigns in Hungarian government circles. It might happen, though it seems odd, that a letter would be received and answered before it was logged in. The official explanation is that the office of the prime minister receives an inordinate amount of mail and that the log-in process–all done by hand–is slow. Surely, even Viktor Orbán’s “plebeian government” could afford an electronic automatic scanner which would take care of all this in seconds.

What is much more difficult to explain is why the Tarsoly letter to Orbán, which Giró Szász proudly showed to Antónia Mészáros, a reporter for ATV, last Sunday, March 29, had no log-in information on it whatsoever. Which letter is authentic? The one the government released, with the log-in date of March 10, or the letter Giró Szász showed on March 29, which had never been logged in? I’m sure the government will say that the letter Giró Szász had was a copy of the letter the prime minister received, a copy made prior to its being logged in. But why, when it is in the throes of a scandal, doesn’t the government keep things tidy? It just raises new questions, arouses new suspicions.