Tag Archives: György Magyar

Metro 4: The largest case of Hungarian fraud and corruption

Now that the complete OLAF report is available online, we can all settle down and try to read 103 pages of dense prose detailing “irregularities, fraud, corruption, and misappropriation of EU funds.” A five-member OLAF group began their investigation in January 2012 after the Court of Auditors and the Directorate General for Regional and Urban Policy of the European Commission contacted OLAF, asking the office to scrutinize the case. During the investigation, the OLAF staff got in touch with only the City of Budapest and Péter Medgyessy, prime minister of Hungary between 2002 and 2004, whose consulting firm worked for Alstom Transport S.A., one of the firms accused of wrongdoing.

The total cost of the project was €1,747,313,606, of which €696,490,000 came from the Cohesion Fund. According to OLAF’s calculation, “the financial impact on the Cohesion Fund is €227,881,690.”

The release of OLAF’s final report put an end to the political game Fidesz and the Orbán government had been playing with the document. János Lázár, head of the prime minister’s office, and his deputy, the honey-tongued Nándor Csepreghy, did their best to get as much political mileage from the affair as possible. Lázár intimated that an international socialist-liberal conspiracy was behind the corruption that occurred at the Metro 4 project. On another occasion, he claimed to have filed charges against Gábor Demszky, mayor of Budapest between 1990 and 2010, Csaba Horváth, deputy mayor between 2006 and 2009, and János Atkári, an adviser to Demszky. Csepreghy must have known that none of these people was mentioned in the document, but in a long interview at 888.hu he intimated that even Ferenc Gyurcsány, prime minister between 2004 and 2009, may have shared responsibility for the misappropriation of funds. A few days later he claimed that other politicians might also be implicated.

All this is just political fluff. What we know from the OLAF report is that the City of Budapest signed a contract in 2004 with Budapesti Közlekedési Vállalat (BKV), the city-owned transit authority, which was commissioned to implement the project. Most likely that was a major mistake, which led to a lot of difficulties later. Any project, especially such a large one as the construction of a metro, needs a general contractor who oversees the project. BKV’s staff was not equipped to coordinate the work, which led to innumerable hiccups during construction.

Throughout the project the Hungarian media, especially the online site Index, reported many suspicious cases of overspending. But these cases were actually small potatoes, like too many consulting firms and lawyers making millions for very little work. Although several such cases are described in the final report, the bulk of the money OLAF would now like to be returned came from serious irregularities during the acquisition of tenders by huge corporations.

According to OLAF, 96% of the “irregularities” occurred in contracts signed by six large firms: Siemens AG, the largest manufacturing and electronics company in Europe; Swietelsky, an Austrian construction company from Linz; Strabag, the largest construction company in Austria, based in Villach; a Hungarian company called Hídépítő Zrt., which as its name indicates builds bridges and roads; the BAMCO consortium (Vinci CGP, Strabag, Hídépítő Zrt); and Alstom, the French multinational company operating worldwide in rail transport, including the manufacture of metro trains.

I left Alstom to last because it was in regard to Alstom that OLAF got in touch with Péter Medgyessy, who received €600,000 in 2007-2008 from Alstom for two years of consulting. This payment occurred after Alstom had won the tender with apparently the worst offer. Medgyessy naturally claims that his consulting firm had nothing to do with the Alstom case, adding that it is a well-known fact that his relationship with Prime Minister Ferenc Gyurcsány and the liberal SZDSZ leadership of the City of Budapest was strained. What his relationship with Gyurcsány had to do with BKV deciding to purchase overpriced Alstom cars is beyond me. I have no idea whether in a court of law Medgyessy would be found innocent or not, but in ethical terms his behavior was highly suspect.

Siemens, the German company which was in charge of electrical works, received 31.7 billion forints (€102,303,730) for the job. Since OLAF claims that Siemens most likely received inside information during the bidding process, the European Union wants the Hungarian government to pay back the whole amount. The same is true of Alstom’s 22.9 billion forint (€73,892,769) tender. BAMCO also won the tender in an irregular manner, and therefore the European Union demands the return of 8 billion forints (€25,817,360). The EU also demands 7.6 billion forints (€24,523,364) from Swietelsky, which was responsible for the interior of the metro stations. Strabag-Hídépítő, in charge of structural work on the station at Baross Square, received 3.7 billion forints for its work but because of procurement irregularities 2.5 billion forints (€8,067,751) should be returned.

Another politician who, although not mentioned by name, was most likely involved in the metro case is László Puch, former financial director of MSZP, whose company Media Magnet Kft. just purchased the ailing Népszava and Vasárnapi Hírek. Media Magnet, according to the OLAF report, received 331 million forints (€1,068,110) from Siemens for advertising. The report notes that “this company was in charge of the campaign of the political party which was in a decision-making position in the case of Metro 4.” In 2010 Index reported that BKV ordered all sorts of superfluous studies from Media Magnet on such things as, for example, the state of the cable television market. There is a strong suspicion that some of this money ended up in MSZP’s coffers.

The biggest culprits will most likely be found among the representatives of the named companies and those BKV officials who were in contact with them. There’s no question that the guilty parties should be punished, but judging from the outcomes of earlier corruption cases I have my doubts that we will ever hear about all the dirt that OLAF unearthed. I’m also pretty sure that Fidesz will try its darndest to drag high-level politicians into the morass around BKV.

I see that Gábor Demszky will be represented by György Magyar, one of the “star lawyers” in the country. On February 3 Magyar announced on ATV that Demszky had signed only three contracts during the many years of construction. One was the contract between the city and the government in which the parties agreed that 79% of the construction cost would be borne by the government and the rest by the City of Budapest. The second contract dealt with a loan the City had to obtain for the project. The third was the contract that gave full authority to BKV for the implementation of the project.

Fidesz naturally wants to have a parliamentary investigation into the case, which will lead to further accusations on both sides. If Hungary had a decent prosecutor’s office and an independent chief prosecutor, it should undertake a speedy, thorough, unbiased investigation of the case. Unfortunately, this is the last thing we can hope for under the present circumstances.

February 6, 2017

Defending “the social order” by force of arms?

Most Hungarian journalists and even opposition politicians find what’s going on in Budapest at the moment highly amusing. The City of Budapest dismantles a dozen advertising kiosks, which workmen hired by Mahir Cityposter, a firm owned in part by Lajos Simicska, then replace with brand new ones. This is not, however, something that one ought to find funny or entertaining. What’s going on is further proof that Hungary is no longer a country of law. The Orbán government can do whatever it wants to those who are in its way. And Lajos Simicska is very much in Viktor Orbán’s way. He must be destroyed.

In 2006 Mahir signed a 25-year contract with the City of Budapest which gave it the right to set up 780 cylinder-shaped kiosks in the busiest parts of the city. Because the investment was substantial, Mahir negotiated a contract that couldn’t be broken before the date of its expiration. I cannot decide whether the contract was disadvantageous from the city’s point of view, but for ten years the city fathers found no fault with it. Last fall, however, they decided that the contract was so shamefully drafted in favor of Mahir that decency and good conscience (jóerkölcs) might be issues here. Sometime in September the city council, with a huge Fidesz majority, voted overwhelmingly to break the contract with Mahir as of October 31. They gave Mahir 60 days to remove all kiosks. If it fails to do so, they said, the city itself will do the job, starting in January 2016.

The inspiration for this late discovery of the foul nature of the contract undoubtedly came from the prime minister, who ever since March has been trying to ruin his old friend Lajos Simicska because Simicska humiliated him, called him all sorts of names, and, above all, was no longer willing to use his media empire in the service of the government. Simicska’s company, Közgép, which previously had received fantastic government contracts financed primarily by the European Union, was put on the government’s black list and, in fact, some of its projects that were under construction have been suspended. The latest chapter in this struggle is “kiosk gate.” We can be pretty sure that István Tarlós, mayor of Budapest, received a telephone call one day and was instructed to get rid of Simicska’s Mahir. Tarlós and 19 Fidesz members of the city council obliged.

Hard at work

Hard at work

It always surprises me how inept opposition politicians can be when it comes to realizing the significance of some of Viktor Orbán’s moves. For example, Csaba Horváth (MSZP) said: “they should conduct this Fidesz in-fighting among themselves and, if it is at all possible, they shouldn’t entertain either the public or the city council with them.” I must say that an unnamed journalist of stop.hu is much more sophisticated politically than Horváth because he captured the essence of this so-called “in-fighting” when he wrote: “Now Lajos Simicska can really see what kind of a country he and his former friend built. If necessary, the government will get even with those who are in the prime minister’s way even if it means disregarding the law. The only difference between Simicska and the average Joe is that the CEO of Közgép became a billionnaire from government investments. While Simicska fights his prestige battles with loose change, Everyman is fighting for his life.”

Mahir Cityposter’s legal defense is in good hands. Simicska hired György Magyar, an able lawyer. As far as he is concerned, the case is clear-cut. Immediately after the city council voted to break the contract, he filed suit against the city of Budapest. As far as he knows, the case will be heard on January 11. Until then, every action taken in this case is illegal. However, a new pro-government website, factor.hu, claims that Mahir’s request for a postponement of the removal of the kiosks was denied on December 12. The only problem is that Mahir’s lawyer knows nothing about this. Perhaps these discrepancies will be cleared up in the next few days. At this point it is useless delving into the details of the case. The immediate reaction of Orbán’s minions is much more interesting and telling.

The very fact that Mahir didn’t take what it is considered to be an illegal action lying down angered those who feel compelled to defend their master. Máté Kocsis, the mayor of District VIII who has been mentioned as the possible next lord mayor of Budapest, suggested police action to ensure the removal of the kiosks. He also threatened the company Mahir hired to guard the kiosks with the withdrawal of its operating license. György Bakondi, chief adviser to Viktor Orbán who made himself ridiculous during the refugee crisis, happily agreed that “public security and social order” might be maintained by armed forces. The word he actually used was “karhatalom,” which has a horrible connotation in Hungarian. After the failed Hungarian Revolution in 1956 the newly installed Kádár regime recruited civilians who were ready to support the new government to patrol the streets, arms in hand. These people were called “karhatalmisták.” Their task was to defend the “social order.” As one newspaper rightly pointed out, Bakondi slept through 27 years. He still thinks he is in the People’s Democracy of Hungary.

What is really frightening is the talk about “public security” and the defense of “social order.” At the moment Orbán and Company want to save the social order from Simicska and they have gone to war against him but, as László Seres pointed out in HVG today, “Who is interested in Simicska? This is a declaration of war. Against all of us, just for your information.” Indeed, whatever one thinks of Simicska, let’s not forget that what is happening to him can happen to any Hungarian.

It took eight years but apparently the Hungarian police found the murderer

Today, for a change of pace, I’m turning to a high-profile murder case in Hungary.

Way back on April 2, 2011 I wrote about a murder that had been committed in 2007. Irma Balla, a local Fidesz politician in Debrecen, was brutally murdered in her home. The police investigated for a whole year, after which they decided that the murderer must have been the woman’s son, Sándor Schönstein, even though he had an iron-clad alibi. He was at a picnic miles away at the time of the murder. Alibi notwithstanding, Schönstein was immediately incarcerated.

His lawyer, the well-known György Magyar, continued battling with the investigators, whom he considered incompetent and negligent. Magyar was clearly frustrated, and at one point he became a kind of Perry Mason, the TV lawyer who together with a private investigator had to solve cases in order to get his clients acquitted. Magyar began his own investigation and found a plausible suspect, Lajos D. Lajos D. had been questioned as a witness because he happened to be working next door at the time of the murder. He already had a criminal record and was, in fact, in jail when he was questioned. During his testimony he gave a fairly accurate description of the interior of Balla’s house. When asked how he could possibly know all this, he claimed that while working on the house next door he could see all the details from a reflection in an open window. György Magyar and his private detective ascertained that Lajos D. was not telling the truth. No matter the time of the day or the weather, one couldn’t see much from the reflection in the window. When a bit more pressure was put on Lajos D., he confessed to the murder twice, only to withdraw his confessions a day or two later. In any case, the police didn’t seem to be interested in him.

Sándor Schönstein and his laywer, György Magyar

Sándor Schönstein and his laywer, György Magyar

In 2009 Schönstein was sentenced to twelve years for the murder of his mother. In 2011, when I wrote my post, the appellate court had taken up the case and had some harsh words to say about the investigation, the prosecution, and the judges of the lower court. The court declared the earlier sentencing null and void. The whole court proceeding had to be repeated. In November 2012 Schönstein was acquitted due to lack of evidence. A year later the appellate court of Debrecen agreed with the lower court. But meanwhile, Schönstein, a university student, had spent two years in jail. Ever since he has been trying to receive compensation for his suffering from the Hungarian state.

I guess everybody thought back in 2013 that this was the end of story. In late 2014, however, dehir.hu learned that the investigation hadn’t been abandoned. But instead of the Keystone Kops of Debrecen, Hungary’s top investigators from the headquarters of the national police force in Budapest descended on the city.  A few months later, in early March 2015, they were prepared to press charges against the same Lajos D. that Schönstein’s lawyer, from the very beginning, had thought was the culprit.

Lajos D. seems to spend more time in jail than not. When the Schönstein case was heard in 2009, Lajos D. was once again in jail. György Magyar insisted that he be a witness at the trial. On this occasion he again confessed to the murder and specifically mentioned the crowbar which he used to break Irma Balla’s neck. The Debrecen police didn’t take the confession seriously. They figured that Lajos D. had confessed in order to get out of jail a few times during the court proceedings. Brilliant, isn’t it? And, by the way, Lajos D. is in jail again. This time he is serving an eight-year sentence for robbery. Finally, he has been charged with the murder of Irma Balla.

So, what happened? The whole case was taken out of the hands of the Debrecen police who made too many mistakes to list. Those who want more details should read the article in dehir.hu. The panel of judges was also either incompetent or negligent. Perhaps both. During the trial Lajos D. had two people testify on his behalf, but their testimony was anything but exculpatory. For example, a friend of his told the judge that when he asked Lajos D. whether he had anything to do with the murder, he paused for a while and did not give an unequivocal answer. Lajos D.’s half brother, contrary to his earlier statement, admitted during the trial that Lajos was not at home during the night of the murder. All that was ignored by the court of Hajdú-Bihar County. I might add that in June 2013 the judge who sentenced Sándor Schönstein to 12 years was promoted because of his outstanding professionalism.

So what did the Budapest detectives find that the Debrecen cops missed? Lajos D.’s DNA, which apparently was found on a blanket under Irma Balla’s body. According to Népszabadság, some new technique made the discovery possible. Of course, I have no idea about the progress in DNA research over the last few years, but I’m a bit skeptical. This story sounds to me like a ploy to mask the total incompetence of the Debrecen police. But at least now Sándor Schönstein can be found not guilty not just because the court couldn’t find evidence that he committed the murder but because, it seems, the murderer was somebody else.