Tag Archives: Hungarian National Trading House

“Observer”: 150 billion Ft. support for ethnic Hungarian businesses abroad. Really?

The Hungarian government has been funding various activities of ethnic Hungarians in the neighboring countries for many years, but the big news here was the unprecedented amount heralded as well as the broad circle of recipients. There are many other Hungarian government projects in the neighboring countries, but this exceptionally large flagship project so vigorously advertised by the government deserves our special attention.

For information, as it came out, I had to rely on the few available government sources. As we know, in Hungary today commitments, decrees, and even laws are altered or annulled at the drop of a word (e.g. dropped at a press conference on Thursday or radio talk on Friday), and since there are only a couple of reports on the actual implementation, significant variances may be revealed later. Our readers may certainly contribute with more information.

On the subject of Hungarian government relations with the Hungarians living in the neighboring countries (hereinafter “ethnic Hungarians”), a bit of background would help understanding. The Orbán/Fidesz attempts of the 2000-2008 period to install puppet (ethnic) political parties in the neighboring countries largely failed, so Orbán resorted to the proven Simicska method of diverting billions of Hungarian taxpayer forints for the purchase of ethnic Hungarian parties/votes and managed 180,000 votes in the 2014 elections.

With popularity slipping, Orbán opened the tap more and now is promising the ethnic Hungarians a real cornucopia, albeit for the future, i.e. for the March 2018 elections. According to the statements of undersecretary Levente Magyar of the Ministry for Foreign and Economic Affairs made in the beginning of 2017, the government was planning to spend 150 billion Ft. (EUR 500 million) in support of ethnic Hungarians’ small businesses. An extensive road show was undertaken to popularize the initiative, as if the businesses addressed wouldn’t be flocking to inquire about the free money. There are no figures on how much was spent on this propaganda and hoopla, but here are some examples of full day programs organized in a college in the Ukraine, in Slovakia, and in a hotel at Balaton – as Levente Magyar informed us, they “reached every Hungarian and every settlement inhabited by Hungarians in Voivodina,” for example.

The undersecretary also announced that the Ministry’s Trading Houses network was creating 22 offices by way of which, together with other (unspecified) local organizations, the funds would be distributed. More sunk costs.

To put things in prospective, the same TH network now designated to process tens of thousands of tender applications in several countries was considered incapable of selling 2-3 thousand residency bonds, as a result of which the state was deprived of 200 billion forints, which went into private pockets.

Two undersecretaries and the government controlled media repeatedly stated that “research found that 40,000 ethnic Hungarian businesses are operating in the neighboring countries,” implying an extremely large circle of beneficiaries. In fact, only start-up businesses founded after January 1, 2016 or “family businesses” are eligible in three of the four programs, so the 40,000 figure is misleading.

Eight months into 2017 we could reasonably expect to see some reports about the implementation of the grand 150 billion Ft. project. Well, not surprisingly, my search found dozens of new items about the tender opportunities, but very little about the implementation.

In the beginning of August the same Levente Magyar stated that “up to now the Hungarian government has placed 9 billion Ft. through its economic development program in Voivodina.” However, the same website refers to the following four programs of the Gábor Bethlen Fund, with total funding of 0.83 billion Ft. for 2017:

  • Tender for Support of start-up ethnic Hungarians’ businesses registered and operating in the neighboring countries–0.12 billion Ft.
  • Tender for Support, cooperation with start-up ethnic Hungarian’s businesses–0.11 billion Ft.
  • Tender for Support of ethnic Hungarian family businesses registered and operating in the neighboring countries–0.6 billion Ft.

At the end of July undersecretary in the Prime Minister’s Office János Potápi stated that “the government supported … ethnic Hungarian entrepreneurs in the Carpathian Basin by 0.83 billion Ft.,” confirming the above total.

Trying to broaden the picture, I added the “Egán Ede Kárpátalja Economic Development Center” charity foundation, which also runs business support programs for:

  • Support for private entrepreneurs and micro and small enterprises’ capacity-building and innovation business development – funding 1 billion Ft.
  • Support for private entrepreneurs and micro and small enterprises’ capacity-building and innovation business development in the agricultural sector – funding 1 billion Ft. Report*
  • Support for large investments (min 50 million forint projects) – no funding information or report.
  • Support for large agricultural investments (min 50 million forint projects) – no funding information or report.

The Bethlen Gabor Fund also runs some non-business support programs:

All the above programs for the support of ethnic Hungarians’ businesses, culture and education, etc. put together do not total even 10% of the 150 billion hyped by the government.

In a confusing mixture of promises, cross references, and multiple announcements, the e-media is awash with all sorts of figures, mostly based on the statements made by the two undersecretaries.

The full statement of Levente Magyar, mentioned above, reveals that of the “9 billion ft. … placed in Voivodina … the amount distributed so far is less than a quarter of the whole, and they will try to distribute the remaining during the next year.” This means that more than 2 billion ft. were distributed, contradicting the Potápi figure of 0.83 billion. Confused? Me too.

According to another statement of János Potápi, “the Hungarian government supported the creation of 104 workshops and training farms in the Carpathian Basin, spending more than 738 million forints” in 2015 and 2016, the “2015 – Year of vocational training for ethnic Hungarians” program included. This amount is similar to the 0.83 billion reported for 2017.

I’m certain more funds are being spent in the neighboring countries, but after the boisterous heralding of the 150 billion forint programs, few if any reports about their implementation were available. I wonder where the road show costs were accounted for, as the amounts spent on propaganda and hoopla are probably commensurate with the 0.83 billion distributed.

Moreover, these support funds pale in comparison to many propaganda items like the many billions for US lobbying, the almost 10 billion of Századvég funding, the never ending multibillion poster campaigns, or, say, a single 8+ billion soccer item.

After all, if even a fraction of the unprecedented amounts hyped were spent for the support of ethnic Hungarians, it would have been a commendable act, but from the “coincidence” of this initiative with the forthcoming parliamentary elections in April 2018 emanates the familiar stench of corruption in the form of vote buying (and eventually awards to cronies and supporters, if the long domestic record is any guide).

The initiative is questionable in light of the negative or downright appalling trends in the Hungarian economic and business areas – the government should fund remedies to the domestic problems before those in the neighboring countries. And problems we have: almost all Hungarian indicators have deteriorated since 2010 according to the World Economic Forum, OECD, and EU: business environment, legal framework, competitiveness, productivity, capitalization (small and medium companies), and vocational skills.

There is also the all-pervasive and all-corroding corruption, the huge bureaucracy, e.g. 18% of the workforce employed by the state, the five-layer administration, e.g. ministerial rank departments have almost doubled since 2010, etc. etc.

To answer to the question in the title – no, not really, nothing like 150 billion is being spent. The much hyped initiative is just another case of propaganda, deception, and trickery, Orbán style. The danger to the ethnic Hungarian businesses is that they may become infected if they operate close to the corrupt Hungarian regime.

* The report of the results in the micro and small agricultural businesses tender contains no actual payout figures. The awards are noted as either “maximum funding” or “depending on availability of funds.” Notably all awards were made to individuals, which raises the specter of political corruption.


One can always count on a good friend (or an alter ego): Lőrinc Mészáros and Viktor Orbán

I have the feeling that as long as Hungary has the misfortune of having Viktor Orbán as its prime minister there will be no end to the scandalous affairs surrounding Lőrinc Mészáros, the pipefitter from the village of Felcsút whose brilliant business acumen is the marvel not just of Hungary but perhaps the whole world. Since 2010 he has become one of the wealthiest men in the country thanks to, as he himself admitted, God, hard work, and, last but not least, his friendship with Viktor Orbán. Every time one turns around the miracle pipefitter has made a new acquisition. By now he himself is confused about the businesses and properties he owns. Occasionally he has to be reminded by others that he is the owner of this or that property or business. It could be amusing if it weren’t so sad.

I don’t think you would find too many Hungarians who think that Mészáros’s businesses are actually his own. The information made public today only reinforces this skepticism. One of Mészáros’s companies paid a 3 billion forint debt of Cider Alma [Apple] Kft., a company in part owned by Viktor Orbán’s brother-in-law and nephew. No, this figure is not a mistake; we are talking about 3 billion forints or $10.3 million.

To understand this transaction, let’s go back a little in time to the establishment of a number of centers, representing the Hungarian National Trading House (MNKH), under the aegis of the newly reorganized ministry of foreign affairs and trade. An incredible amount of money was poured into these trading centers in far-flung places across the globe. They were supposed to promote Hungarian business abroad. Unfortunately, in the last two years the foreign ministry’s business venture has lost something like 6 billion forints without bringing in an appreciable amount of money as a result of international trade.

At the end of September 2016 444.hu found out that a certain Cider Alma Kft. owes MNKH 3.2 billion forints and that the trading house now has in its possession 5 million packages of 425 ml vacuum-packed corn and 1.5 million 720 ml packets of pitted sour cherries. 444.hu’s investigative team was a bit puzzled and at first couldn’t see the connection between the corn and sour cherries on the one hand and Cider Alma Kft. on the other. But then they found an item from 2015 which revealed that MNKH had lent 3.2 billion forints to Cider Alma to produce apple sauce (not, as its name would indicate, apple cider). A year went by and only 280 million forints were paid back. Obviously something went wrong and Cider Alma was broke. Or, using a slang expression, the whole thing went “alma,” in this sense meaning “went bust.” 444.hu couldn’t resist a good line: “Would you like to have some apple sauce? Call the foreign ministry.”

Close friends with lots of secrets

It didn’t take more than a couple of days for 444.hu to learn that “Orbán’s relatives are dropping from the spaces between the packets of corn and sour cherries.” It turned out that Gizella Lévai, sister-in-law of Viktor Orbán, and her partner, Imre Ökrös, are business partners in three different subsidiaries of Cider Alma Kft. The relationship between the owners of Cider Alma and the Orbán relatives is so close that Ökrös’s two companies, Érvölgye Konzerv Kft. and Kelet Konzerv Kft., became the guarantors of the loan MNKH extended to Cider Alma. There are other Orbán relatives in this particular business venture as well. Most notably, Ádám Szeghalmi, Gizella Lévai’s son, cousin of the Orbán children, is the CEO of Drogida Hungaro, also a subsidiary of Cider Alma.

Hír TV immediately went after the story and asked for details of the deal. Specifically, they launched an inquiry into the fate of that loan. Ordinary citizens are entitled to get such information because MNKH is a state company and therefore the sum in question is public money. Five months later, Hír TV learned that the debt had been sold to Hórusz Faktorház Zrt., which happens to be a business venture in which Lőrinc Mészáros is involved. Factoring is a financial transaction and a type of debtor finance in which a business sells its accounts receivable to a third party at a discount. It is hard to find out much about this factoring company, except the name of its CEO.

Factoring is a common tool of finance, so Jobbik’s spokesman, Ádám Mirkóczki, was uninformed when he said: “I have never heard of a case where one company pays another company’s debt.” Admittedly, this arrangement is atypical. Cider Alma, it seems, had no accounts receivable, only some inventory to sell. Perhaps Mészáros and his business partners thought that the corn and sour cherries could be sold for more than they paid to settle Cider Alma’s debt. Of course, it is also possible, perhaps even likely, that Hórusz Faktorház took over the debt knowing full well that the firm will never see a penny. It was simply an arrangement among relatives. Whether we will learn more about this case I very much doubt. I agree with Ágnes Vadai of Demokratikus Koalíció that Fidesz corruption cases are simply dropped by the prosecutor’s office and this is especially so when the prime minister’s relatives are involved.

The funniest piece on the case was written by Bálint Molnár in Kolozsvári Szalonna (Bacon à la Kolozsvár). It bears the title “Is it surprising that with such stupid relatives the prime minister is flat broke?” The reference is to Viktor Orbán’s latest financial statement in which he went a bit too far in trying to make himself an average Joe financially. He was already quite poor in 2015 according to that year’s financial statement, but by the end of 2016 he was outright poverty-stricken. He does have one and a half pieces of real estate. He is half owner of the family’s Budapest home and sole owner of the house in Felcsút, right next to the stadium. But he and his wife have only 743,000 forints ($2,551) in their checking account, and they owe 5,999,694 forints ($20,600). He still has four dependent children, and his monthly pay as prime minister is 1,558,333 forints ($5,350). Let me add that an average Hungarian family has over 2,500,000 forints ($8,580) in its checking account. Anikó Lévai must be a very frugal housewife. On the other hand, Mészáros is busily buying one piece of property after the other. According to the latest account he is building a football stadium in Osijek, Croatia, where he wants to establish Europe’s best football academy. Oh my, and what will happen to Felcsút?

February 14, 2017

Demands for Viktor Orbán’s resignation

Today is one of those days that I have no idea what will happen between beginning to write this post and uploading it. One thing, however, I can be pretty sure of: I don’t have to worry that by tomorrow morning Viktor Orbán will not be the prime minister of Hungary. Although that is what the opposition would like to see.

This morning’s editorial in Népszabadság demanded Foreign Minister Péter Szijjártó’s resignation. And, indeed, Szijjártó’s situation was deemed so grave that Prime Minister Viktor Orbán himself came to his rescue. At a press conference in Sopron he said that he was the one who decided that all government money invested in bonds issued by private financial institutions must be withdrawn immediately. He announced his decision at the Thursday, March 4th cabinet meeting. The Hungarian National Trading House subsequently withdrew 3.8 billion forints from Quaestor on Monday, March 9th. That very evening Csaba Tarsoly, CEO of Quaestor, announced his firm’s bankruptcy.

The problem with this story is that it doesn’t jibe with earlier statements of the ministry of foreign affairs and trade that praised the Trading House officials who “acted conscientiously when, observing the market developments,” they opted to withdraw Trading House’s money from Quaestor. Because, according to the letter the ministry sent to cink.hu, there was real panic in the first days of March “when the majority of Quaestor’s clients began withdrawing their assets.” The problem with this explanation is that it is not true. There was no outward sign of trouble at Quaestor at the time. Once Orbán decided to bear the odium of what appeared to be insider trading on the part of government agencies, the ministry discovered that its earlier explanation did not accurately reflect the situation and that in fact the prime minister’s version was the correct one.

Many political reporters were stunned when they heard that Orbán had decided to be the fall guy in this scandal. “In the first moment I didn’t understand how [Orbán] could do something like that,” László Szily of cink.hu saidM. Kasnyk of 444.hu at first couldn’t believe that the story was true. After all, with this admission Orbán threw himself into a quagmire of monumental proportions with a possibly serious political fallout. But it seems that Viktor Orbán is confident about his invincibility. He thinks that his position is secure and that he has nothing to fear. Given the Hungarian parliamentary rules he is probably right, although the opposition parties appear to be united in demanding his resignation.

As we learn more about the events leading up to the collapse of Quaestor, it seems that the Fidesz political leadership had been aware that Csaba Tarsoly’s financial empire was in serious trouble for some time. A high-ranking member of the Fidesz parliamentary caucus told an Index reporter that it was likely after Buda-Cash’s collapse that there would be other bankruptcies. He specifically mentioned Hungaria Értékpapír and Quaestor, both of which subsequently failed.

But let’s return to why Viktor Orbán decided to speak up. Most likely because he realized that Péter Szijjártó was in big trouble. He had illegally invested government assets in a shaky private business venture and then, presumably equally illegally, had withdrawn 3.8 billion forints just before Quaestor’s collapse. Orbán gave this young man a critically important position, one that he was not prepared for. But Orbán is not the kind of man who would ever admit that he made a wrong decision, and therefore it would never occur to him to remove Szijjártó from his position. Also, Szijjártó served him with undivided loyalty for such a long time that perhaps Orbán feels obliged to defend him.

Viktor Orbán announcing that it was him who ordered the withdrawal of government assets from Quaestor

Viktor Orbán announcing his decision to withdraw government assets from Quaestor

Let’s take a quick look at the opposition parties’ reaction to Viktor Orbán’s announcement. Párbeszéd Magyarországért/Dialogue for Hungary (PM) was the first to announce their decision to press charges against government officials who, they believe, are guilty of insider trading. Tímea Szabó, co-chair of the party, naively said that they will demand the audiotape of the March 4th cabinet meeting. Good luck! As far as I know, no records of Orbán’s cabinet meetings are kept in any shape or form. Orbán made that decision already in 1998 when he first became prime minister. He didn’t want to become a second Nixon.

Együtt/Together decided that, while they were at it, they might as well send Péter Polt, the chief prosecutor, into retirement alongside his old friend, the prime minister. DK is also pressing charges, and they “would like it if the prime minister would assume financial responsibility with his own assets” for the losses at Quaestor. LMP’s spokesman, a practicing lawyer, talked about insider trading, which is a serious crime and for which long jail terms are normally handed down. He even offered an explanation of what might have happened. In his opinion, it was through the close relationship between Szijjártó and Tarsoly that the information leaked out and spread within the Orbán administration. He also raised the possibility that with the ministry withdrawing about 20 billion forints, Szijjártó may have been partially responsible for the collapse of Quaestor. Gábor Fodor of the Liberális Párt (LP) wrote a letter to the prime minister which Orbán will have to answer at the latest in three weeks’ time. Fodor wants to know exactly how Orbán ordered the ministers to withdraw government assets from private firms. Was it in a letter and, if yes, who were the addressees?

Modern Magyarország Mozgalom (MoMa), the party of Lajos Bokros, called the Hungarian state under Victor Orbán a “den of criminals.” He called attention to the seriousness of insider trading for which “in the United States and in Great Britain people receive very long jail sentences.” In Hungary, he claimed, important government officials are involved in such practices. Bokros also wanted to know “how the ministry of foreign affairs and trade has extra money to invest.”

Several MSZP politicians talked about the case and they all called for Viktor Orbán’s resignation. Jobbik’s János Volner, chairman of the parliamentary committee on promoting entrepreneurial activities, plans to convene a meeting where he expects Péter Szijjártó and the leading official of the Hungarian National Bank to answer the committee’s questions. If they don’t get satisfactory answers, they are ready to go as far as the European Union.

Fidesz is stonewalling. The party “doesn’t fall for the socialists’ provocations because after all it was the left that in the socialist broker scandal [i.e., the Buda-Cash collapse] abandoned the Hungarian people.” And in any case, “it is MSZP, Gyurcsány and Bajnai who are involved in the network of brokerages.” I have no idea what the Fidesz spokesman is talking about here.

The last piece of news I read before sitting down to write this post said that MSZP is inviting all other opposition parties to a meeting tomorrow. We will see what the reaction to this call is. If they manage to form a common front, it will be a first.

The Quaestor scandal

I have been remiss in the last few weeks in not following up on the collapse of a number of Hungarian financial institutions. I did write about the bankruptcy of the Buda-Cash Group, which owned several credit unions that were shuttered as well as a brokerage firm. But I said nothing about Hungaria Értékpapír (Hungaria Securities), which declared bankruptcy soon after Buda-Cash’s announcement. And then on March 9 came the collapse of the Quaestor Group. In the case of Buda-Cash, Fidesz politicians and officials of the Hungarian National Bank claimed that its problems started at least fifteen years ago and therefore the socialists were responsible for its financial demise. The same trick couldn’t be used to explain away Quaestor’s problems because the CEO of the Quaestor Group, Csaba Tarsoly, had for years worked closely with the Fidesz government and people close to Viktor Orbán himself. Tarsoly also had a role to play in the government’s “eastern opening” and all the corruption cases that surfaced there.

I’m not even going to try to map out the complicated business arrangement that will most likely enable Tarsoly to save his skin and keep the money he stole from his unsuspecting customers. After all, the Quaestor Group had 68 affiliated companies, among which large sums of money changed hands.

At the center of the current controversy is the sale of billions of forints worth of Quaestor bonds. Hrurira, one of the Quaestor Group companies, handled the issuance–60 billion of bonds that were approved by the National Bank and 150 billion that were “fictive.” Quaestor Értékpapír Zrt. sold the bonds to unsuspecting clients. The money that came from the sale of the bonds was transferred to Quaestor Pénzügyi Tanácsadó/Quaestor Financial Consulting, the parent company, in the form of a loan. The company that is now under scrutiny, Quaestor Hrurira, has no assets. It could repay the customers that bought bonds from Quaestor Értékpapír Zrt. only if it could collect money from the Quaestor Pénzügyi Tanácsadó, from which Csaba Tarsoly departed. On March 16 he named a new CEO–Béla Orgován, a penniless, unemployed man with a prison record. Déjà vu all over again. Josip Tot, Kaya Ibrahim, and the halcyon days of Fidesz.

There is a strong indication that the Hungarian government has been lending a helping hand to Tarsoly so he can keep at least part of his ill-gotten money. While business associates of Buda-Cash and Hungaria are in custody, Csaba Tarsoly is free and, according to neighbors, is in the process of packing. Over the last few days we kept hearing that he will be arrested soon, but he hasn’t even been questioned by the police.

And who is Béla Orgován? 444.hu found the man who will have to face the music when Quaestor’s customers demand their nonexistent money. And, according to some sources, a lot is at stake: 150 billion forints, presumably the amount earned from the sale of the “fictive” bonds, disappeared on Csaba Tarsoly’s watch. Orgován is a 38-year-old unemployed man who lives in the village of Tápióság in Pest county. He apparently has been in jail several times, mostly for robbery but once for attempted murder. His children are already grown, and he and his wife have several grandchildren. I would say he is a perfect person for the job. In the last twenty some years there have been several down-and-out, often homeless people who for a few thousand forints were tapped to serve as CEOs of bankrupt companies.

The Hungarian government’s less than rigorous pursuit of the Quaestor case and its generosity toward Tarsoly most likely has something to do with the fact that the government and Quaestor had some joint business deals. As we just found out yesterday, the Hungarian National Trading House that functions under the ministry of foreign affairs and trade had an account at Quaestor. (In Hungary, where hometowns often matter, it may not have been irrelevant that both Foreign Minister Péter Szijjártó and Csaba Tarsoly are from Győr. Moreover, until March 9, 2015, Tarsoly was the owner of the Győr ETO FC team, which is a good recommendation in today’s Hungary.) For the Trading House to have money invested with Quaestor or any other brokerage firm is against the law. All state money must be kept in treasury bonds. The amount of money involved is unclear. Some people talk about 25 billion forints. According to Tamás Katona, former undersecretary of the ministry of finance, for such a large amount of money to have landed at Quaestor must have had the blessing of Szijjártó himself.

Csaba Tarsoly and Péter Szijjártó at the opening of the Moscow Trading House in 2013

Csaba Tarsoly and Péter Szijjártó at the opening of the Moscow Trading House in 2013

So, we have the illegal deposit of a large amount of government money at a private firm, which is bad enough, but what follows is truly outrageous. A day before the collapse of the firm an official of the Trading House decided to take out its money, thereby saving the taxpayers’ money. What a coincidence! What fantastic financial acumen! It will be hard to deny the likelihood of insider information.

Apparently, the Trading House was not the only one that had large amounts of money at Tarsoly’s firm. There were other state companies as well, and it seems that they were all affiliated with Szijjártó’s ministry. We don’t know whether they suffered losses or whether Tarsoly warned his friend from Győr ahead of time, thereby protecting the accounts of such institutions as the Hungarian Export-Import Bank and Hungarian Export Credit Insurance.

Naturally, the ministry spokesman denies any wrongdoing. First of all, he claims that these state companies had a right to place their capital with an outside firm. The spokesman also claims that they chose Quaestor because it was the only firm that provided its services without any charge whatsoever. Well, yes, I scratch your back, you scratch mine. We all know how it goes. And if there’s a problem, Quaestor may offer a lifeboat to the government while individual bondholders are left to sink.