Tag Archives: Mediaworks

Heinrich Pecina, Orbán’s accomplice in the repression of Hungary’s free press

Until recently little was known about Heinrich Pecina, an investment banker and majority owner of Vienna Capital Partners (VCP). His name appeared often enough in the Hungarian media, but he remained a somewhat mysterious character. Now, after the Népszabadság scandal, plenty of information has emerged about the man, none of which is reassuring. His private equity firm specializes in former Soviet bloc countries--Poland, Hungary, Croatia, Russia–as well as China.

Pecina worked for the famed Creditanstalt before establishing VCP in 1998. Ten years later the firm was making more than two billion euros a year by buying, restructuring, and selling large companies in Eastern Europe. One of Pecina’s business ventures in Hungary was the takeover of BorsodChem (2001), which was not without controversy. VCP was suspected of secretly acting on behalf of Gazprom. At least this is what a Soviet dissident think tank, The Jamestown Foundation, claimed.

Prime Minister Péter Medgyessy ordered an investigation, which found no wrongdoing. But it is true that Pecina acquired BorsodChem from Mihail Rahimkulov, a Russian-born Hungarian businessman of Tatar origin, who at one point was a Gazprom executive and still is one of the large shareholders of that Russian company. By 2010 VCP and another private equity company, after some fancy financial footwork, sold 38% of BorsodChem (and an option to buy the remaining shares within two years) to the Chinese Wanhua Group, a chemical company that is the world’s largest producer of isocyanate. For Pecina, Népszabadság is small potatoes.

The alleged illegality of some of Pacina’s complicated business ventures eventually caught up with him. While the drama of Népszabadság was playing out in Budapest, Heinrich Pecina was sitting in a Klagenfurt courtroom as a defendant in connection with a share sale of Hypo-Alpe-Adria Bank to Bayern LB. He and the president of the Hypo-Alpe-Adria Bank are jointly accused of embezzlement and illegal business practices. Pecina already admitted in July to writing three phony receipts for 4.3 million euros. VPC also produced “expert studies” of questionable worth in return for millions from the president of the Hypo-Alpe-Adria Bank.

pecina

In 2014 Pecina moved into the Hungarian media market, buying the Swiss Ringier’s Mediaworks, which owned Népszabadság, Világgazdaság, and Nemzeti Sport, as well as regional newspapers and a printing business. About two weeks ago VCP also purchased 12 regional papers with 1,150 employees. An earlier attempt to merge these two holdings was vetoed by the Hungarian Competition Authority, but once Pecina was behind the deal the Hungarian government gave its blessing to the purchase. The Austrian Kurier is convinced that “the Orbán government gave the green light in exchange for silencing the annoying, anti-government Népszabadság” and that Heinrich Pecina had no compunctions about being part of this dirty deal.

As the days go by we are learning more details of Pecina’s involvement with Mediaworks and specifically with Népszabadság. Until recently a foundation of the socialist party owned 27.6% of Népszabadság. The former president of the foundation, László Kránitz, admitted that, although they tried to find out whose “stróman” Pecina was, they were unsuccessful. He also claimed that the losses accrued by Népszabadság were partially due to the purchase of a state-of-the-art printing press during the Ringier period. Another questionable business decision was to move the offices of Népszabadság to a high-end commercial site, the Mediaworks Tower, where the rent was extremely high. In fact, rent for a single month would have covered a full year of maintenance and utilities for Népszabadság‘s own building. Moreover, the contract was for ten years. In the event the contract was broken, as it was, the fine was three-years’ rent. The state-owned MKB Bank provided the guarantee to the tune of two million euros.

Some of Pecina’s employees at Mediaworks were not ready to lend their names to this deal between a financier of dubious reputation and the thoroughly corrupt Viktor Orbán. The Mediaworks employee who was in charge of the affairs of Népszabadság refused to execute the orders from above and quit even before the paper was shuttered. So Mediaworks assigned a new man to the job, who was supposed to negotiate with the editor-in-chief. But he “became ill” and didn’t show. The next day he discovered that his illness was grave enough to warrant quitting his job altogether. Now we have a new man, Tamás Door, who was the marketing director of the firm. I wonder how long he will last.

Today being Thursday, journalists could listen to a performance by János Lázár, accompanied by Zoltán Kovács, who has lately become a television personality with his interviews on BBC and CNN. Naturally Népszabadság was a hot topic. Lázár expressed his puzzlement that there are people who want the Orbán government to save the paper with taxpayer forints. As far as I know, no such demand was ever expressed by anyone anywhere. But he admitted that there were some very good Népszabadság journalists whose articles he enjoyed reading. He will miss them. He also had the decency to express his disapproval of how the paper was shut down. As for the accusations that the government had anything to do with the demise of the paper, Lázár’s sarcastic answer was: “Between 2010 and 2014 Fidesz managed to get a two-thirds majority despite the Népszabadság‘s  ‘beneficial’ activities.” Thus, Fidesz had no political reasons to close the doors of the paper.

Even conservative media outlets have offered help to the journalists who are in limbo. Magyar Nemzet, HírTV, and Lánchíd Rádió offered them the opportunity to publish articles and op-ed pieces and to participate in TV programs, which was a nice gesture. The cultural and press attachés of the U.S. Embassy in Budapest visited the journalists, who are now in a small temporary editorial office. On the Embassy’s Facebook page the First Amendment appears in both languages:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Among the comments I read: “Isn’t it interesting that the amendments to the American Constitution were always for the widening of freedom while all the amendments to the Hungarian Fundamental Law point in exactly the opposite direction?

October 13, 2016

Népszabadság: From an emblematic paper to memory hole

People have been clamoring for more details about the demise of Népszabadság, Hungary’s leading independent paper. The story is complicated.

András Hont, in an opinion piece that appeared in HVG yesterday, said that “there is something grotesque in the fact that the burial of the former official daily paper of MDP and MSZMP has become the symbol of an attack on press freedom. But a fact remains a fact.” MDP or Magyar Dolgozók Pártja was the official name of Hungary’s communist party, which during the uprising of October 1956 changed its name to MSZMP or Magyar Szocialista Munkáspárt. During the Rákosi regime the paper was called Szabad Nép (Free People), and this official organ was so intensely hated that its huge headquarters was practically demolished during the revolution. The new party paper was named Népszabadság (People’s Freedom). For a couple of years the party pretended that Népszabadság had nothing to do with Szabad Nép, but on February 1, 1958 the paper accepted the heritage of its predecessor and proudly displayed its 16 years of existence.

For me, who for years received Népszabadság thanks to my parents who thought I should know what’s going on in Hungary, the very name of the paper sent shivers down my spine. Therefore, after the third republic was declared and I discovered that Népszabadság hadn’t changed its name, I was upset. After a while, however, I was persuaded that Népszabadság was a brand name and a pretty good brand name at that. It had a large subscription base. People were accustomed to it. Although in the first few years a lot of papers came and went, the old well-established papers like Népszabadság, Népszava, Magyar Nemzet, and Magyar Hírlap remained. None of them changed their names, although all of them had to conform to the dictates of MSZMP before 1990.

On October 7, 1989 Népszabadság ceased being the official paper of MSZMP. Shortly afterwards it was sold to Bertelsmann AG and later, in 2003, to the Ringier Group. Throughout, a foundation of MSZP had a 27.65% stake in the paper; the association of the employees had a 1.42% stake. In 2014 Ringier sold Népszabadság to Vienna Capital Partners, which already owned several other newspapers and magazines in Hungary under the name Mediaworks Hungary Zrt, which was described as “the country’s right-wing media establishment.” A year later, in June, the financially strapped MSZP sold its shares to Mediaworks. With that move Népszabadság’s fate was sealed.

Shutting down Népszabadság’s operation doesn’t make the slightest sense in economic terms, especially in light of all the development efforts that had been initiated lately. Management was planning to strengthen the paper’s internet presence. In recent months, it hired many well-known journalists. Moreover, last year the paper actually made a 134 million forint (€440,568) profit, although it is true that in the two previous years it suffered substantial losses. But Mediaworks as a whole certainly wasn’t hurting. Only a month ago it purchased Pannon Lapok Társaság (PLT), which owned Fejér Megyei Hírlap, Napló, Vas Népe, Zalai Hírlap, Dunaújvárosi Hírlap, and several county online news sites.

So, what’s going on? 444.hu offered the most plausible explanation of this high-level maneuvering, most likely by Viktor Orbán himself, to get hold of a large chunk of the Hungarian print and internet media by buying Mediaworks. According to the information 444.hu received, Viktor Orbán had been eyeing the company as a target for some time, but he didn’t want Népszabadság to be part of the deal. Fidesz bigwigs thought that if Népszabadság ended up in the hands of an overtly pro-Fidesz oligarch it would cause too great a scandal. After all, Népszabadság is the emblematic independent paper of Hungary. Therefore, an agreement was reached that the sellers should simply stop the publication altogether before the actual sale of Mediaworks to the chosen Fidesz front man.

To complicate an already complicated story I have to say something about Vienna Capital Partners’ recent purchase of PLT. Isn’t it odd that a private equity company that is in the middle of negotiations to sell a company it owns decides to buy several newspapers to add to the company’s portfolio? Such a move makes sense only if the buyer made this enlargement of the portfolio a condition of the sale. It is common knowledge that Fidesz wants to have influence over regional papers, which are more widely read than the large national dailies. Since the German owner of PLT, Funke Mediengruppe, didn’t want to deal directly with overtly Fidesz companies, Mediaworks did the government a favor for what was undoubtedly good money.

Who is the buyer? There is a good possibility that it is Lőrinc Mészáros through a company established in April that raised €20 million from investors.

I don’t know why the Fidesz leadership thought that the sale of Népszabadság to one of the Fidesz oligarchs would cause a greater scandal than the paper’s liquidation. The international scandal was unavoidable in either case, but the choice of stopping publication and especially denying access to the paper’s internet archives was even more disastrous from the government’s point of view. It has further damaged the reputation of the Hungarian government just before Viktor Orbán, after the failed referendum, tries to convince Jean-Claude Juncker of the correctness of his position vis-à-vis the European Union.

Finally, a few words about the obvious sign of political motives in this case: closing Népszabadság‘s online archives. The government doesn’t want anyone to be able to read even past articles written by the staff of Népszabadság. Viktor Orbán wants to obliterate everything connected with that paper. He wants to change history. He wants to change the past, at least by omission. This calls to mind George Orwell’s memory hole in Nineteen Eighty-Four:

In the walls of the cubicle there were three orifices. To the right of the speakwrite, a small pneumatic tube for written messages; to the left, a larger one of newspapers; and in the side wall, within easy reach of Winston’s arm, a large oblong slit protected by a wire grating. This last was for the disposal of waste paper. Similar slits existed in thousands or tens of thousands throughout the building, not only in every room but at short intervals in every corridor. For some reason they were nicknamed memory holes. When one knew that any document was due for destruction, or even when one saw a scrap of waste paper lying about, it was an automatic action to lift the flap of the nearest memory hole and drop it in, whereupon it would be whirled away on a current of warm air to the enormous furnaces which were hidden somewhere in the recesses of the building.

memory-hole

A memory hole is described as “the alteration or outright disappearance of inconvenient or embarrassing documents, photographs, transcripts, or other records, such as from a web site or other archive.” Or as another definition of ‘memory hole’ points out, it is “an attempt to give the impression that something never happened.” Viktor Orbán, if he was the one who came up with the idea to shut down Népszabadság and create a “memory hole,” made a very big mistake.

October 9, 2016

 

 

Viktor Orbán shut down Hungary’s leading opposition paper

By now the whole world knows that Hungary’s leading daily newspaper, Népszabadság, is no more. Although the Budapest correspondents of Reuters and the Associated Press pointed out that the newspaper has lost $18.4 million since 2007, don’t allow yourselves to be fooled. Mediaworks, which owns Népszabadság, makes plenty of money on its other publications, including several profitable regional papers and the popular Nemzeti Sport.

Fidesz may say that it considers “the suspension [of Népszabadság] a rational economic decision,” but ceasing publication altogether is not considered to be an economically sound choice for solving the financial woes of a business venture. Reorganization, restructuring, reducing the size of the workforce–these are some of the most often used instruments to salvage a company. Suspending publication, by contrast, can be a costly affair. There are most likely contracts in force to print the paper for the next few months, and what about the 30,000 some subscribers who will not receive their daily paper on Monday? No, closing the doors of Népszabadság has nothing to do with economics. It is a sordid political maneuver executed by the far-right, dictatorial leader of a country that can no longer be called a democracy.

The hypocritical prime minister wants us believe that “it would be a violation of the freedom of the press if [Fidesz] would intervene in the affairs of the owner of the media,” but it is almost certain that this sudden move was orchestrated by Viktor Orbán himself. Just as we learned only recently that he had been the one who handed down the order to investigate Ökotárs, the civic group responsible for the dispersion of the Norway Funds, two years ago. He lied then as he does now. At the time of the raid on Ökotárs, he was asked whether he played any role in that shameful affair. He denied it, adding that if he had done so, it would have been a crime. Now we have the proof. We know that the prime minister of Hungary, by his own admission, committed a crime in 2014. And I suspect that he did so again while working to eliminate a paper that must have nettled him, especially lately. I wonder what his next step will be in his quest to destroy all independent media outlets. He has been at it for some time, but earlier he didn’t use such heavy-handed and so openly dictatorial methods. By now, it seems, he no longer cares about even the semblance of legality and media freedom.

Darkness, Thomas Toft / flickr

Darkness, Thomas Toft / flickr

In the last few months rumors were flying that the government was trying to buy, through some middleman, Mediaworks, currently owned by Vienna Capital Partners, a private equity firm. In June 2016 Népszava, the oldest Hungarian socialist newspaper, learned that Heinrich Pecina, the majority owner, asked for a meeting with Viktor Orbán. Interestingly, the Hungarian prime minister had no compunctions about negotiating with the owner of Népszabadság concerning the possible sale of the paper. Népszava at that point believed that the “buyer” would be the mysterious “adviser” of Viktor Orbán, Árpád Habony, who is most likely Orbán’s “stróman,” as a front man is called in Hungarian. Others suspected Lőrinc Mészáros, who is usually described as the ultimate “stróman,” the alter ego of the prime minister whose newly acquired fabulous wealth is only partly his. The employees of Népszabadság were living under the constant threat that they would end up in the street and be replaced by a new pro-government owner, just as happened to Magyar Hírlap in 2004 when Ringier, an international media group with headquarters in Switzerland, sold the paper to Gábor Széles, a billionaire with far-right political views.

The journalists working for the paper might have had their forebodings, but I’m sure they never dreamed of such an abrupt and barbarous end to their paper. The question is what made Orbán set aside all niceties and finesse and show his true ruthless self. It seems that the straw that broke the camel’s back was a recent series of investigative articles that appeared in the paper about Hungarian National Bank Chairman György Matolcsy and Antal Rogán, the propaganda minister.

The paper reported that Matolcsy’s lover, while working for the bank, received an inordinately high salary. And once she left the bank, Matolcsy placed her in lucrative positions at some of the bank’s foundations, which serve as conduits to transform the “profits” of Hungary’s central bank from public to private funds.

As it turned out, that was not the end of the Matolcsy story. Since Matolcsy is in the middle of divorcing his wife, he needed an apartment. Soon enough he found just the right one. A lovely, very expensive apartment in the Castle District of Buda. The only problem is that the apartment belongs to the president of the Hungarian branch of Unicredit, Mihály Patai, who is currently the chairman of the Banking Association. Considering that György Matolcsy is heading the very institution that has a supervisory function over the Hungarian banking system, this whole arrangement is highly unethical and suggests a conflict of interest. Népszabadság had begun to investigate possible favors extended by the central bank to Unicredit.

That was bad enough, but then came another story, this time about Antal Rogán, whose extravagant lifestyle and questionable financial dealings have been the talk of the town for a long time. Népszabadság learned that Rogán, his wife, and one of their sons traveled in princely fashion to a wedding. They used a helicopter. Well, I guess nothing is wrong about traveling by helicopter to a wedding if you have enough money, but the story was not so simple. First, Rogán denied the whole thing–until he was confronted with a photo showing him heading toward the helicopter. At this point he switched his story and talked about a kind friend who generously gave him a ride back from the wedding. A day later it turned out that he had used the helicopter both to go to and to return from the wedding. Lies, lies, lies.

Well, these two or three embarrassing stories about people who are perhaps the closest associates of Viktor Orbán were too much for the mafia boss. He gave the order: shut them down! After all, he had no idea what else those two or three journalists who had worked on the stories know. And what paper that wants to live another day will hire them to continue their work? Shutting down Népszabadság doesn’t merely have a chilling effect; it puts Hungarian investigative journalism into a deep freeze.

Viktor Orbán is a vengeful, vindictive, malevolent man who doesn’t forget and who is ready to pursue his victims until they are utterly destroyed. There is no mercy once he decides that somebody is an enemy. At the top of his enemy list are Gábor Iványi, the kind minister of the Hungarian Methodists; Ibolya Dávid, whom he blames for his lost election in 2006; and Ferenc Gyurcsány, who had the temerity to win a television debate against him. And then there are the other lesser-known victims who at one time or the other stood in his way: they often languish in jail for months or years on trumped-up charges. One could go on and on.

Finally, let me quote a bitter Facebook note by Mária Vásárhely, a media expert: “Thank you, European Union. It matters not how painful it is, but it must be said that without you Hungary wouldn’t have ended up where it is now. If you didn’t finance the building and functioning of Orbán’s dictatorship, the whole edifice would have crumbled already. It doesn’t matter how painful it is to point out, but the destruction of Népszabadság, one of the last bastions of press freedom, was purchased with the immense amount of money you have poured into the country and which is now being used by the criminal oligarchs of a criminal state.”

Unfortunately, there is a great deal of truth in this bitter note.

October 8, 2016