Tag Archives: NAV

The latest revelations in the Roland Mengyi case

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

August 20, 2016

Hungarian prosecutors found the lone culprit in the corruption scandal

Between October 17  and November 13, 2014 I wrote four posts on the corruption scandal that beset U.S.-Hungarian relations and contributed to the loss of popularity of Fidesz and the Orbán government a year ago.

It all started with an article that appeared in Napi Gazdaság, precursor of today’s Magyar Idők, then owned by the Századvég Economic Research Group headed by the economist-businessman Péter Heim. The article accused several American companies of tax evasion and fraud and indicated that an investigation into these companies by the National Tax and Customs Office (NAV) was underway. It turned out later that the information, wherever it came from, was wrong. If anything, the opposite was true. American companies found widespread VAT fraud in the food processing industry, where the VAT is exceedingly high (27%). They were the ones who complained in vain at NAV and other government agencies. The Hungarian government did nothing. The complaints of American businessmen eventually reached the U.S. government, which decided to invoke Proclamation 7750, an executive order signed by George W. Bush in 2004 that gives the State Department power to ban corrupt individuals and their families from entering the United States. The U.S. normally keeps such action quiet, but as a result of either Napi Gazdaság‘s or the Hungarian government’s misjudgment of the situation, the decision was made to reveal that six Hungarian citizens had been banned.

Soon enough it became known that Ildikó Vida, head of NAV, was on the list. We also learned that an unnamed businessman, who in total panic ran to ATV to tell his sad story, was among the six. Vida admitted that some of her high-ranking colleagues at NAV were also on the list. Another man whose name was often heard in connection with the infamous list was Péter Heim, owner of Századvég Economic Research. This suspicion found some support when, a month after the the scandal broke, Heim sold his shares in Századvég. My opinion at the time was that, in addition to Vida and the unnamed businessman, two officials of NAV (both women) and Péter Heim were most likely on the list.

The Hungarian government insisted that they could not investigate the cases of these people because the U.S. government refused to release the names of those on the list. Of course, as we learned from some cabinet members, the upper echelon of the Fidesz team knew full well who had been banned.

It turns out that, after all, an investigation of the case began immediately after the scandal broke. And now, after a whole year, the prosecutor’s office of the capital district announced their findings. They didn’t reveal the suspect’s name but gave enough information about him that in no time everybody knew that the man is Viktor Tábor, a successful businessman, the sole proprietor of Advanced Network Technologies (ANT) whose yearly revenue is over a billion forints. ANT has an excellent reputation with a well-known and well-respected clientele. Tábor is being indicted for committing bribery while pretending to have influence over a certain person. And who is this person? Péter Heim, head of Századvég.

According to the story of the prosecutor’s office, Bunge, an American company that produces cooking oil under the name Vénusz, hired a lobbyist to convince the Hungarian government to lower the VAT on cooking oil and other basic foodstuffs from 27% to 5%. The lobbyist turned to Viktor Tábor, whom he knew had many friends in government circles. Tábor informed the lobbyist within a few days that he had approached Péter Heim, head of Századvég. Heim, he said, would be able to help if Bunge deposited two billion forints into the bank account of the Századvég Foundation. (A former employee of Századvég, the well-respected professor of economics Tamás Mellár, described Századvég as a “money laundering operation.”) However, after an investigation that the prosecutor’s office called very thorough, it was determined that Péter Heim didn’t know Tábor and therefore had no role to play in the corruption scandal. The only suspect is thus Viktor Tábor.

Péter Heim of Századvég

Péter Heim of Századvég

444.hu and other media outlets expressed doubts about the accuracy of the prosecutor’s office’s version of the story. They called attention to the fact that Napi Gazdaság, owned by Századvég, was the newspaper that tried to divert attention away any Hungarian involvement in the case by accusing the American companies of wrongdoing. They also found it suspicious that Heim sold his shares in the company within a month after the outbreak of the scandal. And third, they noted that Tábor said he was asked to deposit the money into the Századvég Foundation bank account, not into his own.

Doubts about the veracity of this official story were further heightened by a telephone interview conducted by Antónia Mészáros of ATV with Péter Heim. 444.hu‘s headline read: “Nobody spoke less convincingly about the expulsion case than that.” Heim kept repeating in answer to every question that “he doesn’t pay any attention to such matters.” He knows that he is innocent, and since he didn’t want to travel to the United States, he never inquired from the American Embassy whether he is on the list. He doesn’t know anything about the ban or any corruption cases. Although he is still the CEO of Századvég, he is not involved in the day-to-day running of the business. He has no idea whether lobbyists approach Századvég or not, and he has no idea why his name popped into Tábor’s head in connection with Bunge’s efforts to reduce the VAT on its products.

The most interesting development in the case is an interview with the so-called lobbyist hired by Bunge. His name is Tamás Torba, and he is an economist who has in the past written articles on economic matters for Magyar Nemzet. So, it was not surprising that Torba approached the paper for an interview in connection with the case.

First, Torba was not employed as a lobbyist. He has been a business partner of Bunge ever since 2012. His job was to try to use communication tools against the widespread fraud in the industry. In early 2013 the Orbán government kept signing “strategic partnership” contracts with different companies, and the idea came up within Bunge’s management that perhaps it might not be a bad idea to see whether such a partnership agreement might help their disadvantaged position vis-à-vis those who cheat on VAT and are therefore able to sell their products cheaper. It was at that time that Torba turned to Tábor, an acquaintance of his. Tábor didn’t think that the government wanted to sign a partnership agreement with Bunge, but perhaps they would be able to achieve a reduction in VAT. The price was 2 billion forints. Bunge immediately distanced itself from such an illegal practice. Instead, Bunge developed its own strategy that involved getting together with all the domestic producers of basic foodstuffs to attack the problem. Torba became the spokesman of this organization.

Torba also talked to important people in NAV about the problem at the request of the American Embassy in Budapest. The diplomats were trying to penetrate the wall of silence in NAV, and they hoped that perhaps Torba could do something. The message Torba delivered was that the U.S. would lend all possible help, including financial and technical, to combat VAT fraud. However, if NAV continues stonewalling, they are ready to use sanctions against those persons they consider culpable.

The prosecutors have made it clear that Ildikó Vida is not a suspect. As they put it, “she is not involved in this case,” which of course doesn’t preclude the possibility that she is involved in some other case. But then, why is she on that infamous list, the reporters asked. The only answer the prosecutor in charge of the case could give was that perhaps the “Americans supposed that no investigation was taking place” and that was the reason Ildikó Vida’s name appeared on the list “when in fact behind the scenes an investigation had been going on ever since the winter of 2013.”

I have my grave doubts about the prosecution’s version of events. I can’t believe that the United States on such flimsy evidence would invoke Proclamation 7750 against these six people. I have the feeling that this will not be the end of the story.

♦ ♦ ♦

Further readings from Hungarian Spectrum:

(1) “Ten Hungarian businessmen and government officials can never enter the United States”

(2) “American-Hungarian relations are crumbling”

(3) “No end to the saga of the Hungarian corruption scandal”

(4) “The tax chief Ilidkó Vida versus the Hungarian government: Who is lying? Most likely both”

The chief of the Hungarian tax office resigns

Today’s been a busy day in Hungarian politics. In the last week or so it was hard to find timely topics, perhaps because Viktor Orbán was on a secret vacation on Croatia’s Mljet Island. He went to the same spot last year, traveling alone and amusing himself by watching football games. But now there is so much news that I don’t know where to start. After some hesitation I decided to write about Ildikó Vida’s departure from the Nemzeti Adó- és Vámhivatal (NAV/National Tax and Customs Office).

Vida was the president of NAV, which turned out to be a hub of government corruption. More than a year ago one of NAV’s employees went public with folders full of documents implicating NAV’s top leadership in tax fraud. I wrote about the case at least twice in November-December 2013: “Tax fraud scandal in Hungary” and “The plight of a Hungarian whistleblower.”

It was not only this brave employee of NAV who noticed that something was amiss in the tax office. Certain American companies also realized that their competitors could undersell them with the effective help of NAV, which “overlooked” their games with value added tax claims. The American businessmen went to the U.S. Embassy to complain. After ascertaining the accuracy of their reports, the U.S. embassy was instructed to call the Hungarian government’s attention to the widespread corruption in NAV as well as in other government and pro-Fidesz institutions. The Hungarian government, despite numerous American complaints, did nothing. It was at that point, in October 2014, that Napi Gazdaság, then owned by Századvég, a political think tank with close ties to Fidesz, revealed that the Americans had informed the Hungarian government that six officials and/or businessmen suspected of corruption had been put on a blacklist of sorts: they were barred from entering the United States. Six of them decided to remain silent, but Ildikó Vida, head of NAV, openly admitted that she was one of them.

NAV

U.S.-American relations hit an all-time low when the Hungarian government demonstrated its unwillingness to cooperate with the Americans in ferreting out corruption. The Hungarians claimed that they couldn’t investigate unless the Americans revealed the seven names, which they knew full well the U.S. authorities were forbidden by law from doing. Viktor Orbán himself got involved when he “instructed” Ildikó Vida to sue André Goodfriend, the U.S. chargé d’affaires in Budapest, threatening to fire her if she didn’t.

But it seems that, despite the belligerence of the Hungarian government, behind the scenes the Állami Számvevőszék (State Accounting Office) quietly began an investigation. They found “serious deficiencies.” That happened in March, and with their revelation the guessing game began. Would Ildikó Vida step down? And if so, when? Well, the guessing game is over. We learned today that Vida gave notice on May 20 and that today was her last day on the job.

She is not going out with a whimper, as her farewell letter to the employees of NAV attests. She talks about “five years of constant struggle” against “ideas entertained by the government concerning the organization and the personnel of NAV.” As usual, the government didn’t bother to discuss these plans with the management. In her opinion, these government plans “endanger the budgetary interests and the functioning of the organization. These were the circumstances that resulted–despite the prime minister’s request to the contrary–in my resignation.” Since in the last two months the government didn’t get around to appointing a new NAV chief, Vida asked one of the deputy chairmen, Árpád Varga, to take over her job as of tomorrow.

The secret of her departure was kept pretty well, except that János Lázár, who doesn’t always know when to keep his mouth shut, two weeks ago talked about a reorganization of NAV for which one needs new leadership. More importantly, from Lázár one learned that the government has far-reaching plans for NAV. These plans are still in a preparatory stage: the government doesn’t know in what ways they will change the method of tax collection; they don’t know what kind of organization will adjudicate tax disputes between taxpayers and NAV–the ministry, an independent organization, or an entirely new office. Everything is up in the air.

But this is how things go in the Orbán government on every level. A month ago Lázár, at a forum for architects, admitted that “the state is in dreadful shape. It is too large. It’s immovable and weighed down.” Confusion reigns on every level of the bureaucracy, mostly because for Orbán loyalty is more important than expertise. They got rid of everybody who served in the administration in the eight years prior to 2010. I suspect that by now Viktor Orbán himself realizes that something must be done and that’s why Lázár announced that far-reaching personnel changes are expected to take place sometime in the fall. Many assistant undersecretaries can say goodbye to their cushy jobs.

We most likely will never know whether Viktor Orbán really entreated Vida to stay, but it is unlikely given the administration’s determination to reorganize NAV. Moreover, Ildikó Vida is a close friend of Lajos Simicska. She followed him as chairman of the tax office after Simicska resigned in August 1999. Given the acrimonious relations between Simicska and Orbán, I suspect that Vida’s days were numbered irrespective of her troubles at NAV. The list of recently sacked friends of Simicska is getting longer and longer.

Is Viktor Orbán playing chicken?

It was only yesterday that a lengthy psychological portrait entitled “The Patient’s Name is Viktor Orbán” appeared in Népszabadság under the pseudonym Iván Mester. The author is an associate professor, I assume of psychology or psychiatry, at an unnamed university. In this article “Mester” states that because of his character traits Orbán “is unable to stop … he is insatiable.” What is going on in front of our eyes is a manifestation of his inability to let go. He has to win against all odds.

This afternoon the latest episode of this “drama” (because I’m convinced that for the prime minister this is a real drama) took place in parliament. According to house rules, Orbán had to appear in parliament to answer questions personally. Gergely Bárándy (MSZP) wanted to know “who is lying” about the corruption case involving six Hungarian citizens, of whom at least three are high officials in the Hungarian equivalent of the Internal Revenue Service. Bárándy wanted to know whether it is true that the Hungarian government knows what these people are accused of by the U.S. government. The exchange can be read in an abbreviated form on the web site of the Prime Minister’s Office.

As Orbán explained, the U.S. chargé d’affaires claims that the president of the Nemzeti Adó- és Vámhivatal (NAV) can be personally tied to corruption involving an American firm doing business in Hungary. “According to Hungarian law, in a case like that one ought to start legal proceedings. This is what I expect from the president of NAV. If she does not do so without delay, I will replace her.” In Hungary a person found guilty of corruption does not get replaced but is locked up, said Orbán. “So, the stakes are high.” If the American diplomat can prove the charge and the court finds her guilty, then the head of NAV will be incarcerated. “But if, on the other hand, the American diplomat’s charges are untrue there will be consequences.”

Viktor Orbán is forging ahead

Viktor Orbán is forging ahead

Bárándy pointed out in his rebuttal that the lawsuit Orbán is recommending cannot take place in Hungary. The only solution is what André Goodfriend, the U.S. chargé, has repeatedly recommended to Ildikó Vida, the head of NAV. She should apply for a visa at the U.S. Embassy in Budapest, whereupon she would be told the reasons for her ban.

Orbán countered that if an American chargé accuses a Hungarian official of a crime, he cannot “hide behind his diplomatic immunity. He should be a man and accept responsibility for his claims.”

What the official government version of the exchange did not mention but Népszabadság included in its coverage was the following dialogue between Orbán and Bárándy. The MSZP member of parliament asked whether Orbán “can venture to state that the Hungarian government and authorities have no knowledge of the nature of the cases that resulted in barring the president of NAV from the territory of the United States.” Orbán did not answer this question. Instead, he stressed that the solution lies “in the world of the law,” which in my opinion is a confirmation of the government’s knowledge of the American allegations.

André Goodfriend, as usual, responded promptly by posting a short note on Twitter: “US & Hungary have excellent legal cooperation, including a Mutual Legal Assistance Treaty.” And indeed, back in 2009 Secretary of State Hillary Clinton and Hungarian Foreign Minister Péter Balázs signed the Protocols of Exchange of Instruments of Ratification for the 2005 U.S.-Hungary Mutual Legal Assistance Protocols and the U.S.-Hungary Extradition Treaty. Clinton said at the time that “these twin agreements will give our police and prosecutors in both countries state-of-the-art tools to cooperate more effectively in bringing criminals to justice on both sides of the Atlantic. They form part of a network of similar agreements that the United States has reached with all the countries of the European Union.” Balázs, for his part, stressed the close cooperation between the two countries.

In addition to the Mutual Legal Assistance Treaty, Goodfriend called attention to a legal guide for judges written by a lawyer specializing in international litigation. The message is that Hungary should turn to the United States asking for official legal assistance. Apparently, the Hungarian prosecutor’s office did ask for assistance but the request was not official. Details of the differences between the two can be found in an earlier article in 444.hu.

The question is what Viktor Orbán is trying to achieve by this latest move. Among my knowledgeable friends one thinks that the foxy prime minister is trying to find an excuse to fire Ildikó Vida because “he knows that she is guilty.” My answer to this supposition is that of course Viktor Orbán knows full well that she is corrupt because she was put there for the very purpose of running a corrupt organization. That is part of her job description. She is there as the emissary of a corrupt government headed by the prime minister himself. Another friend, following the same line of reasoning, thinks that Vida’s refusal to sue Goodfriend will give Orbán an opportunity to fire Vida in such a way that he will not be seen as bending under U.S. pressure. This way he will save face. I don’t see much merit in that hypothesis either. What prevents Ildikó Vida from bringing charges against Goodfriend? Nothing. She can certainly try. It could happen that the court refuses to hear the case, but this would not be Vida’s fault. She sued, just as Orbán demanded. Another possibility would be if the Hungarian courts decided to hear the case but the United States government forbade Goodfriend from appearing in court. Thus he would be a man who does not accept responsibility for his claims, to use Orbán’s words. In my opinion that would be the best scenario as far as Viktor Orbán is concerned. And, as opposed to my friends, I believe this is exactly what he is planning to do. What do you think?

No end to the saga of the Hungarian corruption scandal

The reverberations from the news that six Hungarian citizens are not welcome in the United States don’t seem to subside. The perpetuation of the verbal battle is fueled mostly by the Hungarian side. Some of the attacks come straight from politicians, others from the accused and from so-called “civil groups” that are strong supporters of the Orbán government and operate most likely with generous financial assistance from the public purse.

These latter two sources cannot be taken terribly seriously, and in fact as time goes by their originally very loud voices have quieted down somewhat. The most spectacular retreat came from Ildikó Vida, the president of NAV, the Hungarian tax authority, and her lawyer, Barnabás Futó. As one blogger noted, when Barnabás Futó stands next to someone close to Fidesz, that person is in trouble. Futó seems to be rather good at pettifoggery at home, but he is at sea when it comes to international law. Initially he had ambitious plans for getting satisfaction for his client. Since Vida was told by M. André Goodfriend that she can ask for a visa and, if her request is rejected, she might be able to get information about the nature of the charges against her, Futó decided to do just that. Moreover, while he was at it, he contemplated suing the American chargé. Soon enough someone must have told him that members of the diplomatic corps have immunity and that his dreams of his client having her day in court were illusory. He gave up on his plan to sue. And, upon reflection, Vida decided that, after all, she did not want to know any of the details of her alleged wrongdoing and that therefore she will not apply for an American visa.

The other thread in the continuing saga is the Civil Összefogás Fórum (CÖF), an unofficial arm of the government that has helped bolster the popularity of the government. They were the ones who organized the first Békement (Peace March), which was supposed to defend the beleaguered Viktor Orbán against a dark international conspiracy that wanted to remove him from his post during the winter of 2011-12. Ever since the American revelations, the leaders of CÖF, people belonging to the extreme right wing of Fidesz, have been itching to march out again, this time against the United States. However, their beloved leader, to their great regret, held them back.

CÖF’s spokesman, Zoltán Lomnici, Jr, son of the former chief justice of the Supreme Court and a lawyer himself, shows such ignorance of the law that it is simply staggering. He and “Futó Barnabás,” to whom I gave the nickname “futóbolond” (lunatic at large), bring shame to the Hungarian legal profession. Here is Lomnici’s argument: the American chargé is a foreign national who, as can be attested by pictures and videos taken of him, left the embassy of the United States and therefore stepped on Hungarian soil. According to Hungarian law, if he knew of corruption he was supposed to press charges and provide proof of corruption. Since he neglected to do so, he could be sentenced to three years in jail. Obviously our star lawyer hasn’t heard of the Vienna Convention on Diplomatic Relations (1961). I suggest that Futó and Lomnici study the document, which clearly states that “Diplomats must not be liable to any form of arrest or detention. They are immune from civil or criminal prosecution.” Let’s hope that the text is available in Hungarian because Futó at least does not know any English. Today the organizers of the Peace Marches officially announced that for the time being they will not gather the troops.

Politicians have not shown the same restraint. A few days ago Antal Rogán, the whip of the Fidesz parliamentary caucus, called Goodfriend a liar and announced that Hungary is a country of law, unlike the United States. “We all must declare that Hungary is not Guantánamo, here nobody can be accused without proof.” Rogán’s attack on the United States is most likely part of the game plan dictated from above because not long before Róbert Répássy, undersecretary of the ministry of justice, said exactly the same thing.

Calling everybody a liar who criticizes the Hungarian government is a Fidesz specialty. Diplomats, on the whole, at least in civilized countries, don’t call their foreign colleagues liars. But Hungary’s new foreign minister has no such compunctions. In an interview with Magyar Nemzet he said that “to accuse us of not conforming to the European legal system is a gross lie (orbitális hazugság).” In response to Szijjártó’s charge, the U.S. Embassy in Budapest released a statement today that included the following sentences: “As Charge d’affaires Goodfriend has said, the United States has consistently conveyed our concerns to the Hungarian government about developments that harm the health of democratic institutions, civil society, and media freedom in Hungary – including concerns about corruption,” and “the Embassy remains in close contact with the Ministry of Foreign Affairs and Trade. We will continue to conduct a constructive, diplomatic dialogue with Hungary on all issues across the broad spectrum of U.S.-Hungarian engagement.” In brief, the United States will not stop its current policy of defending civil society, media freedom, and civil liberties. It will also pursue its fight against corruption.

In addition, today new information reached the public concerning the background of the American ban. The Demokratikus Koalíció, the party that seems to have good connections with the Hungarian foreign ministry where there are many disgruntled employees, learned that a week ago the American embassy did give some information to the Hungarians. Today Szabolcs Kerék-Bárczy, a DK politician, made that information public at a press conference. At this point the foreign ministry decided to fess up: yes, they received something, but it was only a “scrap of paper” (fecni) that cannot be taken seriously. However, a few hours later the ministry made the document public.

Undersecretary Levente Magyar waving "the scrap of paper" from the U.S. Embassy

Undersecretary Levente Magyar waving “the scrap of paper” from the U.S. Embassy

The two-page note describes the history of the numerous encounters between the embassy and the government of Hungary since February 2012. From October 2013 on, the American complaints multiplied. They had meetings with the “criminal directorate of the tax and customs office (NAV) on specific concerns about agricultural VAT fraud and tobacco nationalization.” A few months later the Americans were back at the “criminal directorate” but noticed “no evidence of action” on the part of NAV. In January 2014 the Americans had a meeting with the ministry of justice and public administration and they raised issues of VAT fraud, “institutionalized corruption, whistleblower protections, and Foreign Corrupt Practices Act (FCPA).” The whole list of complaints can be found on the foreign ministry’s website as well as in an article published on the subject by Index.

In brief, there were numerous complaints, and the Hungarian authorities refused to investigate. It is also clear from the document that the American authorities were fully aware that corruption is “institutionalized” in Hungary, yet the last word from NAV was that there were “no auditing complaints” and therefore the “Criminal Directorate … was unable to act.” Goodfriend  noted that “NAV’s specialized auditing unit created expressly to investigate trans-border VAT fraud … was systematically undermined and then disbanded.”

It looks to me, and obviously it was evident to the head of the American mission, that not only was no effort made to investigate but that the top leaders at NAV were doing everything in their power to make sure that corrupt activities could be continued undetected.

According to Levente Magyar, undersecretary of the ministry of foreign affairs and trade, this “scrap of paper” cannot be taken seriously. Why not? Because there is no date, no authentication, and above all, no seal. “Missing formal requirement” is a favorite excuse of Hungarian authorities.

The Orbán government presses on

Some stories simply refuse to die. Although I have spent more time than usual on the corruption case involving the Hungarian tax authority (NAV), the American corporation Bunge (the complainant), and a Fidesz-established foundation called Századvég, which one of its former associates called a front for money laundering, I think I ought to say a few more words about the latest developments.

Today a new list of possible subjects of the U.S. ban was published by NépszabadságIn addition to Ildikó Vida, chair of NAV, three deputy chairpersons are on the list. All three are women: Mrs. Dezső Csillag, Marianna Dávida, and Katalin Somos. The fifth person is most likely Péter Heim, president of Századvég. The sixth person’s identity is still not known, but he is presumed to be an influential businessman. Right after the news broke about the American decision to ban six Hungarians from entering the United States, “an unnamed businessman” rushed to ATV to share the bad news he received from the U.S. embassy. Although hypothetical lists appeared earlier, none of them sounded plausible to me. This one rings true. Now we just have to find out who the influential businessman is.

The opposition parties keep demanding Ildikó Vida’s resignation, and there has been talk about organizing demonstrations to the same end. In my opinion, such demonstrations would be a waste of time and effort. Fidesz functionaries don’t resign under pressure from the opposition. Moreover, most likely Viktor Orbán doesn’t want her to depart right now because that would be a sign of weakness when he just decided to tough it out. At the moment he might be very angry at her for revealing that she told the government about the U.S. decision, but he needs her to keep the tax office working to enrich Fidesz.

I might add here that I’m becoming more and more convinced that APEH/NAV was an instrument of Fidesz’s money collecting scheme even between 2002 and 2010 when the party was in opposition. Of course, since then the financial opportunities have become much greater. Now not only pressure on businesses yields kickbacks but also huge amounts of public money from government sources land at Századvég and from there go God knows where. The Eötvös Károly Intézet, a legal think tank, wanted to review the “studies” ordered by the Ministry of National Development from Századvég. Unfortunately, they were unable to get hold of the studies, but they managed to learn the exact amount of money Századvég received from the ministry between January 1, 2011 and June 30, 2012. According to the information, the ministry paid out 939,632,750 Ft. and still owed 5,936,845 Ft. Given the personnel and the capacity of Századvég, EKInt figured that the ministry paid 470,000 Ft. (almost $1900) per page for studies ordered by the ministry. Századvég’s answer was that they also provided other kinds of services to the ministry. Of course.

"Good morning my sunshine!" Source: veranus.blog.hu

“Good morning my sunshine!”
Source: veranus.blog.hu

It is equally useless for the opposition to turn to the chief prosecutor for remedies as two Együtt-PM members of parliament tried to do today. They were politely called in for a personal meeting with Péter Polt, who explained to them that his office cannot do a thing as long as they don’t know the exact charges. He wrote a letter to the U.S. attorney general and, if he reveals the details, they will certainly act. Of course, Polt knows perfectly well that the U.S. attorney general can’t release the details. So, that argument is pretty safe. Polt also reassured them that investigations have been going on for some time at NAV and that Ildikó Vida is in no way involved with the cases under investigation. So, this is yet another dead end.

Corruption may not move massive crowds, but internet users may yet have reason to take to the streets. If my reading of the bits and pieces of information that are being released about internet usage is correct, something might be in the offing that is much worse than a steep usage tax. I read with some suspicion that László L. Simon, undersecretary in charge of culture, would like “to improve” the quality of the internet. He also drew attention to the dangers lurking online and called on young people to leave cyberspace and join real-world groups. The fact that Tamás Deutsch is still entrusted with a “national consultation” on the issue of the internet also points in that direction.

Besides the internet, potential protesters should keep an eye on the the Christian Democratic People’s Party (KDNP)’s harebrained idea to close larger chains on Sundays. I’m hoping that the government will not fall for this proposal because of its adverse economic consequences, but anything is possible from this crew. I bet a lot of people would gather for a demonstration against closing the plazas and the malls on Sundays.

Another suggestion to keep pressure on the government is a large demonstration against closing half of the gymnasiums and forcing students into inferior trade schools. Parents, students, and teachers would make a hefty crowd.

There are no governmental checks to Orbán’s drive to create a national illiberal democracy where freedoms are being compromised and increasing numbers of people are living in poverty. Parliament is under firm Fidesz control, and the constitutional court has been packed with Fidesz judges. Only the people can speak against this regime, but they must pick their causes wisely for maximum effectiveness.

The corrupt Hungarian tax authority

Since the fate of the internet tax is still pending, let’s turn to the systemic corruption that has a debilitating effect on the entire Hungarian economy. The existence of corruption on all levels of the administration didn’t escape the attention of the demonstrators who were brought to the street by their concern over the government’s plans to restrict access to the internet through onerous taxation. They protested against the “mafia government” and chanted slogans about thieves who become rich off their own hard-earned money. They deplored the activities of the corrupt officials of NAV, the Hungarian equivalent of the American IRS. NAV spends untold millions if not billions trying to track down small fry while letting the big fish off the hook. Or worse, it is alleged, high officials of NAV receive kickbacks from corrupt businessmen for services rendered. And what is the most disturbing about this whole story is that the highest officeholders of the government party, Fidesz, have known about these fraudulent activities–and have benefited from them–for years.

How can I say with such confidence that members of the government and the party have been aware of these illegal activities for a long time? Almost a year ago András Horváth, an employee of NAV, spilled the beans. He collected evidence that proved that certain crooked businessmen were receiving preferential treatment by NAV. In the wake of Horváth’s revelations nothing happened. After a quick internal investigation, NAV declared that Horváth’s accusations were baseless. And, for good measure, they fired Horváth. Soon enough the police arrived at Horváth’s apartment and took away the evidence.

The fraud that high NAV officials “overlooked” involved all sorts of financial shenanigans that resulted in Hungarian businessmen not paying the admittedly very high 27% value added tax on certain agricultural products like sugar and cooking oil. With that move, and with the active assistance of the Hungarian tax office, these crooked Hungarian businessmen gained a considerable advantage over their main competitor, the American firm Bunge. These Hungarian businessmen were the ones András Horváth was talking about and who are now, after the American revelations, suddenly  in custody. Without the American announcement to ban certain individuals from entering the U.S. these people would still be writing out their fraudulent bills of sale. The thoroughly corrupt Orbán government had no intention of doing anything about the crooked businessmen or, as it turned out, the equally corrupt tax officials. The American ban is invoked only in countries where there is no hope for justice because the government itself is corrupt. Usually third-world countries.

With the American revelations Horváth’s accusations were corroborated. Horváth and Goodfriend obviously were talking about the same cast of characters. But the Americans added another crucial piece of information that Horváth couldn’t have known about: high NAV officials offered their services to the CEO of Bunge for 2 billion Hungarian forints, to be paid to a foundation with ties to Fidesz. In return, they offered a lowered VAT on foodstuffs, a demand of long-standing by the honest producers of sugar and cooking oil. For this sum they also offered to go after Bunge’s competition.

The government’s reaction to all these revelations is fascinating. First, government officials–most notably Mihály Varga, minister of national economy who is in charge of NAV–focused on the corrupt businessmen, ignoring the NAV officials. Why is the Hungarian government accused of doing nothing? After all, three or four people are already in custody. When asked about Ildikó Vida, the corrupt head of NAV who was seen at Vienna’s airport leaving for an unknown destination, he played the innocent. Vida is taking her vacation, to which she is entitled. To the question whether Ildikó Vida is banned from the United States as rumored, Varga announced with a straight face and a hefty dose of the exculpatory conditional, that if she were, surely she would have reported this fact to him as she is supposed to.

Who is this Ildikó Vida? She, like almost all Fidesz bigwigs, lived in the countryside before she entered law school in Budapest. (One reason for the heavy concentration of non-Budapesters among the original Fidesz leaders is that they lived in university dormitories.) Vida was also a member of the by now famous Bibó College which Orbán; Lajos Simicska, former treasurer of Fidesz and now a wealthy businessman; László Kövér, president of the parliament; and József Szájer, a member of the European parliament, attended.

Ildikó Vida at her desk

Ildikó Vida at her desk

As one Hungarian media outlet complained, we know very little about the president of NAV. She does not have a large Internet presence and NAV’s webpage has no biographies of the organization’s top leaders. However, she seems to be a very important person in Orbán’s mafia state.

About a month ago a long study by atlatszo.hu, one of those NGOs who receive money from the Norwegian Civil Fund and whom the government is trying to defund, identified the key persons who “captured the Hungarian state.” Ildikó Vida is among them. She must know about the siphoning of public money into Fidesz coffers and most likely into Fidesz politicians’ own pockets as well. Lajos Simicska, whom Orbán called a “financial genius” but who elsewhere would be considered a criminal, was put in charge of the tax office in 1998 as soon as Orbán won the elections. His job was to get rid of all the incriminating evidence about the illegal financial activities of Fidesz-owned businesses that folded and were subsequently “sold” to people unreachable by Hungarian authorities so their unpaid taxes couldn’t be collected. Ildikó Vida was one of Simicska’s deputies and, once Simicska left a year later, Vida became the head of the almighty APEH, the predecessor to NAV. Most people assume that APEH under Vida was no better than NAV is today. I assume that then, just as now, the tax office serves three purposes. One is to assist certain businessmen close to Fidesz to gain an advantage over their competitors by closing their eyes to their fraudulent activities. The second function is to extract money from business leaders, part of which goes to party coffers through an intermediary, like a foundation. And third, the tax office frightens certain persons and businesses Fidesz does not deem friendly to the party and the government into submission. In brief, the picture is grim–and I suspect we don’t know the half of it.