Tag Archives: OLAF

The Tiborcz scandal is not “a mosquito bite”

Prime Minister Viktor Orbán and members of the Fidesz parliamentary caucus launched what promised to be a glorious path to victory. Everything was prepared. After propaganda campaigns against George Soros and the migrants in the last two years, Fidesz was in the midst of a new assault on those NGOs that receive financial assistance from abroad, claiming that they pose a national security risk through their active promotion of immigration. Fidesz’s election law, which favors Orbán’s party, coupled with limits imposed on the opposition parties’ ability to wage an effective campaign, ensured an easy victory on April 8.

But then came a worrisome message from the European Commission’s European Anti-Fraud Office (OLAF). After two years of thorough investigation, OLAF found such serious “irregularities” in the business practices of Elios Innovatív Zrt. that it is suggesting the return of €40 million to the European Union, money that it claims was illegally obtained. Unfortunately for the government and for Viktor Orbán, this is not one of those run-of-the-mill corruption cases that are far too numerous in Hungary. It is special since Elios Innovatív Zrt.’s co-owner was István Tiborcz, the prime minister’s son-in-law.

Although many who follow Hungarian politics are of the view that not even this super-scandal can shake the Orbán government, I’m beginning to think that this time really might be different. No, I’m not suggesting that Fidesz will lose the election, but I believe that this scandal will not just disappear into the thin air without leaving serious scars on Hungary’s governing party.

Although I can put together a logical argument for my hypothesis, I actually arrived at it in a flash of insight. Today I watched an interview with Gergely Gulyás, the latest leader of Fidesz’s parliamentary delegation. It was a terrific interview, the kind one can see in Western Europe and the Anglo-Saxon countries. Egon Rónai of ATV was in great form. He was hard-hitting and refused to let go. Gulyás, who is articulate, smooth, and able to talk himself out of any situation, crumbled in front of our eyes. It became obvious that he had no good way to communicate Fidesz’s message.

There are already signs that Viktor Orbán has ordered a retreat. Let’s start with the infamous “Stop Soros” legislative package against the NGOs. The original plan was to put the proposal before parliament in a great hurry and to vote on it in typical Fidesz manner, that is, within a few days. But first the laws were amended on the recommendation of loyal citizens who were invited to comment on the draft proposal. As a result, certain parts of the bill that previously needed only a simple majority now require a two-thirds majority. Gergely Gulyás appealed to the opposition to support the bill in the interest of national security.

Commentators critical of the government were certain that this move was a trap. Fidesz wants to show its followers that the opposition parties are not good patriots and that deep down they want to fill the country with African and Middle Eastern immigrants. That explanation made no sense to me then and makes no sense to me now.

Last night we learned that Fidesz is not going to bring the bill forward for a vote before the election. The way Gulyás explained it, the opposition parties will not vote for the bill and therefore it is not worth even trying. After the election, when, according to our optimistic Gulyás, Fidesz will have the necessary two-thirds majority, the bill will pass easily. I might add here that Viktor Orbán, in his pep talk to the members of Fidesz MPs during a recent two-day retreat of the parliamentary delegation, told the troops that he isn’t counting on a two-thirds majority.

Well, let’s take a closer look at the issue. If it took Fidesz only a day to discover that they don’t have enough votes, why did they introduce those amendments that made its passage more difficult in the first place? I suggest that the addition of the last-minute amendments was designed not to shame the opposition but to serve as a pretext for “postponing” the vote. Why? One reason is what Gulyás himself admitted — that the pressure from abroad was too great. The German government specifically expressed its disapproval of the bill. The United Nations and the Council of Europe also protested. And we have no idea what kinds of telephone calls came from Brussels and what kinds of warnings Viktor Orbán received. It had to be something pretty weighty if the vote is “postponed.”

Finally, a few words about the possible ramifications of the Tiborcz scandal. What we hear from Fidesz sources is that many leading Fidesz leaders think that OLAF’s unveiling of the massive fraud committed in a crime syndicate of sorts “might be no more than a mosquito bite, but it can also shake the very foundations of Fidesz because, if these accusations are true, they are indefensible.” Some people who were present remarked that Orbán, despite his decades in politics and all his political cunning, is stunned by the assault on him and his family.

Viktor Orbán is not the only one who is stunned and perhaps on edge. Gergely Gulyás’s miserable performance last night is indicative of the jitteriness of Fidesz bigwigs. He was caught lying when he tried to convince Egon Rónai and ATV’s audience that the Orbán government learned about the OLAF report only this week. But how could that be, he was asked, when the MSZP member of the Szolnok city council received an OLAF document from the government that was dated October 2017? Gulyás had no ready answer. And that document is not the only proof that the Orbán government has been sitting on this report for about four months. There are other less direct clues for the approximate date of the arrival of the report.

I would like to point to two instances which, given this timeline, now make a great deal more sense. One is the complicated story János Lázár told on October 9, 2017, about which I wrote yesterday. I have the feeling that by that time Lázár knew the contents of the OLAF report and that’s why he spent so much time dissecting the exact relationship between the Orbán family and István Tiborcz. My second clue is an interview conducted by Origo, which by then was a government mouthpiece. Tiborcz, who I don’t think had ever given an interview in his life, offered the internet site a lengthy interview about his business activities. The interview appeared on October 30, 2017. In it he told the sad tale of a man whose real calling is business but who is restricted in his financial dealings by the fact that he is now related to the prime minister. This arranged interview was most likely one of the preemptive measures taken at the urging of Viktor Orbán himself.

Meanwhile, Gergely Gulyás wrote a brief note to all Fidesz politicians outlining the official line of communication concerning the Tiborcz scandal. Here are the three simple points. (1) The Olaf report is a “Brussels campaign report and thus an interference in the Hungarian election campaign.”(2) “In 2014, they also timed news concerning the case to come out just before the election. The case was investigated once, but now they are repeating the accusations.” (3) “They try to attack Viktor Orbán despite the fact that during much of the period under investigation the majority owner of the company was Lajos Simicska’s Közgép.”

This is, I’m afraid, a feeble attempt on the part of whoever is in charge of official government lying because right off the bat we can counter that: (1) The report was released in October, not just before the election. (2) The news concerning Tiborcz’s firm didn’t become public until December 2014, while the election took place months earlier, on April 6, 2014. (3) Of the 35 contracts called into question by OLAF, only three were negotiated and signed while Simicska held a majority stake in the company. Moreover, the CEO of the company all along was István Tiborcz.

In brief, Fidesz is floundering. Soon enough, I suspect, Gulyás will have to come up with a new set of instructions.

February 16, 2018

The way the world is beginning to see Viktor Orbán’s Hungary

In the last three days three articles have appeared in two leading English-language newspapers, The New York Times and The Guardian, about the systemic corruption in the Orbán government. The word is out at last: a crime ring, run by Viktor Orbán himself, has taken hold of the Hungarian economy. The beneficiaries are the prime minister and his family as well as a few friends and political cronies.

The foreign press’s new-found interest in the criminal activities of Viktor Orbán was ignited by a short article that appeared in The Wall Street Journal exactly a month ago. It reported that OLAF, the European Commission’s Anti-Fraud Office, had sent a report to the Hungarian government recommending that the authorities take legal action over “serious irregularities” in projects carried out by a company that was controlled by the son-in-law of Viktor Orbán. The very fact that Hungarians had to learn about this damning report from a foreign source says a lot about the lack of transparency in Hungary.

It seems that after almost eight years of brazenly embezzling public funds, 80% of which come from the European Union, the friends and family of the Hungarian prime minister are finally coming under scrutiny. Detailed analyses are starting to plumb the depths of the systemic corruption that has made a small group of people very rich in record time. On the basis of calculations by responsible and usually accurate investigative journalists, Viktor Orbán’s hidden wealth may amount to 300 billion forints, more than a billion dollars.

One of the two Guardian articles by Jennifer Rankin neatly lists all the corruption cases that directly involve the Orbán family, including the growing wealth of Lőrinc Mészáros, which may be only partially his own. The list Rankin came up with is most likely incomplete because sub-contractors do not appear in the databases. Since most of these riches come from the European Union, Viktor Orbán’s anti-Brussels rhetoric is especially jarring. The conclusion is that, as Miklós Ligeti, head of legal affairs at Transparency International, put it, “Hungary is now in the grip of party state capture.”

The article ends with a question: will the European Union have the courage to do something about this theft of EU funds? Between 2014 and 2021 Hungary will have received €25 billion from the European Union, which makes the country one of the largest per capita recipients of the EU’s economic development funds. EU politicians are aware of the wholesale robbery that goes in Orbán’s Hungary, but for political reasons they are avoiding tackling the problem. Ingeborg Gräßle, head of the European Parliament’s budgetary committee who visited Hungary a few months ago to take a ride on Viktor Orbán’s rather expensive choo-choo train, merely says that a new kind of “semi-legal” irregularity is emerging in these post-communist countries, including Hungary. Otherwise, she estimates that in 36% of the cases there is only one bidder for EU-financed government projects, and, let me add, the remainder is most likely fixed. But that’s not all. According to András Inotai, a Hungarian economist, in 2017 5% of the country’s GDP came from EU funding while Hungary’s economic growth during the same period was about 4%. So, all that money is doing mighty little good.


Düsseldorf Carnival 2018

On February 10 an in-depth article appeared in The New York Times by Patrick Kingsley titled “As West Fears the Rise of Autocrats, Hungary Shows What’s Possible.” Hungary is described as “a political greenhouse for an odd kind of soft autocracy, combining crony capitalism and far-right rhetoric with a single-party political culture.” What follows is a detailed description of the process by which Viktor Orbán has managed to achieve his goal of an illiberal state. A former Fidesz official described the present Hungarian situation the following way: “sometimes I feel like I’m traveling in a time machine and going back to the ’60s…. All the characteristics and features on the surface are of democracy, but behind it there is only one party and only one truth.” Viktor Orbán is described as one of the strongmen of the age, alongside Vladimir Putin, Recep Tayyip Erdoğan, and Donald Trump. “Although Mr. Orbán lacks the global profile of those leaders, what he is doing in Europe is seen as part of a broader decline of democracy in the world.”

This is what Hungary looks like from New York and London. But what has been happening since the OLAF report detailing István Tiborcz’s alleged criminal activities was released? First of all, the government has come up with a strategy to divert responsibility from Orbán’s son-in-law to Lajos Simicska, Orbán’s old friend-in-crime, now enemy. This strategy may work on the propaganda level but it will not be sufficient to save Tiborcz from prosecution. But we ought not worry about the future of Ráhel Orbán and her husband. The Hungarian prosecutor’s office has already announced that its investigation of the case will be long and arduous. I have no doubt that after an inordinately long investigation Tiborcz will be found innocent of any wrongdoing. The government propaganda machinery also concocted the story that the European Union’s anti-Orbán forces timed the release of the report to coincide with the national election. It is with OLAF’s help that Soros’s men in Brussels want to remove Viktor Orbán from the seat of power.

Otherwise, all eyes are on Hódmezővásárhely, where István Tiborcz’s business career began. To recap the story: Orbán’s future son-in-law needed money and a contract to establish his business credentials, which he didn’t have. Both were provided through the good offices of the prime minister. Orbán convinced his favorite oligarch at the time, Lajos Simicska, to put some money into the young man’s firm. As collateral, Simicska demanded a share of the business. After two years, Tiborcz and his business partner paid the loan back and Simicska retired from this business venture, which he had never actually run. As for the needed contract, János Lázár, today chief-of-staff of Viktor Orbán but then still mayor of Hódmezővásárhely, suddenly had a burning desire to install new public lighting.

The sleepy little town is now all over the media as a result of the details of the project, which came to light thanks to 24.hu. So, Lázár felt that he had to give a press conference right on the spot. After a general denial of any wrongdoing, he offered a description of the town’s business venture with István Tiborcz. Lázár’s fairy tale about the bidding process and the details of what happened afterward is especially amusing if one reads old articles on the town’s internet news site called Vásárhely Hírek. While there, I also decided to read up on the special election campaign for mayor, which is in full swing at the moment.

The election will take place on February 25. Of course, the scandal around István Tiborcz also touches on the town and the election. There seems to be some anxiety in Fidesz circles about the outcome, although a couple of weeks ago I was certain that the independent candidate, Péter Márki-Zay, who lost his job after he declared his candidacy and was so maligned by his pro-Fidesz parish priest, had not the slightest chance of making a decent showing. But in the last few days commentators have pointed out that the Hódmezővásárhely election is a unique case in the sense that neither Jobbik nor the left-of-center parties have put up candidates and therefore Márki-Zay is facing the Fidesz candidate, Deputy-Mayor Zoltán Hegedűs, alone.

The town was planning to distribute 10,000 forint vouchers to pensioners sometime in March, just before Easter, but, behold, the decision was made to disburse them before the election. The prime minister also invited Hegedűs for a cup of coffee in his office in the parliament, and Defense Minister István Simicskó paid a visit to town to make sure that everybody knows that the old military barracks will be renovated and the Hódmezővásárhely shooting gallery will be the very first one to open in the whole country.

Political observers often complain about Hungarians’ indifference to corruption, which they tend to view as a fact of life. Perhaps there is hope. If Márki-Zay makes a good showing in a town where the deceased Fidesz mayor received 61% of the votes, followed by Jobbik with 17.1% and MSZP-DK-Együtt with 15%, it will give us a clue about public sentiment. A Márki-Zay win could have a measurable effect on the national election on April 8.

February 12, 2018

Mafia-like criminal network around the Orbán family

A month ago The Wall Street Journal reported that OLAF, the European Commission’s Anti-Fraud Office, after a two-year investigation of 35 projects undertaken by Elios Innovatív Zrt. to modernize municipal street lighting in Hungary, found “serious irregularities” and recommended to the Hungarian authorities that they take legal action against the persons involved. Unfortunately for Prime Minister Viktor Orbán, the principal owner of the company in question was his own son-in-law, István Tiborcz.

The company’s fraudulent activities were substantial. According to OLAF’s calculations, Tiborcz and his accomplices pocketed more than €40 ($49.8) million in EU funds through illegal business practices. Although the report was submitted to the Hungarian authorities, who apparently passed it on to the prosecutor’s office, the Orbán government was loath to make the report public even though, in the past, it had been more than eager to release such documents if they involved fraud cases before 2010.

I have written so many times about this case that I won’t bore regular readers with its details. Suffice it to say that by 2014, when OLAF began its investigation, it was obvious that the fabulous rise of Tiborcz’s company was due to his relationship with the prime minister’s family. By then one could also hypothesize that Tiborcz’s decision to switch from electrical and energy supplies to the installation of LED lighting was inspired by his future father-in-law, who was fully aware that the government had put aside 9 billion forints in EU funds for the purpose.

At the outset there were two problems: Elios needed money and it needed at least one city to entrust its project to Elios as proof of the company’s soundness. With the help of Viktor Orbán both problems were solved in short order. A telephone call to his friend Lajos Simicska, who had handled Fidesz’s finances ever since 1990 and who in the interim had become an extremely wealthy man, was enough to get the necessary capital. Simicska infused much-needed capital into the business of Orbán’s future son-in-law through buying the majority of the shares in the company. The second problem was also easily solved. János Lázár, mayor of Hódmezővásárhely and by 2010 head of Fidesz’s parliamentary delegation, was more than happy to help Tiborcz out. By October 2011 Hódmezővásárhely was touted as the first city in the whole of Europe to use LED technology exclusively. Mission accomplished. Two years later Tiborcz and his partner bought out Simicska, and by the end of 2011 Lázár’s city was called “the European Los Angeles.”

But it seems that all of the advantages his ties to the Orbán family offered weren’t enough for the 24-year-old Tiborcz. He was also dishonest. What we didn’t know until now was how corrupt he, his associates, and the government authorities who dealt with him were.

Well, today we know. Or, more precisely, now we are beginning to learn the details of a mafia-like corruption ring engulfing Viktor Orbán and his family.

24.hu managed to get hold of a copy of the OLAF report that the Orbán government is so eager to hide. We know from a recent OLAF report, which was made public, that these reports are extremely long and detailed. This particular investigation covered 35 business transactions, so I assume it is a lengthy document. The journalists who gained access to the OLAF report had only a few hours to study it, so I’m sure there will be plenty more information trickling in as time goes on.

Momentum’s “gift” to the Prosecutor’s Office: “Accomplice, Accomplice” / Source: Magyar Nemzet / Photo: Balázs Székelyhidi

So, let’s start with what we now know. According to 24.hu, Tiborcz and Co. “misappropriated public funds” in a “criminal association” and “on a commercial scale.” There was a network of people involved in the wholesale fraud Elios’s business partners and their helpers committed. All 35 cases involved the “misuse of public funds,” and in 17 cases OLAF discovered organized criminal activity. There were all sorts of fraudulent activities involved, but perhaps the easiest to understand is that the same person on the same computer wrote up the competitors’ so-called “indicative offers” and in every case priced them exactly 5% and 7% higher than Elios’s bid. Later we learned that this person was one of the directors of Elios.

We already know some details of the fraud through the case of Szolnok’s contract with Elios. That case indicates that even government authorities who handle the European Union’s “environmental and energy efficiency operational program” (KEOP) helped Tiborcz win the contract by changing the parameters of the requirements on a Friday with a deadline on Monday to fit Elios’s specifications. The scheme worked the following way. Ivette Mancz, the Elios director in charge of public lighting, was also involved in writing the specifications for the job ordered by the municipalities. And once Elios finished the work, an “independent auditor,” INS Kft., inspected the finished work. The signature on the so-called independent audit, however, was Mancz’s. The scheme was foolproof: Mancz set the terms, Mancz’s firm did the work, and Mancz was also associated with the company that checked the results.

These revelations were naturally welcomed by all the opposition parties, whose politicians had already decided that the Tiborcz case is “the atomic bomb” they have been waiting for. Considering that the prosecutor’s office is solidly in Fidesz hands, I wouldn’t be too optimistic. Nonetheless, these disclosures shook even some Fidesz politicians. For example, in the city of Zalaegerszeg, whose city lighting was handled by Elios, two opposition members of the city council requested a copy of the OLAF report and, behold, 6 of the 12 Fidesz members supported the opposition. But it took only a few hours for the mayor to declare that, sorry, it was a mistake. The Fidesz members simply pushed the wrong button. As for the major opposition parties, they are up in arms. They seem to be concentrating on Chief Prosecutor Polt, who “will have to end up in jail.” Jobbik went so far as to demand Orbán’s resignation.

The Orbán propaganda media’s response will most likely follow the reasoning that Magyar Idők proposed in an article which appeared on January 20. It tried to shift the blame onto Lajos Simicska, who for a short time was the majority shareholder of Elios. Origo today published another piece along the same line. We can expect dozens of such articles in the next few days. In the meantime, investigative journalists will have a heyday exploring and exposing Elios’s fraudulent business affairs.

February 7, 2018

A new job for OLAF? Győző Orbán, the father of Viktor Orbán

Today’s Financial Times carries a lengthy portrait of Viktor Orbán by Neil Buckley, FT’s East European editor, and Andrew Byrne, the paper’s correspondent for Hungary, Romania, and Western Balkans. In this overview of the political career of Hungary’s maverick prime minister, the authors quote George Soros, who said that Orbán “started really going wrong when he made his father rich by giving him a quasi-monopoly on road-building materials, which was a big source of wealth. That’s when [he] started building a mafia state. It’s really when he actually gained power.”

As a matter of fact, immoral financial dealings have been part and parcel of Orbán’s whole career. In 1990 the new democratic parties were penniless and, in order to conduct their activities, they all received a large amount of seed money. Fidesz’s share was half of a very valuable downtown building, which the party sold for cash. Out of this money, quite fraudulently, a few million forints was given to Viktor Orbán’s father, Győző Orbán, who was short of the cash he needed to purchase a stone quarry owned by the state, of which he was the manager at the time.

As time went by, Orbán’s financial appetite grew. After he became prime minister in 1998, he was in the perfect position to work on fattening himself, his friends, and his family through inside information. He was especially interested in agricultural land because he knew that the landowners would receive considerable EU subsidies in the future.

His father’s quarry, just as George Soros remembered, became practically the sole supplier of crushed stone to state-owned companies involved in government-funded road construction. Once all this was discovered, there was an outcry, especially after the 2000 publication of a book on the shady affairs of the “first family.” Orbán, who in those days was a great deal less brazen, had a talk with his father which, according to the prime minister, wasn’t pleasant. His father couldn’t understand why he couldn’t continue supplying crushed rock for government projects.

Father and son

Although there has been less talk about Győző Orbán’s business activities since his son’s return to power, some investigative journalists are convinced that Orbán’s father still has his finger in the “government project” pie. The journalists who are most curious about the business affairs of the extended Orbán family work for Direkt36. It is a center for investigative journalists who work hand in hand with 444, the internet news site. Direct36 has a separate column called “business concerns of the Orbán family.” Two journalists, András Pethő and Blanka Zöldi, are especially busy collecting data on the elder Győző Orbán and his two sons, Győző, Jr., and Áron. Many of their articles can be found here. (As a point of linguistic and psychological curiosity: Győző is the Hungarian equivalent of Victor/Viktor. So Elder Győző named two of his sons after himself.)

In May of last year the journalists of Direkt36 reported that Győző’s crushed rock and concrete building materials were being transported to government projects, most of which are financed by European Union funds, like sewage systems and railroad construction in Érd, Budapest, Jászberény, and Püspökladány. While visiting these sites, the journalists noticed trucks with the name “Nehéz Kő” (Heavy Stone) delivering large amounts of crushed rock and building materials to the government projects. The journalists found out that the trucking company belonged to Áron Orbán (subsequently, it seems, Győző Orbán became the owner), and they suspected that the material Nehéz Kő was carrying came from Dolomit Kft., Győző Orbán’s company.

Dolomit was active throughout the country, but the journalists were especially interested in a mega-project, the construction of a 53 km  railroad line between Szántód and Balatonszentgyörgy with an estimated cost of 72.4 billion forints. The work is being done by a consortium of three firms: R-Kord Építőipari Kft., V-Híd Zrt., and Swietelsky Vasúttechnikai Kft. R-Kord is owned by (who else?) Lőrinc Mészáros.

Direkt36 suspected that they had just encountered a tightly-knit family business, but the reporters were unable to get hold of the documentation necessary to show that the elder Orbán was actually doing business with the government. Today, after months of litigation, Direkt36 received proof that, despite the denial by the prime minister, Nehéz Kő is one of the subcontractors of this EU-funded government project. By setting up a trucking company that doesn’t display the Dolomit name, the Orbáns presumably wanted to hide the fact that the material comes from the family company.

Last summer Blanka Zöldi of Direct36 confronted the prime minister with her findings that Győző Orbán is the supplier of stone and building material to important government projects. Viktor Orbán, during that Q&A session, made a distinction between general contractors, subcontractors, and suppliers. Hungarian law forbids, he claimed, the participation of close relatives of important political figures from being general and subcontractors, but not from being suppliers. Clearly, he said, his father and brother have no business dealings with the government. They have a contract with one of the general contractors. But the documents received today show that Nehéz Kő was a subcontractor on the southern Balaton railroad project to the tune of 300 million forints or $1.2 million.

The Demokratikus Koalíció, which helped call attention to the shady business dealings of Viktor Orbán’s son-in-law, István Tiborcz, is ready to turn to OLAF again. The party’s spokesman declared that “there is no civilized, democratic country where, after such a revelation, the prime minister remains in office. … The money coming from [Brussels] goes toward the enrichment of his family.”

This may be the case (although Trump stretches the limits of what it means to personally benefit from political office), but Hungary at the moment doesn’t belong to the group of civilized and democratic countries. In a mafia state, a designation popularized by Bálint Magyar, earlier minister of education, like-minded people in high political office work together for their own and their families’ enrichment. Here we have the quarry business of Győző Orbán, whose initial capital came from his son’s newly-formed party. His company, Dolomit, supplies stone and cement products to government projects, which are being trucked by his company, Nehéz Kő. The goods are taken to the work site of the firm owned by Lőrinc Mészáros, who is suspected of being the stróman or front man of Viktor Orbán. All in the family.

January 25, 2018

Surprise, surprise! OLAF found “serious irregularities” on Orbán’s home turf

On January 12 The Wall Street Journal reported that, after a two-year investigation, the European Union’s Anti-Fraud Office (OLAF) is recommending legal proceedings over “serious irregularities” found in a company that was co-owned by the son-in-law of Hungary’s prime minister, Viktor Orbán, between 2011 and 2015.

I have been following the rising fortunes of István Tiborcz, the 32-year-old millionaire businessman who married Orbán’s eldest child, Ráhel. A couple of journalists began investigating Tiborcz’s business dealings in the summer of 2014 after Ráhel Orbán boasted on Facebook that she and her husband don’t need her father’s assistance in paying her lofty tuition fees in Switzerland because they “stand on their own two feet” financially. It was this comment that inspired András Becker and Babett Oroszi, two investigative journalists from Átlátszó, to look into Tiborcz’s business affairs. After a few months of hard work they produced a thorough article, published shortly before Christmas 2014. On the same day I wrote a post titled “How do European Union funds end up in the hands of the Orbán family?” The two journalists found that Tiborcz’s firm, Elios Innovatív Zrt., bid and won, more often than not without any competition, 2.9 billion forints worth of government contracts, mostly financed by the European Union. In addition to serious irregularities in the bidding process, OLAF also found “evidence of conflict of interest.” As we have known since 2014, Endre Hamar, a business partner of István Tiborcz, was the owner of a company that “helped municipalities prepare the tender process.”

That article was so hard hitting and so thoroughly researched that in February 2015 Csaba Molnár, DK member of the European Parliament, turned to OLAF in connection with the shady business affairs of István Tiborcz. By March even the Hungarian police had begun investigating Elios’s business transactions. The Orbán family council must have realized that the situation was serious and that the best thing was to get rid of Elios as quickly as possible. By May 2015 Tiborcz “sold” his company to one of his father-in-law’s oligarchs. In July Csaba Molnár announced that OLAF had found the information he provided sufficient grounds for investigation. In fact, as it turned out, the irregularities were so serious that OLAF is suggesting the return of €40 million to the European Union, money that it claims was illegally obtained.

The Wall Street Journal noted that these “allegations could prove embarrassing for Mr. Orbán, an outspoken critic of the EU in recent years.” Indeed, every effort is being made in the pro-government media to minimize the significance of OLAF’s findings regarding the possible misappropriation of funds by Tiborcz’s company. Magyar Idők published an editorial shortly after the appearance of The Wall Street Journal article that tried to give the impression that there is a direct connection between the forthcoming national election and OLAF’s suggestion of an investigation by the appropriate Hungarian authorities into Elios’s business affairs.

The best that Zoltán Kovács, the communication wizard, could come up with was that “it has been possible ever since 2004 to use EU resources for the development of public lighting.” Moreover, he continued, “the objects of the OLAF investigation are tenders that were initiated during the tenure of the Bajnai government.” In brief, it was Viktor Orbán’s predecessor who was responsible for the current prime minister’s son-in-law’s allegedly fraudulent business practices by offering an opportunity to develop public lighting in Hungarian cities. Gordon Bajnai couldn’t resist and wrote the following comment on his Facebook page: “Perhaps we should have been more careful and indicated on the application forms that applicants are obliged to follow the seventh and government spokesmen the eighth of the Ten Commandments. Of course, we thought that it is enough if it is in the Bible.” In case some of you need a refresher course, the seventh commandment says “Thou shalt not steal” and the eighth, “Thou shalt not bear false witness against thy neighbor.”

As for the alleged connection between the forthcoming election and the OLAF investigation, the Hungarian government seems to be exceedingly well-informed about all the alleged recent decisions and moves of OLAF. Magyar Idők claims that in the last few months OLAF rushed to complete the work on this particular case. They were in such a hurry that “they neglected to ask for the comments of the concerned party.” In brief, the announcement was timed to coincide with the start of the election campaign. OLAF is giving the opposition an opportunity to use the case against Fidesz and the Orbán government.

Ottó Gajdics, editor of Magyar Idők and a particularly distasteful character on the far-right Echo TV, took upon himself the task of writing an opinion piece on the OLAF investigation. In his interpretation, the real culprit in this affair is the opposition. “They pounced on the object of their hatred” and “in their usual sly ways, they entrusted their foreign agents” to do the dirty work. But, he continued, one ought not to be terribly worried about this whole affair. It will take months for the prosecutor’s office to investigate the case. It is “in our interest not to allow anyone to take advantage of these investigations in this base political game.” Indeed, I am sure that Mr. Gajdics is right. The prosecutor’s office, a veritable Fidesz bastion led by Péter Polt, will do its utmost to see that nothing comes of the investigation. Viktor Orbán and his son-in-law have nothing to fear.

January 15, 2018

Metro 4: The largest case of Hungarian fraud and corruption

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

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

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

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

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

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

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

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

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

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

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

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

February 6, 2017

The perils of being an opposition politician in Hungary

I don’t know whether I will be able to make a coherent story out of the mess the Orbán government most likely has purposefully created regarding the report of the European Commission’s European Anti-Fraud Office (OLAF) on irregularities—fraud and possible corruption—in connection with the construction of Budapest’s fourth metro line (M4). The report covered the period between 2006 and 2015.

Although the Hungarian government received the OLAF report—or its English-language summary, the Hungarian public heard about it only from the English-language news site Politico. It didn’t take long before the Fidesz government and the Fidesz-led City of Budapest, on the one hand, and the politicians of the socialist-liberal government of the pre-2010 period, on the other, were at each other’s throats. The government claimed that practically all the financial wrongdoings were committed before 2010 while the opposition politicians accused the Orbán government of making political hay out of the case while refusing to make the report public. The administration claimed that it has no authority to release OLAF’s findings.

Most likely because of the holiday season at the end of the year, for about a month not much happened. Then, on January 16, János Lázár officially announced that he will file a complaint against Gábor Demszky (SZDSZ), mayor of Budapest between 1990 and 2010, Csaba Horváth (MSZP), deputy mayor between 2006 and 2009, and János Atkári, a highly respected economist who for many years served as Gábor Demszky’s financial adviser. That announcement started an avalanche of often conflicting articles in the Hungarian media.

A day after Lázár’s announcement, his deputy Nándor Csepreghy gave a detailed press conference dealing with the Metro4 corruption case. The government found MTI’s report of that press conference so important that it was immediately translated into English. We learned from Csepreghy that the Fidesz government had had its own suspicions of fraud surrounding the project even before. The OLAF report only confirmed these suspicions.

Csepreghy disclosed a few relevant facts that might help our understanding of the case. For example, he revealed that the investigators of OLAF conducted interviews with 50 individuals, “including the competent executives and managers” of the Budapest Transit Authority (BKV) and the City of Budapest. In addition, Csepreghy named a few companies that had been involved in the construction of the metro line as possible culprits. He also gave the initials of certain individuals heading large public and private companies. Finally, he said that “there are dozens of actors mentioned in the report who were politicians, were associated with the realm of politics, or operated as semi-public actors.” Finally, he told the press that the “government’s legal advisers are currently looking into the possibility of disclosing the OLAF report to the public in its entirety, to which the Government is fully committed.”

Nándor Csepreghy at the press conference / Photo: Tamás Kovács (MTI)

Although the government filed a complaint against Demszky, Horváth, and Atkári, they weren’t among the individuals Csepreghy referred to by their initials. A Magyar Idők editorial found Demszky’s absence from the list especially regrettable. The former mayor will get off scot-free because “according to rumors, his name doesn’t appear to be in the report.” Only the CEOs of large companies will be prosecuted. But what will happen if they reveal “the name of the chief coordinator”? In brief, the journalist responsible for this editorial accuses Gábor Demszky of being the head of a conspiracy to commit fraud.

Meanwhile Hungarian members of the European Parliament decided to look into the question of whether the Hungarian government told the truth when it claimed that it needed the approval of OLAF to release the report and that it was waiting for OLAF’s response to its request. All three opposition MEPs–Csaba Molnár (DK), Benedek Jávor (Párbeszéd), and István Ujhelyi (MSZP)–asked the head of OLAF, Giovanni Kessler, about OLAF’s position. All three claimed that, according to the information they received, it was up to the Hungarian government whether to release the document or not. Since there is a controversy over the meaning of the information received, I will rely on Ujhelyi’s statement, which includes the original English-language letter he received from OLAF. Here is the crucial passage:

In response to your question, since the OLAF final report has now reached its intended recipients, the Office is not in a position to decide on the possible release of the report. Such a decision belongs in the first place to the national authorities to which the report was addressed. It is for these authorities to assess the impact of a possible release of the report and to ensure compliance with the relevant legal obligations on judicial secrecy, data protection and procedural rights, including the right of access to file.

It is hard to fathom why the Orbán government again resorted to lying instead of appealing to the possible legal problems that could stem from the release of the report. Since then, Attila Péterfalvi, president of the National Authority for Data Protection and Freedom of Information, personally asked István Tarlós, who by now has a copy of the document, not to make the OLAF report public. It looks as if Péterfalvi, before making this request, consulted with János Lázár of the Prime Minister’s Office and Péter Polt, the chief prosecutor, who are both against the release. Although there might be compelling legal reasons not to allow the publication of the OLAF report, given the reputation of Péter Polt’s prosecutor’s office one cannot help being skeptical about the real reasons for the secrecy.

Over the weekend Gábor Demszky gave an interview to Vasárnapi Hírek in which he detailed his position on the case. Demszky said that, according to the rules of the Council of Europe and the European Parliament, OLAF must give anyone mentioned in their investigative reports the opportunity to respond. Since no one contacted Demszky, Horváth or Atkári, it is probably safe to assume that they are not the subjects of the investigation. Even so, the Orbán government filed complaints against them. Demszky also said that because OLAF conducted its investigation between 2012 and 2016, “most of their information came from the offices of the Fidesz government.” OLAF, Demszky added, most likely accepted the information in good faith because its investigators don’t expect these offices to be swayed by political pressure.

I might add that one has to be very careful when assessing the veracity of witness testimony. We know from other politically motivated trials that witnesses often give false testimony. The most infamous was that of Zsolt Balogh, head of BKV. In order to save himself months of pre-trial custody, he invented the story that Miklós Hagyó (MSZP), one of the deputy mayors, demanded 40 million forints, to be delivered in a Nokia box.

The opposition parties are truly worried about the prospect of years of investigation by politically motivated Hungarian prosecutors. Even though in the past most defendants were eventually exonerated, they remained in limbo for years and their careers were ruined. We must also keep in mind that although OLAF has filed scores of such reports on cases involving fraudulent procurement practices, only four guilty verdicts have been handed down in the last almost seven years. Some cases, like that involving Orbán’s son-in-law, were unceremoniously dropped. The prosecutors’ sudden interest in this case indicates to me that they think they can use it to do damage to the opposition, one way or another. Evidence of culpability has never been the litmus test for deciding which cases to pursue.

January 30, 2017