Tag Archives: Szolnok

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

The European Union has had enough: No money for a 110 billion project already underway

Not only does Quaestor’s collapse and the government’s involvement in this scandal weigh heavily on the third Orbán government. Viktor Orbán just heard officially that the European Union is refusing to finance a 30 km section of a new Hungarian superhighway, the M4, that would be 230 km long and would lead all the way to the Romanian border just north of Oradea/Nagyvárad. This is a first. And this time there is no possibility of any further negotiations. The project must either be abandoned or be built from purely Hungarian sources. Trying to resubmit the same project based on another, lower bid seems pretty hopeless since the European Union considers the whole project a “luxury item.”

I would be hard pressed to recall all the dates that were mentioned in the press about the imminent beginning of work on the project. It was in 2003 that civil engineers and experts on transportation came up with a 15- and a 30-year plan which included two much-needed superhighways, M8 and M4, that would transverse the country from the Austrian border to Romania. The point was to avoid Budapest, which has for far too long been the epicenter of the Hungarian transportation system. By 2005 it looked as if both M8 and M4 would be built.

In December 2012 Index reported that work on the planned 30 km section of M4 between Abony and Fegyvernek would begin in 2013. At that time people familiar with the price structure of Hungarian highways predicted that it would cost “tens of billions of forints,” but by the end of 2014, when all the bids were in, the cost was 110 billion or almost 4 billion per kilometer. That is four times the price of similar road construction in Western Europe where wages are considerably higher. Such a blatantly overpriced project was too much for the European Union. Moreover, they suspected price fixing. But what is really devastating for the Hungarian government is that the EU didn’t just stop this particular section of M4 but refused to finance the entire 230 km of M4 during the 2014-20 budget period.

An unfulfilled dream: "M4's construction began at Abony / szolnoknaplo.hu

An unfulfilled dream: “M4’s construction began at Abony” / szolnoknaplo.hu

The European Union’s decision about the Abony-Fegyvernek section of M4 couldn’t have come as a surprise to the government. Although by January 2014 all necessary permits were obtained and therefore work could begin, the green light from Brussels wasn’t forthcoming. In December 444.hu learned that in general there are problems with the Hungarian projects waiting for approval in Brussels. “Among other reasons, the European Commission did not pay because the officials consider the prices submitted too high.”

Benedek Jávor (PM MEP) turned to OLAF (European Anti-Fraud Office) to initiate an investigation into the M4 highway project. He wanted to know whether there were any signs of corruption, specifically any possibility of kickbacks to parties by the five firms involved in the construction of the project. Colas USA and the Austrian Swietelsky were to build 13.4 km for 46.76 billion forints. Lajos Simicska’s Közgép together with another Hungarian company, Híd, was entrusted with a short 2.4 km section, but it had three bridges, including a new 756 meter-long bridge across the Tisza River. For this work they signed a contract for 32.5 billion. For the rest Strabag International was to receive 31.5 billion.

The Hungarian government was so eager to launch the project that in January they began construction, which means that about 30% of the project has already started. It is not at all clear what the government will do in light of the EU decision. After all, it is not the fault of the companies involved that the Hungarians decided to begin construction without the final okay of Brussels. If, however, price fixing can be proven, Nándor Csepreghy, assistant undersecretary in charge of communication on matters related to the European Union, said, the construction companies will be responsible to the Hungarian taxpayers for the loss of 110 billion forints.

Although the Hungarian government now echoes the EU and says that the construction costs are too high, back in 2013 when Benedek Jávor first began his investigation of the case neither Mrs. László Németh, then minister of national development, nor János Lázár found anything wrong with the winning bids. In fact, both insisted that they “were not irrationally high.” But now, suddenly they’re talking about price fixing. It is hard to escape the conclusion that Benedek Jávor’s suspicions about possible kickbacks to individuals and perhaps also to Fidesz’s coffers are well founded.

As far as I know, up to this point it was only Simicska’s Közgép that reacted to Csepreghy’s threat of passing the lost EU money on to the companies involved. Közgép published a statement in which they explained that it was Közgép that offered the lowest price in a proper bidding process and that their job was not simple road building but the construction of three bridges. The new Tisza bridge will require 8,500 tons of steel. In addition, two smaller bridges, on either side of the Tisza, must be built over wetlands. Közgép called attention to the fact that the January issue of the Official Gazette announced that the government would finance from domestic sources a road that “connects M5 with M4.”

Indeed, János Lázár only recently reiterated the “government’s long-standing desire to have at least a four-lane highway between M5 and Szolnok.” Apparently, it is for political reasons that the Orbán government wants to make this road a priority. It was in Szolnok last September that Viktor Orbán announced his ambitious plan for building four-lane highways that would connect each county seat to the larger superhighway system of the country. Moreover, he planned this expansion of the roads not from EU money but from domestic resources. Such a road would “bring spectacular economic development to the city,” said Ildikó Bene, a Fidesz member of parliament. Budapest could be reached from Szolnok in less than an hour, she promised.

As for the charge of cartel activities and price fixing, I’m not sure that this is the real reason for the extraordinarily high prices asked for the job. Colas-Swietelsky bid 3.49 billion/km and Strabag 2 billion/km. Közgép is a different story because their work consists mostly of building bridges. I’m almost sure, however, that officials demanded kickbacks. A conversation between Nándor Csepreghy and Egon Rónay of ATV on Friday morning supports this supposition. When Csepreghy went on and on about the cartel activities of the firms involved, Rónay asked him why Hungary had to wait for the European Union to suggest that price fixing might be behind the high prices. Why didn’t they investigate these suspiciously high prices themselves? Csepreghy refused to answer. He tried every which way to bypass the question until Rónay said, “Well, you just refuse to answer my question.” Probably a wise decision.

Two days, two speeches: Viktor Orbán on a very wrong track

There are always a few people who phone into György Bolgár’s popular talk show on Klubrádió inquiring why he spends so much time on Viktor Orbán. The answer is simple. Orbán controls the country’s political, economic, and social agendas. Lately he has been busily promoting his ideas on topics ranging from religion to re-industrialization. Just in the last two days he made two speeches and gave his usual Friday morning interview to Magyar Rádió (which lately I’ve noticed French and German journalists correctly call state radio instead of public radio). And today the Spanish  El Mundo published an interview with Orbán on Christianity’s blessings for everyone, including nonbelievers.

Here I will tackle only the two speeches he delivered on April 18 and 19. The first was occasioned by an addition to the Stadler Rail Group’s plant near Szolnok. Stadler Rail is a Swiss company. The second also marked a plant expansion, this time by the Danish Lego Group at its Nyíregyháza facilities. There are practically no foreign companies that want to establish new factories in Hungary, so Orbán must be satisfied with even modest expansions of existing ones. Both Lego and Stadler have been operating in Hungary for a number of years. They came during the Gyurcsány and Bajnai governments.

Years ago, during his first premiership, Orbán made a since oft-quoted statement: “There is life outside the European Union.” In the last ten years or so he didn’t want to call attention to that much criticized sentence. At least not until two days ago when he said in his Szolnok speech: “I find it very important that the company that invests in Hungary is Swiss. Hungarians have always admired the Swiss and I am especially pleased that the Ambassador of Switzerland is also here. As school children we learned that Switzerland is a freedom loving country that has never given up its independence, horribile dictu didn’t even join the European Union. Switzerland is a good example that there is life outside the Union, so no one should be scared.” Well, that’s quite something although I doubt that Orbán actually wants to withdraw from the EU. He knows only too well that a financial collapse would follow secession.

There can be no better place to talk about the re-industrialization of the country than in a plant that manufactures railway vehicles and streetcars. The site gave Orbán an opportunity to repeat one of his favorite themes: that only industrial “production” constitutes real work. He will transform Hungary from a service-oriented society to one that is “work-based.” Any other kind of human activity is worthless. In fact, more than worthless. It leads straight to failure. Let’s see just what he has in mind. “Someone who works, produces will stay successful, the one who speculates on the financial market will fail; the one who is in the service industry cannot stand on his own feet.” I haven’t heard such stupidity for a very long time. Try to explain that to the Rothschilds or to Conrad Hilton. On the other hand, there is no guarantee whatsoever that someone producing industrial goods will succeed. Just think of all those companies that have died or that are struggling to keep their heads above water.

But wait, there’s more! According to Viktor Orbán, “we don’t live off others. We don’t live from the dole of the IMF or the European Union. The country is standing on its own feet because of  its economic accomplishments.” I can’t find words!

The next day it was time to visit Nyíregyháza where the Danish Lego Group is expanding its facilities. Here we found out from the Hungarian prime minister why Lego products are so popular. He has, he said, spent some time pondering over this puzzle and came up with the following hypothesis: “These toys are the expressions of the modern age, the world in which we live. In them we can find the greatest challenge of globalization. That challenge is how we can build separate worlds from almost practically identical components. … In 2010 we began exactly that kind of enterprise, which is not at all a game but which demands at least as much inventiveness and fantasy as building our own world from Lego comp0nents…. We Hungarians had to undertake the task of rebuilding a Hungary that is different from all other countries from components at our disposal in the twenty-first century…. We followed the spirit of Lego. We didn’t follow the well known path but started on our own, trying to remove the debris of the past.” And he went on and praised the inventiveness and creativity of Hungarians.

Let's build a country DecoJim's photostream / Flickr

Let’s build a country
DecoJim’s photostream / Flickr

Well, we know that the inventiveness and fantasy exhibited by György Matolcsy produced mighty few positive results. On the contrary, his unorthodox economic moves managed to send the Hungarian economy into recession. One mustn’t forget, although Orbán et al keep trying to rewrite history, that the Hungarian economy was on the rebound when he took office in 2010.

To build a separate Hungarian world today is impossible, and I suspect it was always impossible. Globalization is not a new phenomenon. I would also advise Orbán not to mix up Switzerland with Hungary.