Tag Archives: Zsolnay porcelain

Two men who put up a fight: Lajos Simicska and Bachar Najari

Among the active members of Hungarian Spectrum there has been a long-standing debate about the most useful attitude toward the Orbán regime’s very existence and future. There are those who get upset when they encounter pessimism regarding the removal of the present Hungarian government. They think that defeatism is counterproductive and take every opportunity to raise their voices against naysayers. Among these people we find some who think that these pessimists are actually Fidesz propagandists whose job is to spread the dogma of Fidesz invincibility. But, to be fair, one doesn’t need to be a Fidesz troll to feel less than optimistic given the state of affairs in the country.

I for one agree that the proverbial Hungarian pessimism can become a self-fulfilling prophecy, which should be avoided at all costs. But, at the same time, we must admit that overcoming the obstacles that Orbán and his minions have placed in front of those desiring change is a formidable task.

Today I would like to hearten those who are worried about Hungary’s future by writing about two men who decided to stand up to the government. The first is Lajos Simicska, Orbán’s friend from high school, who reaped all the benefits of the mafia state until his falling out with the prime minister about a year and a half ago. The other is Bachar Najari, a Syrian-Hungarian-Swiss businessman, the new owner of the famed Zsolnay Porcelain Factory in Pécs. Although for different reasons, both were targeted for financial annihilation by a corrupt regime. It looks as if the powers that be are finding it difficult to destroy them.

Some people believe that Lajos Simicska’s contribution to the creation, development, and final accomplishment of Fidesz was even greater than Viktor Orbán’s. After all, it was Simicska who brought home the bacon. Of course, in the process he himself became immensely rich. But then came the falling out. Orbán, being a vindictive man, decided to ruin his old friend financially.

Simicska’s most important business venture is Közgép, a construction company that specializes in building highways and railways. As such, it is heavily dependent on government orders. Thus, Simicska looked like an easy target. Indeed, right after the blow-up between the two men, the government suspended midstream the highway that was to be built by Közgép. The second move was that the Public Procurement Authority (Közbeszerzési Hatóság), which handles government tenders, “discovered” that Simicska’s firm had cheated on one of its tenders. It was decided that as punishment Közgép would not be able to compete for any government jobs for three years. Simicska went to court and won, both in the lower court and also on appeal.

Trying to ruin Simicska through Közgép was not enough. Orbán instructed István Tarlós, mayor of Budapest, to break a long-term contract with Simicska’s firm, Mahir Cityposter. In 2006 the firm acquired the right to provide the city with 761 large cylindrical kiosks. The contract was to be good for 25 years. Ten years later the city suddenly “discovered” that the contract was not fair. When Simicska didn’t remove the kiosks by a specified date, the city ordered them to be forcibly removed despite a court order to stop the vandalism. Simicska promptly hired György Magyar, a very able lawyer, who said from the beginning that the case was absolutely clear-cut. And indeed, he was right. A few days ago the court agreed with the argument Simicska’s lawyer presented and forbade the removal of the kiosks while the case is pending before the court of appeal. The city will also have to pay 6.8 million forints in court costs. If the city loses, it will have to pay Simicska 600 million forints in damages.

Perhaps Simicska’s savviest move to date has been to form a consortium with the Italian company Itinera, which has been described in the Hungarian media as “a big gun.” Itinera has been “active in large-scale infrastructure projects and civil construction for more than 75 years in Italy and around the world.” Közgép together with Itinera presented a bid for a 27 km-long section of the M4 highway between Berettyóújfalu and the Romanian border. Their bid was 58 billion forints or approximately 188 million euros. Two other consortiums were also eyeing the job: (1) a consortium of three Hungarian companies whose bid was 84 billion forints or approximately 268 million euros and (2) a French-Slovak-Czech consortium that bid 87 billion forints or 272 million euros.

The difference in price is staggering. It seems that Simicska with this offer wanted to show the fair (admittedly, probably on the low end of fair) price of road construction and to highlight the graft that is normally built into these bids. In the case of the Hungarian consortium it was as much as 26 billion forints or 80 million euros. In this particular case almost 3 million euros per km would end up in someone else’s pocket. Of course, it is still possible to find fault with the Közgép-Itinera tender if Viktor Orbán so desires, saying that price is not everything, but apparently the Közgép-Itinera bid is also best in every other category, including environmental considerations. The consensus is that it will be very difficult to award the project to anyone else.

 

Now we can turn to the case of Bachar Najari, the Syrian-Swiss businessman with a Hungarian wife who also speaks fluent Hungarian. How Najari ended up owning the Zsolnay porcelain factory is a long story, which I pretty well told in a post titled “How to ruin a businessman with government help.” The upshot of the story is that one of Viktor Orbán’s oligarchs, Attila Paár, decided that he would like to own the factory because many of the vintage buildings in Budapest that will be restored or even rebuilt will need the famed terracotta tiles Zsolnay was famous for in the last decades of the nineteenth century. Najari had managed to put the formerly city-owned factory on solid financial footing, and it looked as if from here on it would be a profitable enterprise, especially with the impending sale of roof tiles. There was a fairly large loan which had been taken out by the city earlier from the Hungarian Development Bank for which Najari offered a certain amount of money to settle the account. The bank declined the offer and instead sold the debt for half of what Najari had offered to Attila Paár. Meanwhile, the city of Pécs decided to help Paár along by setting up a bogus company to which it recruited more than half of the workforce of Zsolnay. These workers are actually on paid vacation and no one knows who pays them. The situation was compared by one of the workers of the factory to a gangster film from the 1930s.

gangsters

Najari decided to fight. First he managed to get back his stock, which had been placed under sequestration. He used his own money and made good on the debt he inherited when he bought the factory from Pécs and also paid 90 million in local taxes, although it was a disputed item. Therefore there was no more reason for the city, which owns 19% of the stock, to take over the factory. Then the Kaposvár court refused to register Pécs’s new porcelain manufacturer, called Ledina Kerámia. Finally, the court in Zalaegerszeg turned down the request for a liquidation of the Zsolnay factory. A few days ago the city of Pécs “sold” the nonexistent Ledina Kerámia to an unnamed off-shore company. The city claims that the sale, for 3 million forints, “will ensure the jobs of those workers who were enticed to leave Zsolnay because it was to fold soon.”

Meanwhile work is being done at Zsolnay. Najari refused to be intimidated, and it seems that he managed to foil the attempt to rob him blind.

Although it is not easy, these two cases show that a person can win as long as he has the means and the determination to stop the Orbán regime’s unscrupulous, illegal activities.

September 19, 2016

How to ruin a businessman with government help? The case of the famed Zsolnay porcelain factory

Zsolt Páva made quite a splash back in October 2009, right after he became the mayor of Pécs in a by-election. One of his first acts was the forcible takeover of the city’s hydroelectric company with a view to expropriating the 48% of the company’s shares owned by Suez Environment, a French company. At 3:00 a.m. security men occupied the headquarters of the firm on the orders of the mayor, and when the employees arrived, they prevented 13 people belonging to the upper and middle management of the company from entering. Prior to the “lock-out” the city fathers, including the MSZP members of the council, had set up a new company with a modest 5 million forint investment.

The optimistic city fathers were sure that Suez would gladly sell their shares for very little money. Wrong. Two years later Suez filed a claim at the Vienna International Arbitration Court seeking €32.3 million (more than 10 billion forints) in compensation for revenue lost. The parties eventually settled for a payment of 3 billion forints, which the city of Pécs was unable to come up. The bill was eventually paid by the Orbán government. At that time I wrote a post titled “Foreign investors in Hungary beware: Pécs and Suez Environment.” The Pécs incident occurred months before Viktor Orbán became prime minister, but surely Páva acted with the encouragement of if not at the instigation of Fidesz. And the case foreshadowed the kinds of crude attacks on foreign businesses that the Orbán government has pursued since.

Now, Páva and the businessmen behind him are embarking on a similar adventure, but this one is unlikely to have the same sorry end that the Suez escapade did. Because this time, it seems, everything will be done “in house.” The city will simply be an intermediary, eventually passing the Zsolnay Porcelánmanufaktura on to a Fidesz oligarch. The methods being employed are akin to those used in the Suez takeover. Just as then, the city has established a new company. It has enticed the majority of the approximately 150 workers to abandon Zsolnay in favor of the new city-owned company. The aim is a forcible takeover of private property.

Vintage Zsolnay vase, ca. 1870

Vintage Zsolnay vase, ca. 1870

Zsolnay became internationally famous in the late nineteenth century thanks to a distinctive style combined with innovative materials. The eosin process was one such innovation, used especially in the art nouveau period. After 1948 the factory was nationalized, and its products bore no resemblance to vintage Zsolnay.

Zsolnay’s exquisite porcelain creations wouldn’t have been enough to keep the factory going. What made it profitable was the invention of pyrogranite, an ornamental ceramic product that is fired at a high temperature. This process makes it acid- and frost-resistant, and thus suitable for use as roof tiles and other outdoor decorative ceramics. Pyrogranite was developed by 1886, just in time for the millennial building frenzy that provided Zsolnay with fantastic business opportunities. Apparently today it is the factory’s tiles that makes the business so attractive as a take-over target.

The current owner of the Zsolnay factory is Bachar Najari, a Syrian-Hungarian-Swiss businessman who arrived in Hungary in 1970 as an exchange student. He is married to a Hungarian and speaks the language fluently. He decided to come to the rescue of Zsolnay for the sake of his wife, who felt very strongly about the survival of this famous porcelain factory.

After 1990 there were many attempts to revive the 150-year-old company, but with no success. The owner just before Najari was so exasperated that he “sold back” the factory to the City of Pécs for one forint.

In 2013 Najari bought 74.5% of the shares from the city for 180 million forints and promised to invest 500 million forints into the enterprise. At the time of the purchase the company had a deficit of 268 million forints, but two years later the loss was only 54.1 million forints. There was also an outstanding loan of 413 million forints taken out by an earlier owner. It is this loan that, in conjunction with the “pillage” of Zsolnay workers, is now being used to wrest Zsolnay from Najari.

The loan was extended by the state-owned Hungarian Development Bank (MFB), whose “core tasks include the provision of funding for growth under favorable terms and conditions to Hungarian enterprises, supporting the long-term development objectives of the state, and obtaining funds from money markets for these purposes.” According to the original agreement with Najari, the city of Pécs was supposed to negotiate with the MFB to convince it to forgive this old loan for the sake of saving the factory. The bank in fact didn’t press Najari to do anything about the loan. But then suddenly, on May 18, MFB informed him that he had 15 days to pay it back in toto.

It is hard to escape the suspicion that the Hungarian government is complicit in this affair. Months ago Zsolnay was declared an “economic organization enjoying strategic priority,” a status that allows the government, if necessary, to take over the liquidation of the company.

The company that the city of Pécs established to squeeze Najari by hiring away his workers will probably become the new owner of record. But the city is unlikely to remain the owner for long. Attila Paár, a Fidesz oligarch, is very interested in buying the factory. In fact, his company has already purchased MFB’s claim against Najari.

Paár is the owner of the West Hungária Bau company, which was in charge of the restoration of the Várkert Bazár. Paár’s name may also be familiar to readers of Hungarian Spectrum because he was the person who “bought” Elios Zrt. when the European Commission’s Anti-Fraud Office started looking into Viktor Orbán’s son-in-law’s company.

Museum of Applied Arts

Museum of Applied Arts

Why is Paár so eager to buy Zsolnay at this junction? First of all, in the last two and a half years Najari and his wife have considerably improved the financial situation of the company, which was desperate straits at the time of their purchase. Among other things, they have invested a billion forints in the company. Second, several important buildings in Budapest will be reconstructed in the near future, among them the Museum of Applied Arts, whose whole roof was originally covered with pyrogranite tiles made by Zsolnay. The building where the ministry of economy will move in the Castle District also had a Zsolnay roof. As far as Fidesz is concerned, these projects, financed mostly by the European Union, should benefit those Hungarians who are steadfast supporters of the Orbán regime. Najari, who was born in Syria, doesn’t cut it.

June 17,2016