The beginnings of one of the oligarchs: Zsolt Nyerges

In the past  here and there I mentioned Zsolt Nyerges’s name, mostly in connection with the acquisition of a formerly foreign-owned radio station. I pointed out at that time that we know very little about Nyerges because this lawyer-businessman makes sure that his activities remain behind the curtain, as it were.

The first time I dealt with this mysterious figure was in my post entitled “The Ministry of National Development and the Building of a ‘National Bourgeoisie’” in which I noted that Nyerges is from Szolnok, the birthplace of Mrs. Orbán, and that after graduation from law school the Orbáns lived in Szolnok for a while. So, I assumed that Viktor Orbán knew Nyerges from Szolnok where apparently the Nyergeses are one of the leading families. Since then I found out that a business partner of Zsolt Nyerges happens to be the brother-in-law of Orbán.

Thanks to the work of Attila Mong, an investigative journalist, today we know more about this mysterious Nyerges. Moreover, I think that once we understand the beginnings of Zsolt Nyerges’s road to riches it will be evident that Viktor Orbán is firmly in control of the financial empire he helped to create.

The foundations of this empire were laid already during the first Orbán government with massive government assistance.

In November 1999 János and Katalin Majoros established a small family enterprise in Szolnok. It was a modest affair with a starting capital of 3 million forints. The couple described the main activity of the company as the manufacture of equipment connected with flour milling. Apparently the Majoroses had neither experience in nor knowledge of milling.  A few months later this company, which most likely existed only on paper, was purchased by Von Holland Zrt. “Zrt.” stands for “zártkörű részvénytársaság” or “closed corporation.” As such, the owners’ identities are not a matter of public record. Von Holland Zrt. allegedly deals with office supplies, computers, and even the wholesale of bottled wines. Von Holland Zrt. put 100 million forints into the Majoroses’ business. Attila Mong, referring to an old article that appeared in HVG (2004), suggested that one of the owners of Von Holland might have been László Tóth, who was a board member at the time of several state owned companies.

When Von Holland got together with the Majoros couple the company’s name, which until then was Majoros és Társa, was changed to Budai Malomipari Kft. (Buda Flour-Milling Co.) In light of later developments this name change is significant. It was also the first time that Zsolt Nyerges’s name could be found among the board members. At that time Nyerges was not yet a businessman. He had a law office in Szolnok.

From that moment on the story really takes off. Although the Majoros couple’s little business was established only in November 1999, by February 2000 the mysterious owners of the brand new Budai Malomipari Kft. were applying for a loan of a little more than a one billion forints from the state-owned Magyar Fejlesztési Bank (Hungarian Investment Bank). In record time they received 1,063,500,000 forints for the purchase of the state-owned Budai Hengermalom Kft. The owners of the Budai Malomipari Kft. with headquarters in Szolnok didn’t put down a penny of their own money and yet they received the loan in record time. Perhaps the presence of Lajos Simicska as a board member of MFB also had something to do with the ease with which this no-name company managed to purchase a very valuable piece of real estate with a functioning flour mill.

I might add that the Budai Hengermalom Kft. was partly owned by Postabank, also state owned, that was under liquidation at the time. Yet there was no tender issued and therefore no competition for this state-owned company. It was simply sold to the start-up company from Szolnok.

But that was not the end of it. This little company from Szolnok received the Budai Hengermalom Kft. free and clear although there was a lien of  2.1 billion forints against it owed to Postabank. Thus, as far as I can figure,  this little company with its mysterious owners received 2.1 billion forints as a gift from the government in addition to a loan of about 1 billion forints without any collateral.

The valuable real estate that came with the Budai Hengermalom Kft. was situated in three different locations. One was the piece of land on which the company’s building stood on Hengermalom út. The second was situated in Nagykáta and the third in Vecsés near the Budapest Airport. The mysterious owners soon enough sold the real estate in Nagykáta and Vecsés for about 1.5 billion forints, and thus they could easily repay the MFB loan of just a little over 1 billion.  The most valuable piece of land alongside the Danube remained in the company’s possession. The owners receive regular rental  income from this property.

The building of the Budai Hengermalom Kft.

All this was achieved without a penny of investment thanks to the generous assistance of the Orbán government.

Reviewing this story of the little family business of János Majoros and his wife that morphed into a major holding, it is clear to me at least that the Majoroses were only a front for a group of people that most likely included Zsolt Nyerges, Lajos Simicska, and other businessmen close to Fidesz. They knew well before November 1999 that their goal was the acquisition of the Budai Hengermalom Kft. and its extensive landholdings. That’s why the modest family business was supposed to manufacture flour milling equipment. They also had to be fairly certain that 1 billion forints would be readily available from the state-owned MFB.

The story of the Budai Malomipari Kft. is most likely a good example of how state property ended up in the hands of pro-Fidesz oligarchs during the first Orbán government.

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26 comments

  1. While the Majoroses are the front for Simicska, he in turn is the front for Orban.

    I don’t understand why Simicska is considered a ‘financial genius’(–Orban?) since all he had to do is cherry-pick the richest, most available, target and have Orban do the rest. None of them are GENIUSES–they’re just shameless crooks peeling off the backs of the hapless citizenry.

  2. petofi :

    While the Majoroses are the front for Simicska, he in turn is the front for Orban.

    I don’t understand why Simicska is considered a ‘financial genius’(–Orban?) since all he had to do is cherry-pick the richest, most available, target and have Orban do the rest. None of them are GENIUSES–they’re just shameless crooks peeling off the backs of the hapless citizenry.

    Very good point. After all, when he was without help from the government he managed to bankrupt about 20 companies he managed for Fidesz. You remember Kaya Ibrahim and Josef Tot? The two stolen passports and the “selling of the companies” to their never to be found owners in order to get rid of the debt they left behind.

  3. I am still awaiting for the moment when the Fidesz investigations against those who ripped off the Hungarian people will reach these crooks (including Orban, his father, brother and his wife). No kidding he has to get rid off the judges, the honest press, and all. If all would come to light today there would be not to many people would left out of jail in the Fidesz headquarters to run the country.

  4. Fascinating, Eva!
    Very good work, only I hope that you – God forbid – don´t end up like Trotski ;-)
    I worked for a guy, Csipak Petér back in 2005, who was/is dealing in property development, especially the Fashion Street project downtown Budapest, as far as I know he was involved in some Postabank-scandal, do you know anything about him, id like to see him publicly crucified… If he is the crook i believe he is.

  5. Fidel Funk :
    Fascinating, Eva!
    Very good work, only I hope that you – God forbid – don´t end up like Trotski
    I worked for a guy, Csipak Petér back in 2005, who was/is dealing in property development, especially the Fashion Street project downtown Budapest, as far as I know he was involved in some Postabank-scandal, do you know anything about him, id like to see him publicly crucified… If he is the crook i believe he is.

    This seems like the right place to relate the bon mots of a neighbor’s thirty-something son:
    “If I don’t cheat someone on a given day, I can’t sleep at night!”

    Orban’s Hungary.

  6. @Fidelfunk, you mean surely well done Mong Attila whose article Eva is quoting from. Incidentally, Attila has also shown that this same property was earlier in the possession of comparably corrupt MSZP business interests.

    I think you are slightly missing the point about bankrupting those 20 companies. The easiest way to make money is by not paying your debts and shifting your assets elsewhere. And Simicska’s talent is for developing immensely complex webs of interrelated companies where it is very hard to work out who owns what. This is something the late Robert Maxwell specialised in.

    I would take issue with your comment that Simicska is a front for Orbán. I think theirs is a profound unhealthy symbiosis, but Orbán is not intellectually capable of organising a web companies and we may have passed the point of Hungarian corruption where actually, Orbán is really the front for Simicska.

  7. Kingfisher you wrote ** “I would take issue with your comment that Simicska is a front for Orbán. I think theirs is a profound unhealthy symbiosis, but Orbán is not intellectually capable of organizing a web companies and we may have passed the point of Hungarian corruption where actually, Orbán is really the front for Simicska” **.

    I will agree with you about that.

    I wrote ** “I cannot see how the Nyerges-Simicska business group is providing or rather recycling its cash into the party hierarchy and into Fidesz its self. Without following the cash flows within the companies” **.

    Thanks to Mr Mong I can now see how it was done. Orban provides the cash to take over some concern with debts. The assets are sold off at a low value (usually in the form of real estate) to other parts of the Nyerges-Simicska Empire and later sold off at their true values. The monies are then distributes.

    The original company is nominally sold off and allowed to go bankrupt leaving its debts which may well include new bank loans etc. The creditors can just whistle for their money.

    However the value of real estate has fallen and outsiders are running scared of Hungarian investments. They are not fools and once bitten twice shy.

    A new method has had to be developed. This is that Simicska has got his grabs on the Ministry of National Development through a proxy one Imre Farkas and now has his hands on the various E.U. grants.
    Simcska has had to make this move because I think things are beginning to look ‘doggy’. I am almost certain that the whole racket will begin to unravel.
    Oh my word what Fun! Especially if ‘hoi poli’ understand what has been happening

  8. Every Hungarian I meet thinks corruption is rampant here but they don’t know how to change it …

    Anyway even in Germany a large part of the GDP is “black work”, though in Hungary it’s probably much larger, so people are accustomed to it and corruption generally. In so called socialist times you couldn’t survive without it.

    OT:

    I just heard that Andras Singer, the owner of the famous Fülemüle restaurant in Budapest, died – but could get no info on it via Google. Can anyone confirm it ?

  9. One of the institutions that is missing is an independent government accountability office. I know some semblance of this exists because I know that people from the Canadian auditor generals office to travel to Hungary and they do work with the Hungarian government on these types of issues. At least they did as the person I know who was involved is now retired and so….

    If I can summarize, guy starts company with about 12,000 euro and then some how manages to get an injection of cash worth about 400,000 euro (roughly at that time) and then they were to parley that into 4,000,000 euros. So far, all this sounds very much like the normal life-cycle of a successful startup. As for investing your own money…. even George Soros doesn’t invest is own money when he cooks up a deal. In fact, having to invest your own money is sort of a deal breaker, it’s a test of the viability of what you are doing in that if you can’t get others to fund it, it’s most likely that the business you’re trying to build isn’t viable. So from my perspective, this all looks fairly normal until you dig into the sources. And now, we’re back to point #1, where is the GAO.

  10. @LwiiH: Yes, start-ups are normally financed by others, but normally by private investors (venture capital). When state money is used to beef up a start-up, that’s a red flag for corruption.

  11. LwiiH :
    If I can summarize, guy starts company with about 12,000 euro and then some how manages to get an injection of cash worth about 400,000 euro (roughly at that time) and then they were to parley that into 4,000,000 euros. So far, all this sounds very much like the normal life-cycle of a successful startup.

    Uhmm, ummm … 4,000,000 euros from the ***state*** to purchase a ***state owned*** business just to flip it – that is selling the 60% of it for 6,000,000 euros shortly after?

    ‘scuse me … ??? VEEERYYY sucessful startup. :-) Why didn’t I think about this?

    Shouldn’t Budai’s successor go after the people who sold the business way below it’s market value? The usual “fiducial responsibilty” thing …

    By the way Budai just lost another lawsuit and was sentenced to run the gauntlet in the public TV, plus fork out 1 million HUF for the demages. Does he get reimbursed from our taxes for this?

  12. Mutt Damon :

    Ron :
    OK. What about this. 50% of the banks will be in Hungarian hands and the EU is going to pay for this.
    http://www.realdeal.hu/20120717/orban-says-will-fight-to-keep-and-expand-new-jobs-plan-put-50-of-banking-system-in-local-hands/

    Horror.
    Does this moron (Orban) know that the domestic ownership in the OTP Bank (aka flagship Hungarian bank) is only 28% ?

    Let me guess, one of his close family members or one of his old buddy is getting into the banking business?

  13. Is the domestic ownership of banks a code word for state owned and controlled bank? So the friendly loans, like the one our Bonnie and Clyde used to by the milling company, can be streamlined?

  14. An: “Yes, start-ups are normally financed by others, but normally by private investors (venture capital). When state money is used to beef up a start-up, that’s a red flag for corruption.”

    How true, just like the US gov investment in Solyndra…

  15. Louis Kovach :
    An: “Yes, start-ups are normally financed by others, but normally by private investors (venture capital). When state money is used to beef up a start-up, that’s a red flag for corruption.”
    How true, just like the US gov investment in Solyndra…

    Exactly!

  16. Mutt Damon :

    Louis Kovach :
    An: “Yes, start-ups are normally financed by others, but normally by private investors (venture capital). When state money is used to beef up a start-up, that’s a red flag for corruption.”
    How true, just like the US gov investment in Solyndra…

    Exactly!

    Well, Solyndra is bankrupt, and the Obama administration has really nothing to show for it, only a huge gaffe. I am not going to get into the argument whether there was any corruption involved in this case or it was a simple blunder. Simply I don’t have enough information to judge that and it is not the topic of this blog, anyway.

    But the Budai Hengermalom Kft. has created a handsome private profit for its private owners (while may channel some money to Fidesz) from state money and cheaply sold state property. You see how much better Orban is at this? Corruption and cronyism does not get any “better” than this.

  17. Eva S. Balogh :

    petofi :
    While the Majoroses are the front for Simicska, he in turn is the front for Orban.
    I don’t understand why Simicska is considered a ‘financial genius’(–Orban?) since all he had to do is cherry-pick the richest, most available, target and have Orban do the rest. None of them are GENIUSES–they’re just shameless crooks peeling off the backs of the hapless citizenry.

    Very good point. After all, when he was without help from the government he managed to bankrupt about 20 companies he managed for Fidesz. You remember Kaya Ibrahim and Josef Tot? The two stolen passports and the “selling of the companies” to their never to be found owners in order to get rid of the debt they left behind.

    “Fiduciary responsibility?”
    The Hungarian Government?
    Is that a joke?

    Example 1: How many times has it been in the past that a Hungarian government has
    bought back Malev and assumed the (private) firm’s debts?

    Example 2: How is it that the government can sell a company and retain the responsibility for its debt?

    When that happened, where there no calls for a judicial investigation (if such a thing exists
    in this laughable country).

  18. Louis Kovach :
    How true, just like the US gov investment in Solyndra…

    Wrong thread Louis. This is the Hungarian discussion. Any concerns you have withe the USA practices you should discuss it on the right blog. How is the giving back your USA citizenship going by the way? I thought you want to move to Hungary to support Orban as things are way better there, and things just suck in the USA. (This is factual observation from your posts!) So, and what is your opinion about this post on how Orban’s friend sucking off the money from the Hungarian government?
    p.s.: A few post ago you made the mistake also to say that no one ever debunked your rambles. Take note Louise!

  19. Győr Calling!

    While we are discussing corruption I’d like to know more about the following please:

    My partner and I were visiting friends deep in deepest Hungary! When we arrived we had obviously interrupted some sort of financial transaction – in fact it was the sale of a house!

    Some eight people were involved – and it was clear that the amount being entered into the contract was only 50% of the true sale.

    What did the vendor’s save by doing this? And surely all involved could be prosecuted for conspiracy to defraud?

    If the so-called professionals where in on this – and facilitating it – then can we assume this sort of thing is widespread?

    In England if a house was sold for half its value then someone would smell a rat – all values are posted on the Land Registry site after about two months after the sale.

    And all the transactions could be requested by the investigating authorities – via a court order through the magistrates. And Banks are obliged to keep 7 years’ of transaction data.

    Intriguing.

    Regards

    Charlie

  20. Some1: ” I thought you want to move to Hungary to support Orban as things are way better there, and things just suck in the USA.”

    You mistook me for retired police chiefs from Israel…..

  21. CharlieH: What did the vendor’s save by doing this? And surely all involved could be prosecuted for conspiracy to defraud?

    It has mainly to do with transaction tax of the property, which use to be up to 6% for housing and up to 10% for anything else. Housing inherited or before a certain period are exempt. Btw I do not know if the last part is still applicable.

    By reducing the value the buyer reduce the tax claim and the seller, as well, if the next house he buys (if he/she buys it) is exempt from transaction tax.

  22. An :
    @LwiiH: Yes, start-ups are normally financed by others, but normally by private investors (venture capital). When state money is used to beef up a start-up, that’s a red flag for corruption.

    If you had of made it to the end of what I wrote.. you’d see I suggested a missing independent auditor. ;-)

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