The Fidesz robber barons. Part I

I think that among the comments there was already mention of a new book by József Debreczeni, A fideszes rablógazdaság (The Fidesz robber barons). In a way it is a companion volume to the book edited by Bálint Magyar entitled Magyar polip: A posztkommunista maffia állam (Hungarian octopus: The post-communist mafia state). In fact, Debreczeni borrows Magyar’s description, “the upperworld,” to describe the modus operandi of the Orbán government between 1998 and 2002. Debreczeni’s book is an account of the illegal activities of Viktor Orbán’s closest associates and provides critical background for understanding the current functioning of the mafia state.

Debreczeni combed through the findings of two decades of Hungarian investigative journalism, which unearthed some of the shady dealings of the Fidesz empire. There is no question that in a truly democratic country some of the actors in this story would have long been retired to lengthy stays in prison. The reason this didn’t happen in Hungary was that the cast of characters was extremely cunning. They made sure that there would be no legal consequences of their criminal activities.

How was this achieved? Most likely, at least in part, through blackmail. The highly respected chief prosecutor, Kálmán Györgyi (1990-2000), after having a conversation with János Áder, in those days president of the Hungarian parliament, suddenly resigned in March 2000 although his tenure expired only in 2002. The Fidesz government thus had a free hand to nominate a man, Péter Polt, a Fidesz party member and an older friend from the early 90s, who in the following years became the incarnation of the Chinese wall between justice and the thoroughly corrupt Fidesz leaders, including Viktor Orbán.

From the earliest days of Fidesz, only a handful of people–Viktor Orbán, László Kövér, Lajos Simicska, and Tamás Varga–dealt with financial matters. Of these four only Tamás Varga ended up in jail.

Once Fidesz became a parliamentary party and thus received a certain amount of money from the central budget, it became patently obvious that “the boys” had little notion of or even inclination toward keeping their finances in order. The party’s steering committee eventually became curious about what was going on with the money at the disposal of the parliamentary delegation. The members who were supposed to take a look at the books were faced with assorted slips of paper stuffed into plastic bags. Bookkeeping Fidesz style, I guess. After some scrutiny, it was determined that there were serious questions about how the money had been spent. The committee entrusted with checking the nonexistent books came to the conclusion that “responsibility for the party’s financial disarray should be the subject of a criminal investigation.”

In the end nothing happened because Viktor Orbán convinced the party membership that the report was the work of people who wanted to ruin the party. He asked for, and received, their vote of confidence. At the same time he threatened members of the steering committee with legal action.

Viktor Orbán survived this early investigation as he has survived all subsequent ones as well. The few million forints spent on who knows what at the launch of Fidesz were peanuts in comparison to the close to 700 million forints Fidesz received in September 1992 as a result of the sale of a very valuable building in downtown Budapest. The building was given to MDF and Fidesz by the Hungarian state. The two parties had every right to sell the building and use the proceeds to cover their own expenses. That was not the problem. The problem lay with where the money went.

Out of the 700 million, Simicska, who by then was in charge of the party’s finances, immediately transferred 574 million forints to FICO Kft., which had acted as a Fidesz foundation since 1990. For two years there was little movement of money in or out of FICO, but in 1992-93 everything changed. Simicska began establishing assorted businesses: Quality Invest Rt., Millennium Rt., Quality Party Service Kft., Terra Negra Ingatlanértékesítő és Hasznosító Bt., Quality Profit Kft, Taxorg Kft., Best Lízing Kft., Auto Classic Kft., etc. Moreover, as it turned out, a few million forints also ended up in the hands of Viktor Orbán’s father who didn’t have enough money to buy the state stone quarry he had managed during the Kádár years.

forints

These were not Fidesz owned companies. They were owned by a network of old friends around Viktor Orbán and László Kövér: Lajos Simicska and Tamás Varga were old high school friends; Szilárd Kövér was László’s younger brother; Zsuzsanna Pusztai, Simicska’s wife; Sándor Varga, father of Tamás; István Bakos, Szilárd Kövér’s brother-in-law; Gyula Gansperger, high school friend; Katalin Horváth, Gansperger’s wife, and so on. So, the state property became party property and then the party property became private property. Surely, the argument goes, Simicska must have convinced Orbán and Kövér that these companies would ensure Fidesz’s financial well-being, which at this juncture looked as if it would win the 1994 election.

What happened to the money that ended up in these private companies? Very little is known of its fate. We know that after a while these companies did not pay taxes, VAT, or social security. Eventually they were sold, twenty-two of them on the same day, allegedly to a Turkish guest worker in Germany, Ibrahim Kaya, and a Croatian called Josip Tot. They, of course, were not the real buyers. As it turned out, the passports belonging to these two men had been stolen, and allegedly they knew nothing of the transaction. Of course, the companies that went bankrupt and were sold for pennies to unknown individuals had also taken out substantial bank loans, on which the banks were unable to collect.

All this came to light in 1999 when two investigative journalists unraveled the complicated story in Élet és Irodalom. Unfortunately, it was too late. By that time Viktor Orbán was prime minister of Hungary. Immediately after the formation of his government he made Lajos Simicska head of APEH (Adó- és Pénzügyi Ellenőrzési Hivatal), the Hungarian equivalent of the U.S. Internal Revenue Service. All documentation on these companies disappeared from the computers of APEH. After all, Simicska was put there for the sole purpose of covering the tracks of their illegal financial activities. Simicska stayed at the head of APEH only as long as was necessary to accomplish his task. A few months later, in the summer of 1999, claiming that attacks on his person ruined his health and caused his father’s death, Simicska resigned. By that time, the APEH files were most likely clean as a whistle. When later during the socialist-liberal period a government commissioner wanted to reopen the case, Péter Polt, the chief prosecutor, blocked his way.

According to an article that appeared in Magyar Narancs in 1999, at least 60 Fidesz-related companies were established between 1990 and 1998. Simicska’s name appeared on 24, of which 14 were “purchased” by Ibrahim Kaya and Josip Tot.

After reading the details of the relationship between Orbán and Simicska, some people came to the conclusion that Orbán had been dragged into the morass of financial wrongdoing concocted by Simicska. He was in so deep that he was unable to extricate himself without landing in jail. He was the good guy under the thumb of the bad Simicska. But, as Debreczeni sums it up: “At the beginning one could perhaps think that Fidesz was led by a democratic Dr. Jekyll and a mafioso Mr. Hyde, but in the end it turned out that in reality a politician Hyde and a financier Hyde ruled the party, and by now, rule the country.”

To be continued

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29 comments

  1. So it’s not then just an assumption that this gang began as criminal bandits from the start?

    Is there any other country like that? There are countries with ‘states within the state’ (just take the 16 secret services that work without real parliamentary control for branches of the US government). No, I mean a country taken over by people who were criminals from the outset.

  2. “The reason this didn’t happen in Hungary was that the cast of characters was extremely cunning. They made sure that there would be no legal consequences of their criminal activities.”

    I don’t agree with this: it assumes that the courts and judges are on the level, which they’re not. In fact, the whole legal profession is, if anything, worse than in most other countries.
    The best proof of this is the swiss-cheese of a constitution they set up in 1989. The whole setup of the country, whether central or local, is highly suspect. As an example, the privatization of apartments with the local districts retaining control of all commercial units in private buildings was criminal.

    So, it wasn’t ‘cunning’–it was the slimey possibility of buying your way out of anything…

  3. @Minusio

    Good apples don’t make rotten ones whole: rotten apples infect good ones. So with politicians. The long history of Hungarian corruption has filtered out any good elements, or the possibilities of their survival, a long time ago. Gyurcsany is a prime example, teetering out of power with the knife-blade of so many of his MSZP cohorts sticking out of his back.

  4. The level of corruption and fraud involved here is simply staggering (and presumably this is only the beginning!). But what is far more staggering is that they have got away with it so completely.

    There must be hundreds, if not thousands, of people out there who knew, or later found out, what was going on, but none of these people were able to, or wanted to, do anything about it.

    I can’t think of another similar situation where this would have been possible. In a democratic ‘western’ country, it would have been impossible to keep the lid on something like this for so long. Of course, in non-democratic states it would have been possible to keep it all covered up by violence and intimidation, but Orbán/Fidesz never had that sort of power and control, especially back in 98.

    When a bunch of incompetent and amateur crooks like these can carry on such an open and obvious level of corruption for so long, you have to look at the environment they were working in – the people who didn’t notice, or turned a blind eye (or didn’t care?) – and the people who were easily bought off.

    For corruption of this scale and at this level of visibility, the culpable and guilty number far more than just those directly involved. If ever Orbán and his pals stand trial for all this, Hungary should be there in the dock with them.

  5. Paul: this is a gang that is made up almost entirely of lawyers.

    As they got older, their friends rose through the ranks of the judiciary, the prosecution, the intelligence services, which they also started to control by installing friendly people there. Even when it took 2/3s to appoint such top heads of a state agencies, and Fidesz alone did not have the 2/3s, Fidesz was very successful in installing people loyal to him, MSZP always accepted the proposal after some negotiations. And if you install the top person you can install/nominate the deputies, who are less visible but still very powerful (especially if in the future there is no agreement on the top position). That was the difference between vision and disarray which characterized the two parties, respectively.

    Moreover, as Fidesz’ power increased more and more, and it became obvious to everybody that Fidesz was the future and the Socialists the past, people wanted to give Fidesz small favors knowing it that such favors to the powerful might prove useful in the future.

    That is how you build a mafia: based in strong personal, often familial ties, from childhood (from university or from earlier times) and being lawyers so, you understand how the system works. Non-lawyers, like people from MSZP or Együtt, don’t even understand the depth of this power because Socialists have traditionally no real connections in the Hungarian legal world, which is very conservative. In addition, ‘the boys’ made sure that loyalty gets rewarded and betrayal always entails retribution. Simple rules, but they always work.

  6. “But what is far more staggering is that they have got away with it so completely.”

    The fact is that Hungarian society is rife with corruption; and nobody wants it to end because they are in line to do the same given that they fall into some position of authority.

  7. The lack of independent ‘watchdogs’ overseeing the state’s agencies makes them very powerful, and the government have zero interest in embracing the checks and balances that more developed nations have evolved. There were some, but in the last few years they have been dismantled. This is Orban’s Hungary. Get used to it. That’s the way it is. And I don’t think it will change as long as he lives. That’s his purpose. And he’s really very good at it, whatever you may think of his policies.
    A friend of mine and his wife were stopped by police blocking the entrance to the tunnel one night last week, and then subjected to an unpleasant 15-20 minute process which too closely resembles police intimidation to be called anything else. My Hungarian wife was also hassled last week, by two plain clothes cops, for parking half on a parking bay and half off. Last night we were subjected to a similar ‘control’ for parking wrongly, absolutely my fault, but if my charming and intelligent wife hadn’t been there I am sure that I would have had the 50,000 Ft fine they were initially threatening, and it was such a harmless parking infringement. And yes, there are not too many zeros – 50,000! Using the police to intimidate good people, tax payers and employers, entrepreneurs: what’s the sense in that? I dread where it’s headed.

  8. Wholesale robbery by the government, more like it’s occurring in Africa, South America, or the Middle East…

    Happening in front of our very own eyes in the center of Europa by a member state of the European Union .

    EU should lset up an express emergency judicial system and a means of rapidly enforcing standards.

    If a country oversteps its jurisdiction the EU should have the means, the political will and the power to protect all its citizens including those living within the confines of the perpetrating country.

    The EU needs to work out an agreement to this effect.

  9. Viktor Orban’s Hungary: Haiti in the Heart of Europe

    There really does seem to be something unique in the blend of carping, complacency and collusion in the Carpathian Basin. If it’s not in the genes (as Akos Kertesz hyperbolically hypothesized), maybe it’s in the drinking water?

  10. What is happening in Hungary now is exactly what happened in the USA in the late 1800s and early 1900s with urban governments. Ultimately it was the major capitalists that revolted against such practices because even if they received benefits there were real added costs. Effectively they created totally non-partisan groups called Better Government Associations whose only goal was to enforce rules. To a degree this was a check on the rampant practices that were taking place, yes there still is corruption, but politicians do go to jail.

    But the problem with this model being applied to Hungary is that you may lack an independent capitalist class. It seems totally dependent on larger capital formations in the west and this allows Orban and company to satisfy them in various ways while totally corrupting internal development inside Hungary.

  11. Istvan, thank you for the reminder that corruption even on this scale is not specific to Hungary. I believe Petöfi is right in that incompetence on many levels of the state and a low level of information on the part of the citizens how to deal with or prevent such corruption plays quite some role. It is not that Fidesz is specifically vile by global standards, it is the setting that made such takeover possible. The book of Debreczeni is certainly very helpful in understanding how Fidesz could take over the country so completely. (I will try to obtain the book asap.) Such understanding together with mass empowerment of the society (which will follow at some point, I have no doubt) will eventually also make an end to this nightmare.

  12. The comedian Hofi had a famous saying: “Korrupció az, amiből kimaradok” – corruption is that which I’m left out of! And it remains true – the reflex of all too many people in Hungary is that they are prepared to turn a blind eye when it is perpetrated by someone from their party and is only considered truly heinous and wrong if comes from a party they would not vote for.

    Why do I mention this? Eva has failed to mention the rather important fact that Jozsef Debreczeni is not an investigative journalist but a DK politician. A man who completely failed to present any remotely convincing explanation for Gyurcsány’s improbable wealth in his sycophantic biography of the man. This doesn’t invalidate this latest book (although I note that he did no investigative work himself but has picked and mixed from the work of others) but it guarantees that no one on the right will read it or take it seriously. Which is a shame. And I somehow doubt Debreczeni has delved too deeply into Puch’s relationship with Simicska which would reveal an even uglier face of Hungarian political corruption. So this book is politics rather than journalism. BUT for the general reader, it is still valuable. But just remember who wrote it.

    One other thing the point about the headquarters scandal is this. Fidesz had become a major political player and had outgrown the building they were originally allotted as part of the change of system in 89. So it was not unreasonable that they be given a large building. What they did was select one for its value and sell it! That may not have been strictly illegal but in spirit, it was quite immoral. And when this scandal broke, and people realised Fidesz was like everyone else, their opinion poll ratings dropped from 40% to about 7%.

    And another thing: István Stumpf was also involved in the companies that eventually went missing…

  13. HiBoM: “And I somehow doubt Debreczeni has delved too deeply into Puch’s relationship with Simicska which would reveal an even uglier face of Hungarian political corruption.”

    You are wrong. He wrote another book about political corruption in which all what is known about MSZP was covered. Moreover, in the first chapter of this book he informs the reader that the “original sin” was committed by MSZP when they tried to save the enormous wealth of MSZMP by moving money and pieces a property into newly established “companies.” I wrote about this book at length on Hungarian Spectrum:

    https://hungarianspectrum.wordpress.com/2011/12/02/corruption-in-hungary-yesterday-and-today/

    It is too bad that you have Gyurcsány mania. It clouds your vision,.

  14. petofi :
    “But what is far more staggering is that they have got away with it so completely.”
    The fact is that Hungarian society is rife with corruption; and nobody wants it to end because they are in line to do the same given that they fall into some position of authority.

    So, in fact Hungary is one big pyramide corruption scheme: no one wants to end it because they all get their share, except of course the people at the very bottom, ordinary Joe (János) who is bribed with a slight cut in his gas bill to keep him happy. Wonderful..

  15. When I said “Puch’s relationship with Simicska”, I didn’t mean relationship in the sense that they are analogous. I meant that they are involved in business deals together. I have no idea whether Gyurcsány profited personally from this, possibly not, but he most definitely knew it was going on. This is one of the reasons why I regard him as a poltroon, for all his charm and indisputable intelligence.

  16. The book makes it sound like the big boss is not only suffering from narcissism but has some tendencies towards clinical psychopathy. Of course this would have to be established properly through PCL-R and extensive interviews. However, if it would be the case, then the Hungarian left has no chance in creating a stable and thriving democracy, even with a 2/3 majority. He will still be there to tear them apart, with demonstrations and 2006 events. The Hungarian soul has been murdered, let us have a dramatic minute of silence.

  17. Perhaps its not too late for a truth and reconciliation commission after all. Covering from the 1940s to the present day. There must be one brave Hungarian who could kick it off.

  18. Hungary maybe a European Haiti.
    I would still trust the last honest Gyurcsany to defeat baby-Orban, as liberator like a not so perfect Aristid.
    Gyurcsany should open the door to all Hungarians, who want to turn from delusions to sanity.
    From old Jobbik and Fidesz supporters to Bajnai supporters, all redeemed Hungarians can unite in the DK. (Completed in the middle to DeáK)

  19. The opposition won the mayoral by-election in Fot. But the Fidesz-dominated local election commission accepted Jobbik’s charge that the opposition transported voters in a minivan. Revenge for Baja.

    I guess the election will be repeated.

  20. The turnout was 29.1%

    Opposition candidate: 25.0%
    Independent #1: 21.4%
    Independent #2: 20.6%
    Fidesz-supported candidate: 19.9%
    Liberal Party (G. Fodor) candidate: 13.1%

  21. HiBoM :
    Why do I mention this? Eva has failed to mention the rather important fact that Jozsef Debreczeni is not an investigative journalist but a DK politician. A man who completely failed to present any remotely convincing explanation for Gyurcsány’s improbable wealth in his sycophantic biography of the man. This doesn’t invalidate this latest book (although I note that he did no investigative work himself but has picked and mixed from the work of others) but it guarantees that no one on the right will read it or take it seriously. Which is a shame. And I somehow doubt Debreczeni has delved too deeply into Puch’s relationship with Simicska which would reveal an even uglier face of Hungarian political corruption. So this book is politics rather than journalism. BUT for the general reader, it is still valuable. But just remember who wrote it.

    Hmmm…
    You’ve probably missed alrady the title, haven’t you, otherwise you’d certainly notice, that the article dealing with the “Fidesz robber barons”, and when I checked last time Gyurcsány did’nt belong to this particular bunch of crooks, so I am pretty convinced, that your criticism is misplaced.
    What abouyt you?

  22. Kirsten :
    Istvan, thank you for the reminder that corruption even
    on this scale is not specific to Hungary..

    While this is true, please, remember, that the examples mentioned by Istvan is from more than a hundred years ago, and in this respect Hungary indeed unique, that there is a contemporary issue..
    Some may call this a Spét, others simply as retarded – take your pick – but something is sure, this is NOT the way how people of a European country should behave in 2013, this is not the attitude or characteristic what should brand any self respecting nation today, whether all alone or in company of similarly developed others – in my opinion, that is.

  23. tappanch :

    The opposition won the mayoral by-election in Fot. But the Fidesz-dominated local election commission accepted Jobbik’s charge that the opposition transported voters in a minivan. Revenge for Baja.

    I guess the election will be repeated.

    First, they have to prove it. In Baja, the local election commission first refused to acknowledge the fraud but then the case went to the court. So, it is not at all sure that it will have to be repeated. We will see.

  24. Spectator, whether people should or should not behave in this manner in 2013, or whether this is “retarded”, I would not think about. They do, and what is desirable (I think) is that this will change some day. It will not change by saying how wrong it is (specifically when most people think that they are irrelevant in this game) or how retarded, but by learning what to do differently. This is a trial and error process. So far, Hungary is still in the phase of analysis of what went wrong, and imho the analysis still often misses the point as it actively supports the division of the society and works with accusations instead of a systemic understanding of the problems. The examples from Istvan were useful because it can be studied how and when things changed in the US but of course the experience of other countries, for instance countries with Communist past in the vicinity who are also still struggeling, could also be taken into account.

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  26. Kirsten :
    Spectator, whether people should or should not behave in this manner in 2013, or whether this is “retarded”, I would not think about. They do, and what is desirable (I think) is that this will change some day. It will not change by saying how wrong it is (specifically when most people think that they are irrelevant in this game) or how retarded, but by learning what to do differently. This is a trial and error process. So far, Hungary is still in the phase of analysis of what went wrong, and imho the analysis still often misses the point as it actively supports the division of the society and works with accusations instead of a systemic understanding of the problems. The examples from Istvan were useful because it can be studied how and when things changed in the US but of course the experience of other countries, for instance countries with Communist past in the vicinity who are also still struggeling, could also be taken into account.

    Kristen, I accept the fact, that it’s only me alone, who find utterly preposterous to keep trying to drag up excuses for why not we doing something – anything – right, again as always, but I do.
    Nothing is wrong with us, it’s Trianon, the “communist” past, the Turan-curse or whatever – but definitely not us..! The sad fact is, that at the meanwhile the World is turning, the civilized world is turning away from us, while we left behind even by our neighbors who started on the same path even later than us, and instead of trying to shape up, we nurture self pity for historical reasons, demanding ‘special respect’, because “the Hungarians has special soul”, but in essence doing nothing to change our fate, but blaming “the others” for our misfortune.
    Doesn’t help much either, that in the recent years we let these crooks take over the country an rob us dry, while feeding us with the delusion of grandeur based of past, and mostly imagined and/or fabricated glory while alieniating us not only from the rest of Europe, but from common sense and reason too, and here we are.
    Actually I don’t think, that – for example – the Polish people had it much better than us, even only in the last century, – somehow they managed to put their country on the right track.
    Strange, isn’t it?
    Well, its true, that I haven’t heard yet eiher as some failed mediocre soccer-player declared with hourly frequency, that “Poland performs better”.
    Could be my ears too, but still…

  27. @Spectator – While in general I feel it’s important for a people to be aware of its own history, in Hungary it seems to lead to a cultivation of sorrow and self-pity. This Hungarian habit of regurgitating and rechewing the past seems to completely kill any attempt of modernizing the country and turning it into a dynamic and open society. Like this, the ‘Egyedül vagyunk’-feeling will become a self-fulfilling prophecy. A new national trauma in the making.

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