Another corruption case and the news of the day

Yesterday I promised to write about another scandalous affair, this time involving a close friend and business partner of Viktor Orbán, István Garancsi. This morning after I read a number of articles on the subject I almost gave up on the idea. The case is so complicated–surely for good reason–that it takes some doing to figure out exactly what happened. Here is what I managed to put together. I’m waiting for more input from readers.

Shortly after Viktor Orbán won the election, companies dealing with distance heating wanted to raise their prices, a move that would not have been popular and something the new government wanted to avoid. So the government instructed the state-owned MVMP Partner Energiakereskedelmi Zrt. to supply gas to these providers from its reserves at a lower rate. In return, the government made sure that MVMP would receive cheaper western gas by way of compensation. In fact, the government bought a great deal more gas than was necessary to replenish the reserves. The extra, which was in fact the bulk of the purchases, was sold by MVMP to a company called MET. It then sold the inexpensive gas at a handsome profit.

MET has its headquarters in Switzerland, but some of its subsidiaries are in Cyprus, the British Virgin Islands, and the Cayman Islands. Behind its complex business structure are two Hungarians:  György Nagy and István Garancsai.  György Nagy was the founder of Wallis Rt., an investment company, whose CEO between 2000 and 2006 was Gordon Bajnai. Subsequent to Wallis Nagy was involved in several successful business ventures. István Garancsai is the owner of Viktor Orbán’s favorite soccer team, Videoton. He also owns a small credit union, Duna Takarék, which miraculously was not nationalized when all others were. It turned out that it was Duna Takarék that gave a loan of 600 million forints to Viktor Orbán’s soccer foundation in Felcsút.

These offshore companies got inexpensive gas thanks to the largesse of the Hungarian government. They then sold it at the going market price in Hungary. According to estimates, their profit was 50 billion forints in 2012 alone.

Those of you who are interested in the extremely complicated details should read the two articles published by atlatszo.hu on January 28 and February 3.

Just a taste of the complexity of the businesses involved / Source: atlatszo.hu

Just a taste of the complexity of the businesses involved / Source: atlatszo.hu

And now let’s move on to some important news of the day. Early in the morning it became known that although the Hungarian government claimed that the European Commission supported its agreement with Russia concerning Paks, the claim is not true. Of course, that doesn’t surprise me because members of the Orbán government are not known for their truthfulness. On Monday, for example, Viktor Orbán delivered a twenty-five-minute speech in parliament in which there was not one truthful statement about the real state of affairs. At any event, when the government initially made its claim that the EU was on board with the Paks deal,  HVG was skeptical and inquired from the commissioner for energy about the case. The reporter was told that the commissioner hadn’t received detailed information and that they were waiting until they had it in hand. Today came the news that the European Commission will investigate the case very soon.

And in a blow to the Hungarian government’s tax policy, the European Court of Justice ruled that

Articles 49 TFEU and 54 TFEU must be interpreted as precluding legislation of a Member State relating to tax on the turnover of store retail trade which obliges taxable legal persons constituting, within a group, ‘linked undertakings’ within the meaning of that legislation, to aggregate their turnover for the purpose of the application of a steeply progressive rate, and then to divide the resulting amount of tax among them in proportion to their actual turnover, if – and it is for the referring court to determine whether this is the case – the taxable persons covered by the highest band of the special tax are ‘linked’, in the majority of cases, to companies which have their registered office in another Member State.

To translate this convoluted sentence into plain English, the extra tax that foreign-based retail chains had to pay since 2011 is discriminatory. The judges instructed the Hungarian courts to make a ruling in accordance with EU laws in those cases where foreign companies suffered financial discrimination. Apparently the contested tax revenues amounted to about 90 billion forints. According to legal experts, it is likely that the Hungarian government will end up paying a great deal more compensation to these companies.

As for a resolution on the fate of the “Gabriel” monument, the suspense remains. Tomorrow János Lázár will have a meeting with various Jewish organizations. A leak published by Népszabadság claimed that the erection of the monument has been “postponed,” a statement that was promptly denied by Antal Rogán. Meanwhile one Jewish organization after the other is returning the money received from the government for the events of the Holocaust Memorial Year. In brief, it is a mess. But Viktor Orbán doesn’t like to admit defeat, and therefore there is a good possibility that he will go ahead with the project. Let’s hope that he realizes the gravity of such a decision given the general climate both within and outside Hungary.

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75 comments

  1. Eva S. Balogh :
    Mr. Paul, I have been fairly patient in the last few days but if someone accuses An of “stupid lies” then, I have to raise my voice.
    An was right. Mihály Varga is the source through HïrTV. HVG and Nepszabadsag simply copied the new from HírTV.

    I was angry at An because he started the whole comment chain of attacks on me which resulted in things like saying I am a whole team of astroturfers. You see why that would be offensive to me? I was very diplomatic up until now, but a mass attack like that from multiple people threw me off balance.

  2. Let me see…Dr Balogh writes: “György Nagy was the founder of Wallis Rt., an investment company, whose CEO between 2000 and 2006 was Gordon Bajnai.”

    Pilot writes: “Nagy György sold its minority stake in Wallis in 2005, Tibor Veres was always the main person at Wallis. Although Wallis was mentioned as being close to MSZP that has been an enduring myth.”

    Does this mean that Dr Balogh writes “enduring myth” or only myths that do not seem to endure?

  3. Eva S. Balogh :
    Mr. Paul, to tell you the truth there is not much difference between HirTV and MTV.

    You are 100% right. This is why I would never believe anything they said. Ever. I don’t watch them I don’t read their websites I don’t have anyhting to do with them. But I do read index.hu Népszabadság, ATV and others. When they report a news item, I will consider it.

  4. Mutt :
    @Mr. Paul
    Dude, man up and stop whining. We don’t care. Suck it up.

    You know what? Fair enough. I am stopping let me get back to the topic.

    The fact that Tappanch reported earlier surprised me. About the Gabriel monument that they are going ahead with it. After Népszabdaság reported a possible delay I was sure Lazar would announce the delay after the meeting. But there is another possibility that Népszabadság raised that might still turn out true. That the sculptur will not be able to finish the statue for March 19. Now as many said including on this blog the statue is likely already done, but that does not stop him from saying it is not done.

    In other words it would be a “we are not bowing to pressure it was the sculptor’s fault” type of line of retreat from the situation.

  5. Louis Kovach :
    Does this mean that Dr Balogh writes “enduring myth” or only myths that do not seem to endure?

    When did professor Balogh say Wallis was close to the MSzP?

  6. Mr. Paul :
    In other words it would be a “we are not bowing to pressure it was the sculptor’s fault” type of line of retreat from the situation.

    The sculptor is happy camper already. He charged 211 million HUF (~ 1 million US) plus for this offensive kitsch …

  7. tappanch :
    January 31
    EUR/HUF daily high 314.2, trend is up.
    Rumor: Orban will back out of the Nazi eagle monument.
    February 6
    EUR/HUF daily high 309.1, trend is down.
    Lazar: Orban will build the Nazi eagle on Freedom square.

    I may have to change my glasses, but the result was quite interesting as I read the last line:
    “Lazar: Orban will be the Nazi eagle on Freedom square.”

    As an afterthought, I may keep the glasses after all. Es tut mir leid, Herr Freud..!

  8. A rather telltale illustration regarding the twisted/manipulated mindset of 12774 Hungarians:

    http://index.hu/belfold/2014/02/06/paks_vagy_a_simon-ugy_a_nagyobb_botrany/

    According to the still ongoing poll on Index, the online news portal, 12774 against 12475 people think, that bigger scandal Simon’s money blunder than the Paks-deal!

    Unfortunately I dare to say, that the overall picture not a single bit prettier.
    A major part of the nation is beyond salvage as I see it.

  9. Let me inject a little humor into all this intra-mural infighting with Paul…

    Isn’t it a peach to think that Fidesz, or some Russian asset, deposited the $700,000 dollars into that account? That dollar figure is probably the aim of every Hungarian politico to retire
    on comfortably in Canada. And now that, presto!, it appears in your account…would not any
    Hungarian politician not gladly accept the disapprobation and keep the money? I have no doubt 98% would.

    No doubt the KGB boys in the Zavidova sauna, wrapped in their huge towels, quaffing vodka between mouthfuls of black caviar….are laughing uproariously!

  10. @MrPaul, Oh wow, this is going out of hand…I never accused you of watching HirTv, read my comments carefully. I did suggest that you were trying to intentionally obfuscate the original source (which was Varga on HirTv, repeated by Index and Nepszabi) and maybe I was wrong. Maybe it wasn’t intentional.

    The point is that it was coming from the present government, and unless the full documentation of the financial details of the deal are made publicly available, we don’t know if they are telling the truth (and the whole truth) about the exact terms of the deal.

  11. “Hungary lost its self-determination on March 19, 1944” – Fidesz

    “Hungarians lost their self-determination on May 29, 2010” – tappanch

  12. Turn-over tax is applies to many domestic companies also. The simply crazy part of this tax is that you pay even if you operate at a loss for the year!

  13. Dr Balogh writes: February 6, 2014 at 3:52 pm | #13 Quote
    Mutt :

    Louis Kovach :
    Does this mean that Dr Balogh writes “enduring myth” or only myths that do not seem to endure?

    When did professor Balogh say Wallis was close to the MSzP?

    Dr Balogh: Never

    Since the cock crowed…….

  14. Eva S. Balogh “Bajnai has never been a member of MSZP”

    I have never said that he was a member either. But it was implied that he was not even close.

    He just “helped out” after Gyurcsany by being Prime Minister….and he just happaned to be the Minister of Commerce before that in the Gyurcsany government…Oh there is no connection at all…Tell it to the marines.

  15. <Tappanch says Hungarians lost their self-determination on May 29, 2010. Oh yes,. Didn't they vote massively for Fidesz? And didn't nine out of ten local governments vote Fidesz in the autumn of 2010. And they will probably vote in Fidesz again first chance they get. You guys are living in a dream world.

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