Bálint Magyar’s post-communist mafia state: front men, transaction brokers, and gatekeepers

Yesterday we left off with a description of the kinds of oligarchs who play an important role in Viktor Orbán’s mafia state. Today we move on to the front men (stróman/Strohmann) and their function in the system. According to Bálint Magyar’s definition, they are people without formal position either in politics or in the economic sphere who “serve as bridges between legitimate and illegitimate realms.”

Magyar identifies two kinds of stróman, political and economic. The political front men are people who originally came from Fidesz itself and were put in important government and parliamentary positions–for instance, president of the parliament and president of the Hungarian Republic. Soon enough the leader extended the circle from which he could choose people for key positions. They were either relatives or close friends, or friends of friends. Such appointees can be found heading the prosecutor’s office and the National Office of Justice. Eventually, he drew from employees of companies owned by members of the political family–managers, accountants, lawyers–to fill posts in the ministries. These people are front men of the poligarchs, only instruments, not autonomous actors. In this mafia state the majority of government officials fall into the category of political front men.

An originally Fidesz-appointed stróman after a couple of years can be removed and replaced by another Fidesz-appointed individual, as we have observed recently. Magyar’s explanation is that some of the original appointees owed their allegiance to top poligarchs, for example, Lajos Simicska and his business partner, Zsolt Nyerges. Because of the internal power struggle that is currently going on between Simicska and Viktor Orbán, several of Simicska’s front men have been removed from important positions, like the Hungarian Development Bank and the Ministry of National Development. Perhaps the best example of such a personnel change occurred a few months ago in the Ministry of National Development which was considered to be the stronghold of the Simicska-Nyerges poligarchic duo. Here, after the election, Viktor Orbán replaced Mrs. László Németh, clearly a puppet of Simicska, with his own man, Miklós Seszták, a crooked lawyer. Seszták then fired 200 people from the staff of the ministry, which Magyar calls a bloodless decapitation.

The economic front men act like proxies of the poligarchs, although oligarchs can also have their own front men if for one reason or other they want to hide their presence in an enterprise. Some of the money accumulated by these people eventually ends up in the poligarchs’ secret bank accounts.

What are the characteristics of the economic ventures of strómans? (1) With practically no capital or expertise they receive large state orders. (2) The increase or decrease of their economic activities depends not on economic but on political cycles. They often receive tenders when they are the sole bidders. (3) They act as gateways to the state. They collect the profits generated by large bona fide companies which themselves would be able to do the job but which are are forced to work as subcontractors. (4) Profits of these companies are much larger than of companies not politically connected. (5) The managements of these companies pay themselves inordinately large dividends. Normally, especially in the case of a new company, most of the profit is reinvested in the firm. But these companies don’t have to worry about business expansion. It is the subcontractor’s headache. (6) While successful companies without political connections often encounter aggressive takeover attempts by the government, the companies of strómans never have to worry about such an eventuality.

In sum, the basic goal of the mafia state is the elimination of autonomous positions in the political, economic and societal spheres and their transformation into a patron-client relationship. The men whose names appear in the regularly published list of the most influential Hungarians are all dependent on the good will of Viktor Orbán, be they politicians, entrepreneurs or university professors.

In addition to oligarchs and front men, there is another group of people Magyar calls transaction brokers who are mediators between the actors in illegitimate transactions. These people are often lawyers who are involved in writing grant applications, for example. They are the ones who have the personal network that can facilitate the transaction between, let’s say, the government bureaucracy in charge of monies coming from Brussels and the applicants. Transaction brokers, mostly law firms and institutes attached to ministries, by now have taken over some of the functions of ministries. They are the ones who actually write legislative proposals submitted by individual members of parliament.

There are two types of transaction brokers. One is the so-called gatekeeper who works from inside the administration and who defends and legitimizes illegitimate businesses. The other is the representative broker who by the size of his business could in fact be an oligarch but who is only an economic stróman.

Finally, Magyar spends some time on the nature of the family’s guard and the secret services. One of the very first decisions of Viktor Orbán after he became prime minister was to create a large force of personal bodyguards misleadingly named the Anti-Terror Center (TEK). In addition, there are private security firms often owned by Fidesz oligarchs that have the support of the police or TEK. Magyar even includes in this category the infamous soccer fans of Fradi, a club headed by government functionaries. These football fans can be mobilized if necessary as they were in the fall of 2006. Fidesz again called them out in 2013 when a few students surrounded the Fidesz headquarters. TEK itself has practically limitless powers. Sándor Pintér, minister of the interior under whom the police force functions, is a stróman of Viktor Orbán.

Viktor Orbán and his old body guard, János Hajdu From major to brigadier general overnight

Viktor Orbán and his old body guard, János Hajdu
From major to brigadier general overnight

Supervision of the secret services, since there are several of them, has always been close to Fidesz poligarchs’ hearts. Magyar recalls that in 1990 when Gábor Demszky became mayor of Budapest he resigned his seat in parliament. The chairmanship of the parliamentary committee overseeing the activities of the secret services thus became vacant. Fidesz insisted that the post should go to one of its own. László Kövér was chosen. Until 2005 Fidesz through this committee managed to keep the secret services under its influence. In 2006 the governing socialists closed the secret services’ avenues to Fidesz by firing a number of people known for their close ties to Kövér and others in Fidesz. These Fidesz loyalists who found themselves without a job established their own private concerns and continued their spying activities through old friends still employed by the government. As soon as Fidesz won the election, these people were immediately rehired. Earlier there was a minister whose sole job was the supervision of the activities of the secret services, but after 2010 Sándor Pintér took over this role. Thus both the police and the secret services report to him.

I still have covered only half of the introductory essay by Bálint Magyar. Time permitting, I will continue my summary sometime in the future. However, I think that today’s and yesterday’s posts give you an idea of how Orbán’s mafia state functions. Dismantling it will not be an easy task when the time comes.


  1. OT: I would like to congratulate the EU to Viktor Orban’s success! AT this very moment I just came across on Index.hu wit the following advertisement paid from tax payers money:
    “Hungary unites!
    More money
    to the economy
    Our homeland gets more EU money now than anytime since joining [the EU]
    This is our joint success!”

    So, when a couple of days ago an other organization published an other warning about the dire political situation in Hungary (religion), I asked: So what? This is exactly it. Orban could care less, and the EU with all their diplomats are rolling over on their back making sure that instead of waller Orban will be kind enough to rub their belly.

  2. What Eva describes here (thanks very much!) reminds me of the structure of the current Chinese political/economic system that has developed over the last 25 years – though I’m not an expert there, it’s just a gut feeling that I get from the snippets of info that we get outside China.

    PS and a bit OT:

    I went on a business trip to China in early 1991 and was astonished about the mixture of old traditions, Communist ways and the capitalism that was just starting …

  3. Of course, Orban has a point when he declares that Hungarians are misunderstood….who could fathom the deviousness of the Hungarian Mind!

    Case in point: the numerous organizations set up as protective bodies–for Orban, Kover, and Pinter (I’m not sure about Pinter) has, as its main point, not the protection of the individual concerned…but the threat to the existing, traditional police and secret service centers, that there are bodies, with weapons, outside of their own, and that they should mind their p’s and q’s, and not even contemplate any possible action against the government.

    Now, what modern, western, government official would think like that?


    But such tactics are probably standard fodder at KGB headquarters on lessons to ‘divide and conquer’…

    The Hungarian Reality under the auspices of Pyutinism: tribal life anew.

  4. Interesting summary, thanks. The part about political straw persons, though, doesn’t seem to be specific to the current Hungarian regime at all.

    Except for nepotism, one can find many instances in Western democracies where appointments in power positions are due to allegiances more than to skills or experience. Sometimes, it is even accepted as a (half-acknowledged) spoil system. And when several factions compete within a domineering party, their struggles naturally extend to both the nominations and the nominees themselves. Also, the circulation of the same people between large corporations and the administration isn’t specific either.

    I tend to think that this isn’t necessarily a big issue. That is, as long as the possibility of political change is preserved. This last factor alone obliges large companies to nurture good relations with both sides of the political spectrum; it also encourages self-restraint from the winning party and result in more ‘middle ground’ or ‘moderate’ nominations, which are good for the continuity of the State.

    My guess is on this point, the issue lies entirely with the unfairness of the Hungarian election and campaigning systems. Not per se with what is described.

  5. Marcel, you misunderstand. These strohmen are not your usual political puppets.

    They are fronts. Human shell companies.They own property for somebody standing behind them.

    It is alleged that among others Garancsi (MET, Market Építõ) or Polonyi (Olajterv) are strohmen holding property for somebody behind them. They are like Timchenko or now Törnquist at Gunvor — strohmen for somebody more powerful.

    That somebody’s property even if he himself was involved in a legal matter will be protected because these people, the strohmen are legally clean (apart from the fact that there is no conceivable way they had the money to acquire the respective property in the first place), so no property can be taken away from them.

    Or you could name the legal owner of the Terminal Restaurant which by all accounts is actually owned by Rachel Orban and her husband. Or Ötkert is widely rumored to be Rogan’s. In fact, somebody proposed a new smartphone app which would show which restaurant, pub, club is owned by some oligarch so you would know where not to spend your money.

    I doubt people would hold property for Cameron, Obama, Merkel or Hollande. For V.V. Putin, yes.

  6. Very interesting remarks – especially the last sentence with the comparisons to “established democracies” and their politicians. Sure, we also have some people who got rich through their political activities (Berlusconi?) or went into politics using their money (Bloomberg?) but the majority are relatively clean …

    Also it’s very uncommon (at least in my homeland Germany – I’ve remarked on that before) that children of politicians go into politics themselves – probably they’re put off from what they see regarding their parents …

    But in the East (China comes to mind) that seems to be normal: politicians found a dynasty like in the good old times when even the stupidest son of a king became king …

    Let’s hope that there will not be an Orbán dynasty!

  7. Bálint Magyar is very lucky he avoided prison for his part in the biggest corruption cases in Easter Europe. He was the leader of the SZDSZ party. The SZDSZ party was rightfully sent to the dustbin of history by Hungarian voters.

    About SZDSZ it was said: “SZDSZ is full of corruption cases” – and Balint Magyar was the president of SZDSZ.

    And who pointed out that SZDSZ was extremely corrupt? It was none other than

    Péter Medgyessy the Prime Minister of Hungary in the Socialist era. The first thing that SZDSZ politician Balint Magyar should explain is how his extremist SZDSZ party which was publicly admitted to be corrupt by their own coalition partner avoided prison. To my knowledge the boundless SZDSZ corruption, stealing and theft resulted in SZDSZ people avoiding punishment for their crimes. They corrupted the whole justice system and bought judges by the busload. Otherwise a publicly corrupt SZDSZ party should have collectively gone to prison, never to be seen again.

  8. @About SZDSZ. One can rarely read so much unfounded accusations, starting with the extremist SZDSZ that “publicly admitted being corrupt.” As for Magyar’s chairmanship of SZDSZ, SZDSZ had many chairmen. Magyar was one of them between December 1998 and June 2000. As for the boundless corruption, why don’t you give some examples.I would be curious to hear about them.

  9. Somewhat peripheral question but:
    “micska, with his own man, Miklós Seszták, a crooked lawyer. Seszták then fired 200 people from the staff of the ministry, which Magyar calls a bloodless decapitation”

    Something similar happened in the Foreign Ministry, approx. the same number lost their job because of a change of *direction*. What happens to these sacked bureaucrats afterwards?

    From personal experience of dealing with these people I can assure you that they are not geared with the *compete skill-set *to deal with looking for comparatively paid jobs in the private sector- and that is putting it kindly

    So, they become part of Orban’s Slave Labour battalions- cleaming up leaves in the Varosliget for 50 K monthly? The oligarchs who put them in the ministeries in the first place reemploy them as “advisors”? They do a crash course in English and end up working for Burger King in Liverpool?

    I don’t have that much sympathy for them as many got their jobs in the first place purely because of connections rather than any talent or intelligence. But 200 here, 200 there does seem to be building up quite a sizeable number of discontents with experience and inside knowledge of the Orbanist system.

  10. Again slightly wandering OT:

    “Magyar even includes in this category the infamous soccer fans of Fradi, a club headed by government functionaries.”

    Fidesz’s relationship with the Ferencvaros traditionally far-right and racist hooligans has been somewhat complicated, ironically enough considering the amount of taxpayers’ money which has been ploughed into it, by the building of their new stadium. Orban, to his own evident shock, was roundly booed at the stadium’s opening match against Chelsea, so much so that the Fidesz-appointed media censored the reaction out of existence.

    The reason is largely because of the new security systems introduced at Ulloi Ut- security systems operated by Fidesz companies naturally but which are built to exclude a lot of the more *boisterous* element of the Ferencvaros support.

    It is not going down well with the ultras generally although the small hooligan gang operated specifically by Fidesz as the security force mentioned by Balint Magyar remains loyal (and well-paid). It is nowhere near the situation yet which prevailed at the end of the Milosevic reign where Partizan and Red Star hooligans combined to help bring down his dictatorship but they are the one group of society that Orban probably shouldn’t really be messing with.

  11. neonfeny, just out of curiousity, why is it necessary or useful that someone else holds your (being an “poligarch”) properties? From whom are these properties hidden? The broad public probably not, that is neither interested nor (if it were) capable of some threat towards these people. Is “ownership” as such a problem? Or the way how it was acquired? But in a “mafia state” certainly it does not matter how it was acquired as the whole legal system already works in the interest of the “poligarchs”. In the West, at least in broad terms, the legal system, if some irregularities are found out, has to do something. Of course, there are ways to circumvent it but in principle they are not “acceptable”. But in Hungary, the legal system would not do much anyway. So is this property “hidden” mainly from the other “oligarchs”?

  12. “To really get a person like Navracsics or Szájer or Aszódi (Paks) one has to prepare very thoroughly and with great interest in, almost passion for the subject matter.

    If someone lacks these, like those lame EU politicians or Olga Kalman on a bad day, they will never even lick these people”

    So opined one of our Orbanist apologists on here the other day re the Navracsis hearing.

    Well, it seems a majority of those voting today did consider him and the primitive values his thug government represents to be completely at odds with civilized values.
    You could even say he has been “licked” good and proper by those “lame” EU politicians.

  13. Bálint Magyar and Juliet Vasarhelyi’s edited work provides massive evidence that Fidesz has systematically used the mass confusion and failure of the transition to capitalism in Hungary to create an economic structure highly dependent on the ruling party and PM. If one looks at the massive privatization that took place following the collapse of the Kadar regime it is simply astounding as was how devalued all state owned enterprises became,

    When the still functioning Russian security apparatus looked up by 1999 they had a drunken President Yeltsin who had overseen a mass privatization and confusion along with a growing Islamic separatist movement in Chechnya. Immediately in 1999 Putin who was put in power by the security apparatus as acting President began and succeeded in a massive increase in state control over the economy. Orban had a play book to apply coming directly from Putin’s use of his United Russia Party, pro-Putin front parties, and what became called the Popular Front formation to create a legal and economic structure that ensures Putin’s control over the Russian Federation.

    PM Orban is an astute man who understands the politics of greed and patronage, he manipulates would be oligarchs with both the carrot and the stick. Bálint Magyar’s book provides a comprehensive picture of the movement of Hungary from the wild west of privatization to fundamentally a state capitalist system under the guidance and control of Orban. Benito Mussolini was able to do much the same thing with the creation of the corporate Fascist State. Mussolini provided conservative Italians exhausted by WWI, strikes, and communist occupation of major industrial centers with what seemed like a path forward based on shared national interest. It turned out to be a disaster, as will the Mafia state of Orban.

  14. Kirsten, Orban and his pals are lawyers and they plan for any kind of contingencies you would not. They own the prosecution, the judiciary, the constitutional court, sure, but they are prepared even for the unlikely case there is a “revolution”. Smart people plan for black swan events too.

    Since Hungary never really had a successful violent revolution only legal ones which always built on the previous systems (even Orban’s new basic law built on the previous constitution and so on back to maybe until 1945) Orban believes that some basic principles will have to be respected. Nulla pona sine lege will remain intact. If Garancsi is clean you cannot take away his assets even if Orban is condemned (which will never happen anyway) and even if everybody knows that Garancsi holds them for “the first family”. Garancsi coming from where he does, will not crack in any court procedure and he will keep the assets he has been amassing.

    Orban and his people, often from the secret services, are well-prepared and this is why nobody from the EU Fraud Office or from the the Commission could ever catch them. Only the hapless lefties like Szanyi or those MSZPniks who lease real estate from Rogan for 200 euros a month (saving 400 euros and thereby letting themselves cheaply corrupted — you cannot imagine how much fidesznks look down on the leftists for being so petty) are so stupid that they don’t prepare for the future or rather they realized long that that they don’t have any.

    Orban and co let the EU play around with voting down Navracsics (so now he will get an even more important post because education was almost the lightest portfolio), but on matters that really matter to Orban, the EU is impotent and will remain so.

    The EU and some observers can feel that they won scores against Orban when in fact he doesn’t give a damn if he has to sacrifice Navracsics or not. This is a circus that has no relevance to Orban. The EU will pay the subsidies and that’s that. This is the sole thing that matters to Orban re the EU. He absolutely doesn’t care about any other aspects of the EU (though the EU is a fantastic and willing villain in his discourse).

    For example Orban hasn’t exhausted recalculating the GDP, so if Merkel insists on holding the 3% rule then Orban just includes prostitution and whatnot so that Merkel can get what she wants. But she will continue to pay and that’s what counts and keeps Orban in power though friends in Russia also help.

  15. Speaking of prostitution and Hungary Latino, another sad commentary on the economic desperation of Hungarians today it was reported in the Miami Herald and on television that three Hungarian nationals lured a trio of young Hungarian gay men to the United States only to work as a “sex slaves” for up to 20 hours a day in New York City and Miami, Florida state prosecutors said Friday. The suspected ringleaders – Gabor Acs, Viktor Berki and Andras Janos Vass – were charged in Miami-Dade Florida state court with human trafficking and racketeering. Acs, Berki and Vass ran a company called Never Sleep Inc. Here is the story running on Miami TV today http://www.nbcmiami.com/news/local/Hungarian-Gay-Sex-Trafficking-Ring-Busted-in-South-Florida-SAO-278040871.html

  16. New book: “Putin’s Kleptokracy – Who owns Russia?” by K. Dawisha

    KGB’s connections with Miller of Gazprom & Mogilevich [didn’t he have a working relationship with Orban’s permanent Minister of Interior?]

    p. 314

    “A U.S. Embassy cable released through Wikileaks concluded that RosUkrEnergo (RUE) was a money-making operation for the Kremlin. Gazprom itself owned 50 percent of RUE, and 50 percent was owned by two Ukrainian oligarchs, Dmitriy Firtash (45 percent) and Ivan Fursin (5 percent). But “the circle of true beneficiaries of RUE is wider and includes Semyon Mogilevich, a Russian organized crime boss wanted by the FBI and currently in custody in Russia.” Mogilevich was soon released and took up residence in Moscow, where he lives freely”

    “Both the board of directors and the Management Committee of Gazprom are packed with Putin coworkers from the KGB and St. Petersburg who lack prior significant energy experience:
    • Chairman of the Management Committee Aleksey Miller, Putin’s deputy in St. Petersburg at the Committee for Foreign Liaison”

    p. 319

    In a kleptokracy, ” the state nationalizes the risk but privatizes the reward.”

  17. @Latino

    “For example Orban hasn’t exhausted recalculating the GDP, so if Merkel insists on holding the 3% rule then Orban just includes prostitution and whatnot so that Merkel can get what she wants”

    Prostitution & drug consumption have been included since 2006. The new thing in the GDP is smuggling, included since September 30.

    What is great about these activities that they are illegal. So the Statistical Office can come up with any number they like for their value, therefore the value of the GDP is also arbitrary and the Maastricht criteria for debt/GDP can easily be satisfied.

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