The revelations that surfaced about NET Holding in the last few days, thanks to 444.hu, exposed an intricate network of affiliated companies and described the complicated international trading in natural gas. The corruption case I will be talking about today is a lot simpler. Admittedly, the loss to the taxpayers is also a lot less, about four to ten billion forints over the last eight years. Small potatoes, you might say. But keep in mind that we are talking about the sale of one-third of all real estate owned by the municipality of District V, where property prices are the highest in the country. Moreover, these shady deals occurred during the mayoralty of Antal Rogán, considered to be the third most important politician in Hungary after Viktor Orbán and János Lázár.
Stories of corruption in District V, downtown Budapest, have been circulating for almost a year. Népszava learned in April 2014 that a city official demanded a bribe from a businessman who had just successfully competed for a site to open a restaurant. The brave man refused and went straight to the police, naming names. As is typical in Fidesz country, the deputy mayor who was most likely implicated in the affair did not end up in court but was simply removed from the scene and transferred to the ministry of foreign affairs where an “urgent” job was waiting for him. His replacement was Péter Szentgyörgyvölgyi, who became the district mayor last October. Soon enough it became known that Szentgyörgyvölgyi himself was a beneficiary of the shady real estate deals of the past few years. Under pressure, he decided to give his apartment back because “he just got tired of all the attacks against him.” Details of these revelations can be found in a post I wrote in December.
The force behind the investigations is Péter Juhász (Együtt), who was Szentgyörgyvölgyi’s opponent in the municipal election and who subsequently became a member of the city council of District V. He thus has access to documents that shed light on the means by which expensive apartments or business sites were passed on to political friends for a fraction of their real value. Juhász is a former human rights activist with vast experience as an investigator of corruption cases.
So, how was it done? The key concept in these transactions is preemption, the right of a tenant to purchase something, especially public property, ahead of anyone else. Ever since the 1990s a law has been on the books that allows the state or the municipality to sell its properties to tenants at a reduced price. The rationale behind this practice was that every year the tenants of these public properties were obligated to pay higher and higher rents and received no equity in return. The price abatement thus assumed a long-standing contract between owners and tenants. Moreover, as Antónia Rádi of Átlátszó.hu pointed out, three persons are needed for such a transaction: the owner, the person who intends to buy the property, and the current tenant. Apparently, in practice this particular rule is often dispensed with. That is, no outside buyer is necessary for the transaction. What happened in District V, however, went beyond both the law as it was written and the law as it was practiced. The transactions were, quite simply, illegal.
Let’s say an apartment or store front became vacant. The city officials notified their friends, political or otherwise, that these sites were available for rent. After a few months the happy tenants announced their desire to buy the property. The price was determined by two “independent” appraisers. One of the appraisal firms was owned in part by György Rubovszky, a Christian Democratic member of parliament and father of Csilla Rubovszky, deputy mayor of District V. In addition, Rubovszky, a lawyer, was employed by the district as an “expert” assisting the committee in dealing with properties owned by the district. The assessed prices were very low. They always agreed with the prices on the district’s books, most likely thanks to inside information by Rubovszky. Then came the bonus: a 30% reduction in the price.
Among the many cases Péter Juhász is pursuing, he found a tenant turned owner who within a few months sold his newly acquired property for double what he had paid for it.
Juhász is not only digging through property files. He also organized a walk through the streets where most of the questionable property transfers took place.
Rubovszky is just one of several people with Fidesz or government connections to surface in these real estate swindles. Péter Heim also handled some of the deals. He is now head of Századvég and as such may be on the list of individuals banned from entering the United States because of their involvement in corruption cases affecting U.S. businesses operating in Hungary. András Giró-Szász, undersecretary in the prime minister’s office, is also indirectly involved through his brother-in-law and business partner, Péter Serfőző.
Juhász is convinced that the city officials undertook these real estate deals as part of a private business venture and did so in a conspiratorial manner. Between 2008 and 2013 277 pieces of real estate changed hands in District V. The appraisers low-balled the value of these properties at a half or a third of their real worth. On top of that came the 30% abatement. If Juhász, who since then pressed charges against District V, can prove his claim, the people involved might end up in jail for years. Or, they should but, judging from other earlier cases, they most likely won’t.