No end to the saga of the Hungarian corruption scandal

The reverberations from the news that six Hungarian citizens are not welcome in the United States don’t seem to subside. The perpetuation of the verbal battle is fueled mostly by the Hungarian side. Some of the attacks come straight from politicians, others from the accused and from so-called “civil groups” that are strong supporters of the Orbán government and operate most likely with generous financial assistance from the public purse.

These latter two sources cannot be taken terribly seriously, and in fact as time goes by their originally very loud voices have quieted down somewhat. The most spectacular retreat came from Ildikó Vida, the president of NAV, the Hungarian tax authority, and her lawyer, Barnabás Futó. As one blogger noted, when Barnabás Futó stands next to someone close to Fidesz, that person is in trouble. Futó seems to be rather good at pettifoggery at home, but he is at sea when it comes to international law. Initially he had ambitious plans for getting satisfaction for his client. Since Vida was told by M. André Goodfriend that she can ask for a visa and, if her request is rejected, she might be able to get information about the nature of the charges against her, Futó decided to do just that. Moreover, while he was at it, he contemplated suing the American chargé. Soon enough someone must have told him that members of the diplomatic corps have immunity and that his dreams of his client having her day in court were illusory. He gave up on his plan to sue. And, upon reflection, Vida decided that, after all, she did not want to know any of the details of her alleged wrongdoing and that therefore she will not apply for an American visa.

The other thread in the continuing saga is the Civil Összefogás Fórum (CÖF), an unofficial arm of the government that has helped bolster the popularity of the government. They were the ones who organized the first Békement (Peace March), which was supposed to defend the beleaguered Viktor Orbán against a dark international conspiracy that wanted to remove him from his post during the winter of 2011-12. Ever since the American revelations, the leaders of CÖF, people belonging to the extreme right wing of Fidesz, have been itching to march out again, this time against the United States. However, their beloved leader, to their great regret, held them back.

CÖF’s spokesman, Zoltán Lomnici, Jr, son of the former chief justice of the Supreme Court and a lawyer himself, shows such ignorance of the law that it is simply staggering. He and “Futó Barnabás,” to whom I gave the nickname “futóbolond” (lunatic at large), bring shame to the Hungarian legal profession. Here is Lomnici’s argument: the American chargé is a foreign national who, as can be attested by pictures and videos taken of him, left the embassy of the United States and therefore stepped on Hungarian soil. According to Hungarian law, if he knew of corruption he was supposed to press charges and provide proof of corruption. Since he neglected to do so, he could be sentenced to three years in jail. Obviously our star lawyer hasn’t heard of the Vienna Convention on Diplomatic Relations (1961). I suggest that Futó and Lomnici study the document, which clearly states that “Diplomats must not be liable to any form of arrest or detention. They are immune from civil or criminal prosecution.” Let’s hope that the text is available in Hungarian because Futó at least does not know any English. Today the organizers of the Peace Marches officially announced that for the time being they will not gather the troops.

Politicians have not shown the same restraint. A few days ago Antal Rogán, the whip of the Fidesz parliamentary caucus, called Goodfriend a liar and announced that Hungary is a country of law, unlike the United States. “We all must declare that Hungary is not Guantánamo, here nobody can be accused without proof.” Rogán’s attack on the United States is most likely part of the game plan dictated from above because not long before Róbert Répássy, undersecretary of the ministry of justice, said exactly the same thing.

Calling everybody a liar who criticizes the Hungarian government is a Fidesz specialty. Diplomats, on the whole, at least in civilized countries, don’t call their foreign colleagues liars. But Hungary’s new foreign minister has no such compunctions. In an interview with Magyar Nemzet he said that “to accuse us of not conforming to the European legal system is a gross lie (orbitális hazugság).” In response to Szijjártó’s charge, the U.S. Embassy in Budapest released a statement today that included the following sentences: “As Charge d’affaires Goodfriend has said, the United States has consistently conveyed our concerns to the Hungarian government about developments that harm the health of democratic institutions, civil society, and media freedom in Hungary – including concerns about corruption,” and “the Embassy remains in close contact with the Ministry of Foreign Affairs and Trade. We will continue to conduct a constructive, diplomatic dialogue with Hungary on all issues across the broad spectrum of U.S.-Hungarian engagement.” In brief, the United States will not stop its current policy of defending civil society, media freedom, and civil liberties. It will also pursue its fight against corruption.

In addition, today new information reached the public concerning the background of the American ban. The Demokratikus Koalíció, the party that seems to have good connections with the Hungarian foreign ministry where there are many disgruntled employees, learned that a week ago the American embassy did give some information to the Hungarians. Today Szabolcs Kerék-Bárczy, a DK politician, made that information public at a press conference. At this point the foreign ministry decided to fess up: yes, they received something, but it was only a “scrap of paper” (fecni) that cannot be taken seriously. However, a few hours later the ministry made the document public.

Undersecretary Levente Magyar waving “the scrap of paper” from the U.S. Embassy

The two-page note describes the history of the numerous encounters between the embassy and the government of Hungary since February 2012. From October 2013 on, the American complaints multiplied. They had meetings with the “criminal directorate of the tax and customs office (NAV) on specific concerns about agricultural VAT fraud and tobacco nationalization.” A few months later the Americans were back at the “criminal directorate” but noticed “no evidence of action” on the part of NAV. In January 2014 the Americans had a meeting with the ministry of justice and public administration and they raised issues of VAT fraud, “institutionalized corruption, whistleblower protections, and Foreign Corrupt Practices Act (FCPA).” The whole list of complaints can be found on the foreign ministry’s website as well as in an article published on the subject by Index.

In brief, there were numerous complaints, and the Hungarian authorities refused to investigate. It is also clear from the document that the American authorities were fully aware that corruption is “institutionalized” in Hungary, yet the last word from NAV was that there were “no auditing complaints” and therefore the “Criminal Directorate … was unable to act.” Goodfriend  noted that “NAV’s specialized auditing unit created expressly to investigate trans-border VAT fraud … was systematically undermined and then disbanded.”

It looks to me, and obviously it was evident to the head of the American mission, that not only was no effort made to investigate but that the top leaders at NAV were doing everything in their power to make sure that corrupt activities could be continued undetected.

According to Levente Magyar, undersecretary of the ministry of foreign affairs and trade, this “scrap of paper” cannot be taken seriously. Why not? Because there is no date, no authentication, and above all, no seal. “Missing formal requirement” is a favorite excuse of Hungarian authorities.

The tax chief Ildikó Vida versus the Hungarian government: Who is lying? Most likely both

Practically daily I hear callers to György Bolgár’s program on Klubrádió, Let’s Talk It Over, ask: “Do these  people think we are that stupid?” ‘These people,’ of course, are the current leaders of Hungary, Viktor Orbán and his coterie.

Well, the answer to this question is a resounding “yes.” Moreover, until recently their assumption was correct. A large percentage of Hungarian society swallowed everything that was shoved down their throats. In fact, not much shoving was necessary. The gullible and often fanatic followers of Viktor Orbán refused to face the ever more obvious fact that members of this government brazenly lie. Day in and day out. The lies are necessary, at least in part, to cover up the illegal acts that are being committed daily.

As we all know, lies by their very nature multiply. A vain woman decides to lie about her age and from that moment on her whole life story must be adjusted, a difficult task. As Abraham Lincoln said, “No man has a good enough memory to be a successful liar.” Well, Hungarian officials are now trying to reconcile contradictory stories. Earlier lies about the alleged corruption case at the Hungarian tax authority (NAV) must be adjusted to square with the new revelations coming from Ildikó Vida, the chairman of NAV and one of the people put on the U.S. travel ban list. I must say that government officials are turning out to be less accomplished liars than one would expect from this experienced crew. The only man who cannot be caught uttering truly contradictory statements is Viktor Orbán. He is a master.

So, what happened today? Ildikó Vida gave a long interview to Magyar Nemzet in which she admitted that she and several other employees of NAV are on the list of six individuals who have been barred by the American government from entering the United States. The reason? Their involvement in corruption cases that hurt the interests of American firms operating in Hungary. This decision couldn’t have come as a shock to the Hungarian government because in the past two or three years the Americans have expressed their displeasure numerous times over the growing corruption in Hungary. Yet the government did nothing, which is not at all surprising because it is my firm belief that corruption is an integral part of the mafia state of Viktor Orbán that has been so aptly described in the two-volume The Hungarian Octopus. 

All right. So we know for sure that Vida is on the list, but as I said earlier, most of us were pretty sure that this was the case. Her sudden disappearance for a two-week vacation only reinforced that suspicion. What was new in this long interview is that Vida told Magyar Nemzet that she informed an unnamed member of the government right after she received the letter about the American decision. That was shortly before she embarked on her vacation on October 22. The problem is that in the last three weeks numerous government members, including the prime minister, have denied knowing any details of the case. They repeated time and again that they would be most willing to cooperate with the American authorities but unfortunately they can’t because they don’t know who is alleged to be involved. In brief, they were caught lying. Besides Viktor Orbán, the list of those who claimed they knew nothing includes János Lázár, Mihály Varga, and Péter Szijjártó.

But, of course, Vida herself is not exactly truthful when she claims that the accusations against her are baseless. The United States government would not embark on such a sensitive bilateral move against an ally without hard evidence. Vida’s threats to seek “legal satisfaction” in court are ridiculous. In the first place, M. André Goodfriend, the U.S. chargé d’affaires and the messenger of the bad news from Washington, did not reveal her name or that of any other person barred from entering the U.S. Moreover, he, as all other members of the diplomatic corps, has immunity against prosecution. Another strange aspect of the case is that Vida’s loud complaints about her ignorance of the American accusations are also bogus. She had and still has an opportunity to find out more about the case at the U.S. Embassy. Up to now she has shown no interest in doing so.

Those nasty Internet addicts have a wonderful time with Ildikó Vida

We found out from Ildikó Vida’s interview that there will be an investigation into NAV’s activities. She said that she will investigate the whole organization with “microscopic precision.” The head of the tax office who is accused of corruption will be in charge of the investigation into corruption in the organization. A perfect solution, don’t you think?

This interview is also interesting from the perspective of Ildikó Vida’s relationship to the Orbán government. Surely, Vida did not have to tell the whole world that she informed the appropriate official sometime between October 17 and 22 that she had been barred from entering the U.S. as a result of alleged corruption. After all, by this revelation she pushed Viktor Orbán and his government into a corner. On the surface her move seems both calculated and antagonistic. Observers of the Hungarian political scene immediately connected the dots: Vida has been a close associate of Lajos Simicska, whose current relationship with his old buddy Viktor Orbán is less than rosy. Orbán would like to curb Simicska’s power over politics while Simicska is fighting back with critical articles on some of the Orbán government’s latest attacks on businessmen.

Ildikó Vida is not too eager to cooperate with Fidesz politicians. Last week the parliamentary committee on national security asked her to appear today at its meeting. She did not show up. Instead she sent one of her deputies, Árpád Varga, who most likely could not provide any information to the committee members. Szilárd Németh, chairman of the committee, perhaps in frustration, announced that they will ask Goodfriend to appear before the committee sometime next week. My hunch is that Németh and his friends will not have the pleasure of the American chargé’s company.

In the meantime the official lying continues. Mihály Varga told an inquiring journalist that Ildikó Vida informed him only yesterday about her misfortunes. When a journalist called Szilárd Németh’s attention to the fact that there are only two possibilities in this case–either Vida is lying or the government is–he announced that he sees no contradiction between the two statements. László L. Simon (Fidesz), a member of the committee, is now asking Vida to please tell the government who the “appropriate person” was to whom she told her story. Perhaps that man “forgot to pass on” the information. There is a saying in Hungarian when somebody tells an especially big lie: “And the ceiling did not fall on him!”

Political observers often express their admiration of the Orbán government’s “communication skills.” This time something went very wrong, which is actually not all that surprising. Viktor Orbán and his crew think that good communication means constant lying to foreign politicians and the Hungarian public. Yet we know the other famous quip attributed to Lincoln: “You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.” Or a proverb, which also exists in Hungarian, “the pitcher goes to the well once too often.”

The corrupt Hungarian tax authority

Since the fate of the internet tax is still pending, let’s turn to the systemic corruption that has a debilitating effect on the entire Hungarian economy. The existence of corruption on all levels of the administration didn’t escape the attention of the demonstrators who were brought to the street by their concern over the government’s plans to restrict access to the internet through onerous taxation. They protested against the “mafia government” and chanted slogans about thieves who become rich off their own hard-earned money. They deplored the activities of the corrupt officials of NAV, the Hungarian equivalent of the American IRS. NAV spends untold millions if not billions trying to track down small fry while letting the big fish off the hook. Or worse, it is alleged, high officials of NAV receive kickbacks from corrupt businessmen for services rendered. And what is the most disturbing about this whole story is that the highest officeholders of the government party, Fidesz, have known about these fraudulent activities–and have benefited from them–for years.

How can I say with such confidence that members of the government and the party have been aware of these illegal activities for a long time? Almost a year ago András Horváth, an employee of NAV, spilled the beans. He collected evidence that proved that certain crooked businessmen were receiving preferential treatment by NAV. In the wake of Horváth’s revelations nothing happened. After a quick internal investigation, NAV declared that Horváth’s accusations were baseless. And, for good measure, they fired Horváth. Soon enough the police arrived at Horváth’s apartment and took away the evidence.

The fraud that high NAV officials “overlooked” involved all sorts of financial shenanigans that resulted in Hungarian businessmen not paying the admittedly very high 27% value added tax on certain agricultural products like sugar and cooking oil. With that move, and with the active assistance of the Hungarian tax office, these crooked Hungarian businessmen gained a considerable advantage over their main competitor, the American firm Bunge. These Hungarian businessmen were the ones András Horváth was talking about and who are now, after the American revelations, suddenly  in custody. Without the American announcement to ban certain individuals from entering the U.S. these people would still be writing out their fraudulent bills of sale. The thoroughly corrupt Orbán government had no intention of doing anything about the crooked businessmen or, as it turned out, the equally corrupt tax officials. The American ban is invoked only in countries where there is no hope for justice because the government itself is corrupt. Usually third-world countries.

With the American revelations Horváth’s accusations were corroborated. Horváth and Goodfriend obviously were talking about the same cast of characters. But the Americans added another crucial piece of information that Horváth couldn’t have known about: high NAV officials offered their services to the CEO of Bunge for 2 billion Hungarian forints, to be paid to a foundation with ties to Fidesz. In return, they offered a lowered VAT on foodstuffs, a demand of long-standing by the honest producers of sugar and cooking oil. For this sum they also offered to go after Bunge’s competition.

The government’s reaction to all these revelations is fascinating. First, government officials–most notably Mihály Varga, minister of national economy who is in charge of NAV–focused on the corrupt businessmen, ignoring the NAV officials. Why is the Hungarian government accused of doing nothing? After all, three or four people are already in custody. When asked about Ildikó Vida, the corrupt head of NAV who was seen at Vienna’s airport leaving for an unknown destination, he played the innocent. Vida is taking her vacation, to which she is entitled. To the question whether Ildikó Vida is banned from the United States as rumored, Varga announced with a straight face and a hefty dose of the exculpatory conditional, that if she were, surely she would have reported this fact to him as she is supposed to.

Who is this Ildikó Vida? She, like almost all Fidesz bigwigs, lived in the countryside before she entered law school in Budapest. (One reason for the heavy concentration of non-Budapesters among the original Fidesz leaders is that they lived in university dormitories.) Vida was also a member of the by now famous Bibó College which Orbán; Lajos Simicska, former treasurer of Fidesz and now a wealthy businessman; László Kövér, president of the parliament; and József Szájer, a member of the European parliament, attended.

Ildikó Vida at her desk

As one Hungarian media outlet complained, we know very little about the president of NAV. She does not have a large Internet presence and NAV’s webpage has no biographies of the organization’s top leaders. However, she seems to be a very important person in Orbán’s mafia state.

About a month ago a long study by atlatszo.hu, one of those NGOs who receive money from the Norwegian Civil Fund and whom the government is trying to defund, identified the key persons who “captured the Hungarian state.” Ildikó Vida is among them. She must know about the siphoning of public money into Fidesz coffers and most likely into Fidesz politicians’ own pockets as well. Lajos Simicska, whom Orbán called a “financial genius” but who elsewhere would be considered a criminal, was put in charge of the tax office in 1998 as soon as Orbán won the elections. His job was to get rid of all the incriminating evidence about the illegal financial activities of Fidesz-owned businesses that folded and were subsequently “sold” to people unreachable by Hungarian authorities so their unpaid taxes couldn’t be collected. Ildikó Vida was one of Simicska’s deputies and, once Simicska left a year later, Vida became the head of the almighty APEH, the predecessor to NAV. Most people assume that APEH under Vida was no better than NAV is today. I assume that then, just as now, the tax office serves three purposes. One is to assist certain businessmen close to Fidesz to gain an advantage over their competitors by closing their eyes to their fraudulent activities. The second function is to extract money from business leaders, part of which goes to party coffers through an intermediary, like a foundation. And third, the tax office frightens certain persons and businesses Fidesz does not deem friendly to the party and the government into submission. In brief, the picture is grim–and I suspect we don’t know the half of it.