Lajos Simicska

The asphalt tax: Lajos Simicska is not taking it lying down

A few days ago 444 reported that the government is planning to levy extra taxes on companies that have received large government contracts for road construction over the past few years. The reason for these new taxes is a large fine that the Hungarian government is expecting from the European Union. Apparently, ever since 2007  Hungarian governments have insisted that only construction companies that had asphalt mixing plants close to the job sites could bid for contracts. The European Union objected to this constraint which, in their opinion, restricts free competition.

The argument between Budapest and Brussels has been going on for some time, and it looks as if the Hungarian government has reconciled itself to the fact that it will have to pay a heavy fine, perhaps as much as 100 billion forints. Although the current Hungarian government spends money quite freely, it either doesn’t have the money for such a fine or doesn’t feel like paying it from funds it would rather spend on stadiums or the purchase of private enterprises. In any case, the government came up with a splendid idea: let the companies pay for something that is clearly the Hungarian government’s fault.

Although the public usually hears only about Lajos Simicska’s company Közgép, the firm that receives most of the government orders, there are others. Apparently, there is a company called Duna Aszfalt that lately has become a true competitor to Közgép. In addition, there is a French company called Colas, the Austrian Strabag and Swietelsky Magyarország, Magyar Aszfalt, and Hídépìtő Group. Each of these companies has had more than 100 billion forints worth of government orders and thus would be obligated to pay a 15% tax on its gross income.

According to an article that appeared in HVGKözgép was the greatest beneficiary of the Orbán government’s largesse. Since 2007 it won bids for projects to the tune of 132 billion forints, which would mean a retroactive tax of 20 billion. But in the last two years Duna Aszfalt–which is in fact situated in Tiszakécske–has grown tremendously. In 2012 it received government work amounting to 28 billion forints, whereas in 2013 this amount was 54 billion and its profits almost quadrupled. The two owners received 1.8 billion forints in dividends. It was Duna Aszfalt that built the road from Makó to the Serbian border.

road construction

Soon after the first report of the possibility of an extra levy on these companies, the Hungarian government denied any such plan. The denial, however, was carefully worded. On HírTV János Lázár said only that “in the last few months the topic has not even been mentioned in cabinet meetings.” That is not a categorical denial of the existence of such a plan, especially since Lázár during the same interview admitted that Brussels “has formulated doubts and misgivings concerning road construction worth about 500 billion forints.” He added that “it was probable that Hungary will have to pay a significant fine.” For the time being Lázár couldn’t say how and to what extent this fine will affect the companies that were the beneficiaries of the contracts, but he claimed that the “Hungarian government will defend the Hungarian people and the Hungarian companies.” He added that “this defense will not be extended to foreign companies.”

That is clear enough. The Hungarians will not have to pay or will have to pay less while the Austrians and the French will pay through the nose. Therefore, it might seem surprising that Magyar Nemzet today wrote a scathing article against the government’s plan in defense of the construction companies. One must keep in mind, however, that Lajos Simicska and Zsolt Nyerges, his close business partner, have a stake in the newspaper. The publisher of Magyar Nemzet is Nemzet Kft, which used to be called Mahir Kft; this was Simicska’s first business venture.

The title of the article is: “How will a 100 billion forint tax become a 1.2 trillion deficit?” The article claims that if the companies have to pay such a large amount, their own future business activities will be in jeopardy. The contention is that the companies’ profit margin is nowhere near 15%. In fact, the spokesman for Strabag talked about a 3% profit margin on road construction. The author thus calculates that the loss to these companies would be unbearable. Moreover, these companies haven’t even received all of the money the government owes them: “in brief, the money that the government wants to collect is nonexistent.” The consequences will be serious, the article warned. There will be liquidity problems that will result in these companies not being able to pay their workers and their subcontractors; they wouldn’t even be able to buy material. In brief, their current projects will come to a screeching halt.

And that’s not all. Even the slightest delay might mean that these firms could not finish the construction jobs before the December 31, 2015 deadline, in which case the country would have to pay back all of the subsidies received from Brussels. That would mean a loss of 1.2 trillion forints. Further, the article warns about possible bankruptcies, which may result in the loss of 90,000 jobs. Problems in the construction sector could seriously affect Hungarian economic growth. In the first quarter of 2014 GDP was 3.5%, and the construction sector contributed 0.5% to that figure. As a result, it can easily happen that Hungary’s deficit may exceed 3%. If that happens, Hungary could be placed under the excessive deficit procedure, which would mean a suspension of all EU subsidies.

The construction lobby is pushing hard, using Magyar Nemzet to describe the worst case scenario if the “asphalt” tax is imposed. It may persuade the government to go light on Hungarian companies, as Lázár already intimated the government would. But I don’t know what Brussels will think if Hungary implements a two-tiered tax: one for domestic companies and the other for foreign companies. Such a solution would definitely restrict free competition, which was Brussels’ objection in the first place.

Viktor Orbán and his oligarchs: Impending power struggle?

I am always amused when I read that this or that politician from the opposition loudly demands the resignation of this or that minister. Equally amusing, if you can call it that, are the demands that President János Áder not sign this or that piece of legislation. It is also becoming quite obvious that hoping to get redress from the Fidesz-appointed constitutional court is equally hopeless.

A couple of weeks ago I introduced the readers of Hungarian Spectrum to Miklós Seszták, the new minister of national development. The title of the post was “Another corrupt official: The minister of national development and his ‘businesses.'” After Seszták’s highly suspicious activities as a small-time lawyer came to light, there was the usual choir demanding the man’s resignation. Viktor Orbán’s reaction in such cases is always “no comment.” As if nothing had happened. Seszták stays. Moreover, it seems that he was chosen to perform some very important tasks in the new Orbán government.

Only a few weeks have gone by since his appointment, but Seszták is emerging as one of the newest “favorites” of Viktor Orbán. More than a year ago a video circulated on the Internet showing Viktor Orbán, Miklós Seszták, and Károly Nemcsák, an actor, drinking pálinka and singing an off-color song about the hussars of Fehérvár. Surely, their relationship was closer than is normal between the prime minister and a very ordinary first-time member of parliament. But, of course, no one could have suspected at that time that Miklós Seszták would become one of the new confidants of Viktor Orbán.

What is Miklós Seszták supposed to do in the next few months? It looks as if one of his jobs will be to change the management of some state companies. The number of state enterprises is very large as is, but Viktor Orbán is planning to have even more soon enough. Naturally, Seszták is eager to accomplish the task. He promised quick action on the removal of certain undesirable people at the helm while he also announced further nationalizations. For example, Orbán wants to have the whole Magyar Villamos Művek Zrt. be taken over by the state. Seszták assured the public that “there is money for it.” It looks as if the Hungarian government also has money for the purchase of Bombardier MÁV Kft, some percentage of which is currently in foreign hands.

It didn’t take long to learn that Seszták has another job to perform which began as early as May: every state enterprise received a letter instructing the management to suspend all contracts with outside firms. The reason? Allegedly to ensure “responsible business practices” at the state enterprises. The suspension order was e-mailed, which the not too smart employees of the ministry sent out with all addresses visible. Since someone squealed in one of these companies, by now we know that the number of companies is greater than 100. This employee also said that in the instructions it was pointed out that some of the contracts “that are necessary for the normal running of the business can be renegotiated,” but he added that it is hard to pinpoint exactly what one can consider the “normal running” of a business. The same whistleblower suspects that in most of these companies both acquisitions and R&D have come to a screeching halt.

oligarchs

László Szily, blogger of Cink, who received the information from the whistleblower, immediately asked the ministry about possible personnel changes either at the ministry or in the companies. He received the following answer:

We are in the middle of analyzing the effectiveness of individuals both at the ministry and in the companies. In case we think that the lack of effectiveness is the result of the incompetence of the leadership we will make the necessary personnel changes. At the same time we do not want to decapitate the enterprises. If there are personnel changes, we will announce them in the next few weeks because we don’t want to keep anybody in uncertainty.

MSZP finds it amusing that Orbán picked a man accused of corruption to check on the allegedly corrupt state company managers. Amusing or not, something very interesting is going on. Rumors have been circulating for a number of years that both Fellegi and his successor, Mrs. László Németh, were Lajos Simicska’s people. As for Lajos Simicska, his business empire is vast and, especially since 2010, he has been the greatest beneficiary of European Union subsidies and state orders for road building and other construction projects. What the relationship is between Viktor Orbán and Lajos Simicska, besides friendship, no one knows. Until now everybody was convinced that what is good for Simicska is also good for Orbán. But now, the latest moves undertaken by Miklós Seszták on Orbán’s orders indicate that perhaps Orbán has had enough of Simicska and his friends.

There are further signs that something else  may be afoot that would weaken the power of some of the oligarchs. Yesterday 444, an online news site, received a copy of a bill the government apparently wants to put before parliament. It would introduce a 15% tax on all companies that have been involved in road building in the last seven years. That would mean a tax of 20 billion forints on Simicska’s company, Közgép. All this indicates to me that Viktor Orbán now feels strong enough (especially with his budget in desperate need of a new source of revenue) to turn against his former friends and put an end to their further enrichment and thus political influence. Cracks seem to be appearing in the Fidesz monolithic wall.

Sándor Kerekes: Hungarian democracy in a nutshell*

I am speaking about democracy in a nutshell today, because that’s pretty well all that is left of Hungarian democracy by today. In fact, it is even quite loose in that nutshell, after having shrunk so small.

On December 31 2013, in the late night hours, as the country was well on its way to getting drunk and celebrating the new year, the Official Gazette of the Hungarian government published the text of a theretofore unheard-of Order: “About the memorial to be erected in Budapest’s fifth district and qualifying it as an overriding national economic importance and the appointment of the competent authorities.” This is just the title! You can imagine what follows.

But let me translate the details. The fifth district is the historic center of Budapest. The “overriding national economic importance” is the legalese term lifted from a not so long before enacted piece of legislation that enables the government to avoid any public tender process and, regardless of the size of the project, to award it to whomever they please, without any disclosure or explanation. This is corruption writ large, carved in legislative stone. (The price was found out later to be 311 million forints, or $1,399,671). The memorial is intended to stand on Freedom Square, a storied and beautiful public place, rife with social and historical significance, just under the windows of the US Embassy, and to be ready on the 19th of March 2014, on the anniversary day of the German occupation of 1944.

A short break for explanation
You must forgive the interruption, if I stop to explain. The winged figure, according to the artist’s technical description, is the defenseless and innocent Archangel Gabriel, symbolizing the defenseless and innocent Hungary, savagely attacked by the imperial eagle of the Third Reich. Of course, you all know that, far from innocent, Hungary was a staunch ally of Hitler, benefitted from the alliance and received the occupiers with open, welcoming arms at the time. This memorial is nothing but the most blatant, revisionist falsification of history. The intended spot for the memorial is on top of an underground garage, whose roof had to be enforced to bear the weight, so the deadline had to be extended to the end of May.

Naturally, you may ask: who could think it desirable to memorialize and celebrate the day of national humiliation, the source and the beginning of untold suffering and bloodshed?

Well, it is the government of Prime Minister Viktor Orbán.

As you see, PM Orban himself is not at all averse to flaunting some eagles of his own.

PM Orbán himself is not at all averse to flaunting some eagles of his own.

The rush to the slope
But how did we come to this point?

Well, in the election, May 2010, Viktor Orbán and the FIDESZ party won an overwhelming majority. The electorate was thoroughly fed up with the previous Socialist-Liberal coalition and wanted change. They elected the only alternative available, with a comfortable majority of 53%, and that was enough for a 2/3 majority in Parliament. On the evening of the election Viktor Orbán declared that “the people of Hungary executed a revolution in the voter’s booth.” He set to work within weeks to transform the entire system of government. It worked democratically before: checks and balances. But now, just as he described it previously, in a secret speech in the fall of 2009 to his confidantes, it would be a central “force field.” Eliminate the useless bickering, the bothersome tug of war between disparate interests and replace it with government by the will of a single force.

Before the opening of Parliament he personally received each member in his country house, where they, one by one, assured him of their personal loyalty and pledged cooperation. With one single exception this pledge has endured, their 2/3 of Parliament has flawlessly functioned as a voting machine.

With such legislative prowess it was a cinch to strangle the checks and balances. Some of them were just shut down. Others he replaced with new ones, or only their personnel were replaced with his own loyal followers. Usually placed there for nine-year terms, to carry out his policies, even if god forbid, he should lose an election in the future. After an unfavourable decision by the Constitutional Court, he diluted it, from nine to fifteen members, appointing his supporters, among them his personal lawyer, to prevent any similarly unpleasant decision in the future. And since he was working on the court already, he cut off most legal access to it and curtailed the court’s field of competence.

After these swift and efficient preparations he was ready to implement his “vision” even further!

The Orbán government, in a legislative fury, first issued the Manifesto of National Cooperation to be displayed in every public building. This document stipulates that the national reconciliation, peace and brotherly understanding will be accomplished if everyone just meekly follows the government. A new constitution was secretly prepared, without any consultation, and pressed through Parliament in three weeks, claiming that it was absolutely urgent and necessary, because the previous constitution (to which they all swore allegiance and promised to uphold) was a communist document.

Codified corruption
Concurrently, Orbán personally appointed as state dignitaries his college friends, reduced the number of ministries to eight, thus concentrating power in the most trusted hands. The speaker of the house and the president are his roommates from his college dorm. But there is a fourth college friend who is perhaps the richest man today in Hungary and who, from the beginning, has directed the financial dealings of the party and possibly Orbán himself, and is so obscure in the background that for more than twenty years has not been seen, or photographed: Lajos Simicska. The oligarch par excellence! This man owns the vast majority of billboards in Hungary, the largest advertizing agency, newspapers, TV and radio stations, the largest and most favoured civil engineering firm, and has the largest long-term lease, over 9000 acres of state-owned agricultural land. (While the legal limit is 300 acre per person and 1200 acres per family.) In 2013, his mind-bogglingly complicated company-network was awarded 14% of the entire public works and procurement budget of Hungary: 875 million forints (€2,916,700, or $3,946,418) every day, 39.6 billion forints (€128,721,432=$178,603,644) in total for the year.

All this, of course, was done secretly, through unknown channels and processes. So, it’s no wonder that some people claim that behind the mask of Orbán, it is actually Simicska who is running the country.

At the head of the eight ministries are Orbán’s most trusted people. That would be fine, if they were qualified. But in many cases they are not. Most ministries are covering unrelated responsibilities. For example, the Human Resources Ministry, which controls the greatest budget, has the responsibility for pensions, healthcare, education, employment, funding for the arts, Roma integration and so on. And who is the minister of this complex? He is Viktor Orbán’s spiritual adviser, the Rev. Zoltán Balogh, an ordained minster of the Reform Church, who has not the slightest previous experience in public administration.

Although the individual fields are supervised by undersecretaries whom, in many cases, are at least professionals. (Some of them are also graduates of the Simicska conglomerate.) While the Minister of Finance, interestingly, is an economist, the Minister of Development, in charge of all public works, is a bookkeeper, Mrs. Németh, who is also an alumna of the oft-mentioned oligarch, Mr. Simicska. Her educational attainment is a high school diploma. She hardly ever speaks publicly, or in Parliament. Her voice, (and her professional adviser as well), is Dr. János Fónagy, and with him we arrive at one of our basic subjects: the Jewish contribution. He is one of the two known, openly Jewish members of Parliament. Fully secular, very smart, a truly dedicated lawyer. Dedicated, that is, to upholding and operating the new, practically single-party system. But this savvy, seasoned lawyer was stunned, well-nigh speechless when, in November 2012, one of the openly anti-Semitic MPs demanded the listing of Jews in Parliament. All he could say was that his parents were Jewish, yes, but he had no choice, and no, he is not practicing.

Of course I became interested. One day two years ago I naively walked up to the entrance of Parliament asking to be admitted. They didn’t laugh, just sent me to this office and that, all for naught. In the US and Britain it is a matter of merely asking a representative for a free ticket and entrance to the legislature is assured. In France free entrance for all is outright spelled out in the Constitution. Now in Hungary one can buy a ticket for a guided tour of Europe’s largest parliament building, but visiting the sitting of the Assembly is tied to a special permit, a press accreditation, that must be renewed from week to week, and for me it took several months to obtain. Finally, months later, miraculously I was admitted at last. (The whole thing took only another twenty minutes of phone calls and checking.)

So, now that we are inside, let me introduce you first to Mr. Speaker, Viktor Orbán’s former college roommate, former communist party apparatchik with latent authoritarian inclinations, the intensely anti-communist Dr. Lászlo Kövér. His job is to restrict the House’s operation so that only Fidesz can have its way and to stifle the opposition. Speaker since August 2010, from his appointment on, he imposed control on proceedings. He cancelled all press credentials, then later, after readmitting them, he relegated all press to the loggia above the Speaker’s perch. This resulted in the prevention of photographing him and the person speaking on the rostrum from any angle, except from above and from behind. All rights to video are restricted exclusively to the official parliamentary broadcasting system; journalists are forbidden to make videos. This is not just idle talk, there are guards immediately interfering with any such attempt, if necessary, by putting their hand in front of any camera. The “official” video broadcast is strictly controlled in the government’s best interest and if the opposition should do anything untoward, or unexpected, the screen shows the speaker only, the sound is cut off and the public will never find out what actually happened. The public cannot come in and information cannot get out of there. Is it any wonder, therefore, that the public at large is completely ignorant of Parliament? One of Speaker Kövér’s golden rules is that immediate questions must be submitted in advance in writing, the MP must read them verbatim from paper and the Government’s answer is also read from paper. The whole charade of “immediacy” is a surrealistic farce.

Having sat in that press gallery for some time, I became increasingly frustrated by my failing hearing. I knew I was losing it, but this fast? After some days I realized though that I can hear Mr. Speaker perfectly well, only the rest is a muffled noise. I decided to “investigate.” Looking around the balcony I discovered that two loudspeakers on each end clearly convey Mr. Speaker’s voice from his microphone, but the connections to all other microphones are cut off and the disconnected loudspeakers and wires, as sad leftovers of corpora delicti, have been strewn under the chairs. I went immediately to the Press Office a few doors away. The head of the Press Office didn’t want to believe me. “Nobody has ever complained about such a thing before,” he said with conviction, (Yeah, I retorted, because nobody was interested in what is said in there,) then he put on his jacket and we dashed off to the press gallery to see it. I showed him around in his own domain, explained how the system worked, that is, how it actually didn’t work, showing the detritus beneath the chairs.

I still don’t know to this day, how sincere his astonishment was. We went back to his office and I asked what he intended to do about it. He promised to reconnect the speakers.

A week later, seeing that nothing happened, I went back to him, but another official told me that it was the end of the session, they are swamped, and this must wait until next session. That, of course, never came; soon an election was called for a new, reconstituted Parliament.

Speaker Kövér also called into being a special military unit, the Parliamentary Guard. These live tin soldiers are meant to impress the tourists, but even more, suggest the sinister muscle power at his exclusive personal disposal to apply force against unruly MPs. (The number of guards: 349, in the 2013 budget 2.3 billion forints €7,476,245=$10,373,444 and in 2014 an additional 30 are being hired.) The costume of the Guard is a combination of a little pre-war Royal Hungarian and a lot of German Wehrmacht elements and bears no resemblance to anything historical. But no matter, if Regent Admiral Horthy had such a guard, then Speaker Kövér, the son of a provincial metal worker, must have his too.

Legislating the coup
The Hungarian Parliament has dispatched a prodigious number of bills, produced at a scorching rate. In 2012 the government submitted and the House voted in 364 pieces of legislation. That’s right, one for every day, except Christmas day! So to speak. Regularly the government introduced legislation, several hundred pages long, on Friday evenings and got it read and voted in the following Monday. Amendments were proposed by obscure Fidesz backbenchers, often just half an hour before the final voting, and they passed, regardless of the opposition’s claims that there wasn’t even time to thumb through the papers. Voting was frequently timed to occur in the middle of the night, or later, to avoid possible public scrutiny. To my knowledge, in these four years not one single bill submitted was supported by any corroborating background papers. If ever made, they have been kept secret from Parliament, as well as from the public. Many of these laws are contrary to European Union rules, sometimes contrary even to their own new Fidesz constitution, but the European Union besides ruminating, producing damning reports and furling its collective brow, does nothing. The Machine works miracles.

One of those “miracles” was the new election law pushed through with the same dizzying speed and a mere few months before the election itself. It came out of the machine providing unprecedented advantages to the governing party, while making a win for the opposition nearly impossible. (As one of the opposition MPs noted, the field was not only tilted, it was actually vertical.) It reduced the members of Parliament almost by half and included rampant gerrymandering. Consequently, last month’s election, although free, was neither fair nor equitable. The rules were so skewed that even cheating was not necessary. Thanks to the carefully “calibrated” rules, with 44.87%, of the 61.24% voting, Fidesz won another electoral triumph. This represents a mere 27% of the eligible voters, yet again it was enough for a super-majority.

What system?
This election was a good example of how the Fidesz system works, its aims and its goals. All election-related spending was done to the benefit of Fidesz oligarchs, just like the public works are. The government boosted its success propaganda, often verbatim identical to that of the Fidesz party, the two inseparable; party money mingled with government money and they are indistinguishable. Billions have been paid to oligarchs. Then through unknown channels those oligarchs recycle the government monies into the party– and private coffers. Thus laundered, it buys more power and is rewarded by government largesse, contracts and fat jobs. There it yields new income for the oligarch and the cycle spins ad infinitum. This is the substance of the Orbán system of National Cooperation.

Sense and sensibility
In closing, let’s come back to the memorial, the start of this lengthy presentation.
When the Alliance of Hungarian Jewish Parishes, known as MAZSIHISZ, heard of this bizarre memorial, the normally cordial air between the government and them froze almost solid. Their newly elected board and new president, Mr. András Heisler, sent a memorandum to the government. They set three conditions to participate in the official year of remembrance, one of them being: this memorial project must be abandoned. Anti-Semites were crying foul immediately, talking about an ultimatum.

No sane person could accept the whitewashing of war crimes attempted by this “statue”: the murder of 600,000 Jews, the 160,000 casualties on the front, or the cruelties perpetrated by the Hungarian forces in Serbia and against the Ukrainians.

Grudgingly, Orbán, citing the impending election campaign, suggested adjournment and reconsideration until, after the election, consultations could be held in a calmer, more conducive climate. MAZSIHISZ quietly agreed but were stunned when two days after the election the construction work started without the promised consultations. So, they decided that the Jewish Community “en bloc” would disassociate itself from the official government memorial events. The Jews will remember in their own way, in their own time, and with their own money.

Thanks to his own obstinacy, Viktor Orbán has painted himself into a corner from which he can only come out with a major loss of face and, by the same token, forged a Jewish Community tightly united as never before, and to a degree never thought possible. This is the first time, in an unprecedented way, that the Jewish Community has taken it upon itself to proudly represent civic courage, the advocacy of reason, and the principles of democracy, in the name of all of Hungary, that hardly anyone else dares to do in the ever-deepening and darkening pit that Hungary is rapidly becoming in the middle of Europe, and do it right into the face of the government machine of Viktor Orbán.

—–

* This paper was presented at a workshop organized jointly by the Ben Gurion University and the Konrad Adenaur Stiftung. The topic of the workshop was “Jewish Contribution to the European Integration Project.”

Mária Vásárhelyi on the “media octopus” in Hungary

Yesterday I talked about the state of the Hungarian media. In today’s Galamus, Zsófia Mihancsik, who is a very good journalist, suggested to her colleagues that it would be a good idea if they learned to read. But, as some of you suggested, the slanted reporting on certain “sensitive” topics might be the result not so much of careless reading or writing but of a willful distortion of the facts. This is definitely true about media under the direct or indirect control of the governing party.

So, I think it’s time to look around a little in the world of the Hungarian media. Here I’m relying heavily on Mária Vásárhelyi’s essay “The Workings of the Media Octopus–Brain and Money Laundering” that appeared in the Bálint Magyar-edited volume, The Hungarian Octopus.

According to Vásárhelyi, Viktor Orbán’s psyche was crushed in 1994 when he  managed to lead his party with a 40% chance of winning the election into almost total ruin with 7.7% of the votes. Before that fiasco Orbán was the darling of the press, but subsequently he became the pariah of the then still mostly liberal Hungarian media. He decided right then and there that the goal is not to be liked by the existing media; rather, a smart politician should strive for a loyal media he can easily influence. In Vásárhelyi’s estimate Fidesz had the lion’s share of responsibility for the 1996 media law that turned out to be neither liberal nor democratic.

Once Fidesz won the election in 1998 Viktor Orbán made a concerted effort to build a media empire with the use of private and public money. Billions of public money were spent on establishing Heti Válasz and on the “rescue” of the heavily indebted Magyar Nemzet. And right-wing oligarchs like Gábor Széles, Tamás Vitézy (Orbán’s uncle by marriage), Zoltán Spéder, István Töröcskei, and Lajos Simicska put large sums of their own money into media outlets that were anything but profitable. They were hopeful that their investments would serve them well one day when Viktor Orbán again returned to power.

Between 2002 and 2010 the preponderance of media outlets shifted to the right. Moreover, by 2008 the liberal media’s financial situation was dire. Companies strapped for funds cut their advertising budgets, and the liberal media outlets had no rich oligarchs who could ensure their continued existence during the hard times. Since 2010 the lopsidedness between right and left in the field of media has only become worse. According to Mária Vásárhelyi, “only those messages which the government party wants to deliver reach 80% of the country’s population.”

octopus

Studying the changes in the political orientation of radio stations is perhaps the most fruitful and most telling because it is here that the Media Council, made up entirely of Fidesz appointees, can directly influence the media. It is in charge of allocating radio frequencies. As the result, in the last five years the radio market became unrecognizable. Every time existing radio stations had to reapply for frequencies, the frequencies were given to someone else. The new stations were owned by companies or non-profits preferred by the government party, and in consequence government advertisements immediately poured in. Between 2010 and 2012 some 50 local and regional radio frequencies changed hands. Of these Mária Rádió (Catholic Church) got seven frequencies all over the country and Lánchíd Rádió (also close to the Catholic Church) got five. Európa Rádió, which is close to the Calvinist Church, by now can broadcast on three frequencies. Magyar Katolikus Rádió has two local and two regional frequencies. All these stations are considered to be non-profit and therefore they don’t pay for the use of the frequencies.

Zsolt Nyerges has built a veritable media empire: he is behind “the three most valuable radio frequencies in the country.” During the same time the liberal stations have been disappearing one by one. Radio Café, very popular among Budapest liberals, lost its frequency in 2011. So did another popular liberal station called Radio1. Of course, Klubrádió is the best known victim of Viktor Orbán’s ruthless suppression of media freedom. Klubrádió began broadcasting in 2001 and could be heard in a radius of 70-80 km around Budapest. By 2007 the station had acquired eleven frequencies and could be heard in and around 11 cities. Soon enough Klubrádió was the second most popular radio station in Budapest. Today, Klubrádió after years of litigation moved over to a free but weaker frequency that it already had won before the change of government in 2010. Out of its 11 provincial stations there is only one left, in Debrecen, and we can be pretty sure that as soon as its contract expires Klubrádió will no longer be able to broadcast there either.

As for the public radio and television stations, let’s just call them what they are: state radio and television stations as they were during socialist times. But then at least the communist leaders of Hungary didn’t pretend that these media outlets were in any way independent: the institution was called Hungarian State Television and Radio. They were at least honest. The only difference was that in those days state television and radio aired excellent programs, especially high quality theatrical productions and mini-series, all produced in-house. Now I understand the programming is terrible and only about 10% of the population even bothers to watch MTV, and most likely even fewer watch Duna TV. Their news is government propaganda: on MTV more than 70% of the news is about government politicians and the situation is even worse at Magyar Rádió.

These state radios and television stations have a budget of over 70 billion forints, a good portion of which ends up in the hands of Lajos Simicska. How? MTV and Duna TV no longer produce shows in-house but hire outside production companies. Thus, public money is being systematically siphoned through MTV and Duna TV to Fidesz oligarchs. The programs are usually of very low quality and complete flops.

Most Hungarians watch one of the two commercial stations: RTL Klub and TV2. Both are foreign owned but as Orbán said not long ago, “this will not be so for long.” And indeed, a couple of weeks ago TV2 was sold, allegedly to the director of the company. Surely, he is only a front man. An MSZP politician has been trying to find out who the real owner is. Everybody suspects the men behind the deal are Lajos Simicska and Zsolt Nyerges.

And finally, the print media is also dying, which is not surprising given the worldwide trend. But right-wing papers are doing a great deal better than liberal and socialist ones for the simple reason that public money is being funneled into them through advertisements by the government and by state-owned companies. Even free newspapers are being brought into the right-wing fold. There was a very popular free paper called Metro owned by a Swedish company. But Orbán obviously wasn’t satisfied with its content. So, the government severely limited the locations where Metro could be stacked up, free for the taking. Thus squeezed, the Swedish owner decided to sell. And who bought it? A certain Károly Fonyó, who is a business partner of Lajos Simicska. The paper is now called Metropol and, in case you’re wondering, is doing quite well financially.

Napi Gazdaság was sold to Századvég, the think tank that was established by László Kövér and Viktor Orbán when they were still students. As I mentioned earlier, Népszabadság was sold recently to somebody who might be a front man for Tamás Fellegi, former minister of national development who had financial interests in the world of the media before he embarked on a political career. The paper was owned by Ringier, a Swiss company that wanted to merge with the German Axel Springer, which owns a large number of provincial papers in Hungary. Although in many European countries the merger was approved with no strings attached, the Hungarian government set up an obstacle to the merger. The merger could be approved only if Ringier first sells its stake in Népszabadság.

Fidesz hasn’t been so active online. Most of the online newspapers are relatively independent. What keeps the party away from the Internet? Vásárhelyi suspects that it is too free a medium and that it doesn’t comport with Fidesz’s ideas of control. Surely, they don’t want to risk being attacked by hundreds and hundreds of commenters. Index, howeveris owned by Zoltán Spéder, a billionaire with Fidesz sympathies. After 2006 it was Index that led the attack on Ferenc Gyurcsány and the government. Vásárhelyi predicts that Index will turn openly right sometime before the election.

The scene is depressing. There is no way to turn things around without the departure of this government. And even then it will require very strong resolve on the part of the new government to stop the flow of public money to Fidesz media oligarchs. The task seems enormous to me.

Corruption and conflict of interest in Hungarian politics

Although Medián came out with a new poll on voters’ party preferences, it tells us practically nothing new. Fidesz is still leading and the united opposition has no more support than before even though a majority of people would like a change of government.

So let’s move on to two embarrassing cases, both involving leading MSZP politicians. The first is the easier to deal with. Gábor Simon, one of the deputy chairmen of the party, is accused of having two bank accounts, totaling €700,000, in an Austrian bank which he didn’t reveal in his financial statement. At the time Simon deposited the money he told the bank officials that the money was acquired by selling a piece of real estate and a firm he owned. The problem is that Simon didn’t own or sell any real estate or a company.

It was only on Monday that Magyar Nemzet published this explosive story, the timing of which was most unfortunate for MSZP. Attila Mesterházy, József Tóbiás, and Csaba Horváth are currently in the United States, but word already reached Budapest that Simon must give up all his important positions within the party. Simon, realizing his untenable position, “suspended his party membership.” A few days ago he was still a candidate in electoral district XIII, but according to rumors Ágnes Kunhalmi will run there in his stead.

Up to this point one could say that Simon was a bad apple and MSZP an innocent victim, but the situation is a bit more complicated. The prosecutor’s office has been investigating Gábor Simon in another case ever since last March. This particular case involved little money, only 300,000 forints. But his immunity was suspended despite MSZP’s protestations in committee. Although the two cases are not connected, the MSZP leadership should have been more cautious early on and not just say that it was a baseless accusation against one of the leading politicians of MSZP.

Apparently Simon’s downfall was caused by his wife, whom he divorced recently. (One has to be careful with estranged wives. Just think of the former wife of Attila Szász, Aranka, who spilled the beans about Viktor Orbán’s questionable business deals in Tokaj.)

The second case is a great deal more complicated. It involves István Józsa, an important MSZP politician who is the energy expert of the party. The background is as follows. Fidesz desperately wants to prove that MSZP always wanted to build one or two more reactors in Paks and that they also wanted to use Rosatom and Russian technology. This is what, they contend, Gyurcsány, Bajnai, and Mesterházy said before 2010, but now that the Orbán government made this fabulous deal with the Russians they are suddenly against it. Yesterday Fidesz came out with another “discovery.” István Józsa, who had a 42% share in a company called Gépkar Kft., received 6.6 billion forints worth of orders from Paks between 2000 and 2010. The Fidesz politician György Balla charged that Józsa’s opinions on Paks changed with his financial interests. Before 2010 he was for building the new reactors but now he is against it.

Józsa, who gave an interview to Hír24 on the fly in one of the many corridors of the parliament building, sees nothing wrong with his company getting work from the state-owned Paks nuclear plant. He pointed out that in 2002 when he became a member of parliament he withdrew from the actual management of the company. The company got the bulk of its orders from Paks between 2000 and 2002 when Fidesz was in power. Moreover, the sum of 6.6 billion forints in ten years may sound like a lot of money but anyone who is familiar with this industry knows that it is not considered to be a large amount. In 2010 they sold the company because they no longer got any orders. Zsolt Nyerges, a close business partner of Lajos Simicska, made their situation untenable. The man who bought the company eventually went bankrupt; under the circumstances the business was no longer viable.

ethics

The reporter inquired from Józsa several times whether selling his stake in the company wouldn’t have been more appropriate once he became an MP, but the politician indignantly refused the suggestion. He is upright man; he had nothing to hide; he didn’t do anything illegal; the company received work from Paks through competitive bidding. He doesn’t understand what’s wrong. I fear Józsa is not the only one who seems to be unable to grasp the inappropriateness of such arrangements.

On this score one could congratulate the Orbán government’s decision to forbid outside business or professional activities for members of parliament. However, as we know, in the political structure Viktor Orbán set up members of parliament are not the ones who truly matter. Fidesz MPs currently function as puppets or robots and most likely will do so in the future as well. The money and power are elsewhere, in the financial and economic circle of oligarchs around Viktor Orbán. They are the ones who matter.

Tomorrow I will investigate a case involving close friends of the prime minister in one of the shadiest business dealings of late.

The Fidesz robber barons. Part II

Today I’m continuing the story of Fidesz’s mafia methods as perfected by Lajos Simicska, the financial wizard of the party. I will pick up the story at the time of the campaign that preceded the election of 1998, which Viktor Orbán with the help of József Torgyán, chairman of the Smallholders Party, won.

For the campaign Fidesz needed money. Lots of money. Enter Gábor Princz, chairman of Postabank, which was a state-run bank. The name of the bank accurately reflected its structure. Its branches operated at post offices and thus could reach a wide clientele. Princz ran the bank in a totally irresponsible manner and handsomely paid politicians on both sides for expected favors. He was also very generous when it came to support of the media and organizations connected to culture. Eventually, Postabank went bankrupt, but before that happened Princz used his bank’s assets to support Fidesz’s election campaign. Gábor Kuncze, chairman of the liberal SZDSZ, calculated that Postabank lent and/or gave 800 million forints to Fidesz. Since a few months later there was no Postabank, it is unlikely that Fidesz ever had to pay this money back.

If Princz thought that his generosity toward Fidesz would save him, he was wrong. One of the very first moves of the Orbán government was to remove him from his post as head of the bank. Princz moved to Austria for a while where he felt a great deal safer. Meanwhile, the government began to take care of the immense debts that Postbank had managed to accumulate. Eventually, they calculated the amount of money which according to their experts was needed to put things in order: 152 billion forints. Naturally, Princz himself doubted this figure, which was not surprising. But even people like Imre Tarafás, at the time head of the Állami Pénz- és Tőkepiaci Felügyelet, the organization that supervised bank and monetary transactions, in his report for the year 1999 claimed that the government spent far too much money trying to straighten out Postabank’s accounts. Tarafás was asked by Orbán to resign. When he declined, the government created a new office with a similar mandate and abolished Tarafás’s organization. Tarafás was not the only one who had doubts about the financial needs of Postabank. In 2006 it came to light that at the time KEHI, the government financial supervisory body, also noticed several very shady real estate deals in connection with the consolidation of Postabank. However, István Stumpf, head of the prime minister’s office, suspended any further probe into the matter. But it looks as if about 50 billion forints disappeared in the process of cleaning up the books of Postabank.

Once Fidesz won the election Viktor Orbán began building his political and financial power base. Corruption now became systemic and centralized. The Fidesz government established a number of entities that siphoned large sums of money from the public coffers. First, they set up something called Országimázs Központ (Country Image Center) whose duty it was to conduct a propaganda campaign lauding the outstanding performance of the country under Fidesz leadership. The man in charge was István Stumpf. This body handed out large contracts to two business ventures, Happy End Kft. and Ezüsthajó Kft. (Silver Ship), to stage large state events. One must keep in mind that the new millennium and the Hungarian Kingdom’s 1,000-year anniversary gave plenty of opportunity for lavish celebrations. Just the New Year’s Eve extravaganza, which by the way was a flop, cost, at least on paper, 3.75 billion forints.  Several more billions were spent on celebrations all across the country, including the smallest villages, during the Hungarian millennium year. It seems that altogether the Országimázs Központ spent almost 13 billion forints on such events, and more than 90% of that amount was received by Happy End and Ezüsthajó.

Hyde and Hyde

Hyde and Hyde / varanus.blog.hu

It would be too long to list all the phony overpaid providers who were naturally members of the Fidesz inner circle or at least people with close connections to Fidesz. It is almost certain that some of the money paid out to these firms ended up in Fidesz coffers handled by Lajos Simicska.

The really big corruption cases, however, were connected to government investments, especially highway construction. Here the key organization was a state investment bank called Magyar Fejlesztési Bank (MFB, Hungarian Development Bank). The bank was supposed to give out loans for promising business ventures.

When Lajos Simicska left APEH, he got a job at this state investment bank and came up with a fiendishly clever scheme. Road construction was not handled directly by the government but by a company called Nemzeti Autópálya Rt., which was created by MFB specifically for this purpose. The beauty of the arrangement was that the rules and regulations that applied to projects financed by public money were not applicable here. For example, no competitive bidding was necessary. The next step was to designate a company to be the beneficiary of government orders. The chosen company was a leftover from the Kádár years called Vegyépszer. The name is typical of the many state companies that existed in the socialist period. But the name of this company indicates that it didn’t have anything to do with construction. Judging from its name, once upon a time it had something to do with chemicals. But that really didn’t matter because it wasn’t Vegyépszer that was going to do the work but hired subcontractors. Suddenly Vegyépszer received orders to the tune of 600 billion forints. From nothing it became as important a company between 1998 and 2002 as Lajos Simicska’s Közgép is today. I might add that Vegyépszer went bankrupt last year.

The question is how much of that money was returned to Fidesz. After the defeat of Fidesz in 2002, an old high school friend of Orbán, Simicska, and Varga told Debreczeni that the reason for Orbán’s electoral defeat was that “the boys were not satisfied with the customary 10%, they wanted 20% of everything.”

Of course, this is a very brief summary of exceedingly complicated financial transactions. I suggest that those who know Hungarian read the book. It is full of details about the functioning of MFB, which acted as a never ending source of government funds and also was involved in selling state properties to friends of Fidesz politicians under highly questionable circumstances. Some of the beneficiaries of these unsavory deals involving large state farms are still members of Viktor Orbán’s inner circle: Sándor Csányi, István Töröcskei, Zsolt Nyerges, and, yes, Lajos Simicska.

As for Fidesz’s current favorite company, Közgép, which gets almost 100% of government investments financed by the European Union, it belongs to Lajos Simicska himself. Or whoever stands behind him in the shadows.

To be continued

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

Brussels’ suspension of payments for most of Hungary’s cohesion projects

It was on May 1 that I first reported that 444.hu, a new Internet website, published an article according to which sometime during the summer of 2012 the European Union suspended payment for cohesion fund projects. The apparent reason was that Brussels discovered that there was discrimination against foreign engineers. Only engineers who belong to the Hungarian Society of Engineers could be hired.

I expressed my doubt that the only reason for the suspension of billions of euros was discrimination against foreign engineers, although I do know that such discrimination within the EU is strictly forbidden. I suspected that Ferenc Gyurcsány’s Demokratikus Koalíció, which had brought Lajos Simicska’s Közgép to the attention of the European Anti-Fraud Office (OLAF) , might have had something to do with the suspension of funds.

At that time the government offered only a couple of soothing assurances that all was well. One government official even insisted that the requisite membership in the Hungarian Society of Engineers was not really discriminatory because, after all, foreign engineers could join the society. The Hungarian government seemed to be quite sure of itself.

By now, however, the Orbán government seems to be in a total panic. There is still no resolution of the European Union’s suspension of payments for 13 of the 15 operative programs financed from Brussels, and in the worst case scenario Hungary might lose somewhere between two and four billion euros in EU grant money.

Let’s look at a few of the details. I should note here that I feel sorry for those journalists who don’t speak Hungarian and have to rely on information that is available on government sites because very often the English version of the press releases bears no resemblance even to the government doctored news in Hungarian. The August 12 press release on “Action plan to avoid losing EU funds” is a good example of this practice because it says not a word about the suspended funds. The Hungarian version published on the Office of the Prime Minister’s site is more informative.  János Lázár, the new head of the Nemzeti Fejlesztési Felügyelet (NFÜ, National Development Agency), announced at his press conference that “the European Union raised concerns with several large development programmes” and that  Lázár “has already asked European Commissioner for Regional Policy Johannes Hahn to assure completion of related negotiations at the earliest opportunity so that Hungary may utilise the maximum amount of funds available within the 2007-2013 programming period.” This, however, is still not the whole truth.

Lázár actually said that of the 20 billion euros allocated to Hungary for 2007 through 2013 there is a good possibility of losing about 2 billion euros if no agreement is reached before the end of the year. He didn’t dwell on the reasons for the suspension of funds but showed himself eager to “close the disputes between Hungary and the European Union.” The Hungarian government is ready to pay the fines that will most likely be forthcoming without turning to the European Court of Justice because of the urgency. He indicated that he would be happy if Hungary had to pay only 50-70 billion Hungarian forints.

János Lázár at his press conference / Photo Károly Árvai

János Lázár at his press conference / Photo Károly Árvai

This withholding of funds is only one of the problems. The other is that Hungary has only a few more months to utilize the remaining grant money, about 1 billion euros, that until now has not been allocated.

What happened? In 2010 the Orbán government completely reorganized NFÜ, which entailed firing 170 of the 210 employees of the agency. Brussels was apparently stunned. They may also have considered Viktor Orbán’s “reorganization” illegal because the Hungarian government was supposed to ask approval of these changes from the European Union. Because of the reorganization there was practically no work on projects at the agency. And not a single new project was launched. I might add here that today NFÜ has 600 employees and, as Lázár made clear at his press conference, there is no plan to reduce the size of the staff.

Meanwhile, just as I suspected back in May, concern was raised in Brussels over the alleged widespread corruption in the dispersion of funds, currently being investigated by the police. Most of the corruption that is under investigation happened when the Hungarian government tried to allocate money to small- and medium-size Hungarian businesses. Then there was the case when NFÜ wanted to decide the winner by lottery, which Brussels gravely objected to and eventually managed to stop. Sometimes grants were handed out without open competition. It is also known that there were occasions when firms with close ties to Fidesz offered assistance (naturally for a fee) to smaller companies without political connections. As far as I know, Közgép, the largest recipient of EU funds and according to some the most tainted, is not under investigation.

The question of the operative project funds was discussed yesterday at the cabinet meeting. As usual, not much can be learned from the press release except that the decision was made to create a new “working group” within NFÜ called “Tervezési Támogatási Munkaszervezet” (Planning and Assisting Working Organization) which is supposed have “functions of direction within the organization units.” Whatever that means.

According to MSZP’s Gábor Harangozó, although Lázár talked about 2 billion euros (500-600 billion forints) that needs to be approved by the European Commission and spent this year, in his opinion the real figure might be as high as 1,500-1,200 billion forints or about 4 billion euros. Right now no money is coming from Brussels, not even for projects that are already under construction. Moreover, it seems that the Hungarian government, which is supposed to be the guarantor of EU subsidies, doesn’t have the resources to pay the companies that are working on these projects.

Harangozó inquired in writing from Viktor Orbán about key details of the case. For example, how long has the Hungarian government known about the European Union’s objections to the government’s handling of the grants? When did Brussels turn off the spigot? Did the European Union complain about government corruption? MSZP also inquired about the situation from the director-general of the European Council.

Today the government, obviously feeling the pinch, reacted to Harangozó’s statements. They countered that Hungary “has lost billions of euros due only to the incompetence of the Gyurcsány-Bajnai governments.” According to the government press release, during Gordon Bajnai’s tenure as the head of NFÜ “76% of the money for development that was spent was not in accordance with rules and regulations.” In any case, one of the first announcements of Lázár after the cabinet meeting yesterday was that the Orbán government will re-examine all projects, including those long since finished, beginning with 2007.

In brief, a new attack on Ferenc Gyurcsány and Gordon Bajnai is in the offing. If they follow their usual pattern they will darkly hint at all sorts of irregularities, fraud, and corruption. Then the police and the prosecutors will madly search for evidence while Magyar Nemzet reports on lurid details of the investigation that they gleaned from reliable sources. The whole circus will last at least until the elections. A tried and true campaign strategy.

The Orbán family’s enrichment with a little government help

Today I read an editorial in Magyar Nemzet on the fate of Silvio Berlusconi.  It seems that Anna Szabó, the author, who is a great admirer of Viktor Orbán, forgot that the Hungarian prime minister is a friend of Berlusconi. Because she found Berlusconi’s sentence far too lenient and expressed her utter astonishment that the Italians, although they have long known about Berlusconi’s “dirty affairs,” only now were ready to punish him for his sins.

In the final paragraph of the editorial Szabó bemoans the fact that in Hungary many corruption cases have gone unpunished, pointing the finger at Ferenc Gyurcsány and Gordon Bajnai. She lists among their sins the fate of the Posta Bank, MSZMP’s former retreat in Balatonőszöd, the Budapest Airport, and “stealing parts of Lake Velence’s shores.” In case you draw a blank, it was at Lake Velence that the Israeli businessman Joav Blum and his American partners who included  Ronald S. Lauder hoped to build a luxury hotel and a casino.

If I were Anna Szabó I wouldn’t mention these cases right now because practically all the accusations she hurls at the former prime ministers are without foundation. On the other hand, in recent days Hungarian newspapers have been full of descriptions of certain business activities of members of the Orbán family that are suspect.

I am not an overly suspicious person. In fact, I can even be called naive when it comes to questionable business deals. On the one hand, I’m inept in business matters and, on the other, since I’m not in the habit of cheating or stealing from others I find it very difficult to imagine people whose daily activities include such shady activities.

I have encountered people over the last twenty years who have floated fanciful stories about Fidesz and the “boys.” I know a woman who to this day is convinced that a group of MSZMP leaders allowed the formation of Bibó College, the dormitory where Fidesz was born, in order to develop “trustworthy cadres” who would eventually be entrusted with salvaging the Kádár regime’s essential features. Well, I think this is madness.

On the other hand, I take much more seriously the persistent allegations that seem to be well founded about the money Fidesz got from the sale of the building the party received from the Hungarian state in 1992. Here only one thing is not entirely clear. How much of the 750,000 million (in 1992!!!) remained in the party coffers and how much disappeared into private pockets. We know only that László Kövér didn’t allow top party officials to take notes while Viktor Orbán tried to explain the distribution of the money among various Fidesz companies. But Klára Ungár, who was by that time highly suspicious of the activities of Lajos Simicska, László Kövér, and Viktor Orbán, tried to keep the figures in her head. She found that at least 170 million was missing from the total. We also don’t know what happened to the rest of the money that was invested in several companies that were eventually liquidated under very suspicious circumstances.

It is also another fairly well established fact that some of the money went to help Viktor Orbán’s father, Győző, purchase the state quarry he ran before the change of regime. It was this quarry in the village of Gánt that established the Orbán family’s fortune. Since then Győző Orbán has been able to add various enterprises to his original business and has become very rich indeed. According to Krisztina Ferenczi’s calculation, two of the businesses in which the older Orbán has a majority share (the quarry in Gánt and a company that produces peat) netted 2,192 billion forints last year. In addition to these two companies, there is another one that is owned exclusively by Viktor Orbán’s father and his two young brothers. That company was also profitable, bringing in an additional 400 million.

The Orbán Quarry in Gánt

The Orbán Quarry in Gánt

Győző Orbán also owns land in Felcsút adjacent to a parcel of land owned by Viktor Orbán. The VIP parking area of the Aranycsapat Stadium will be located on this piece of land. (Aranycsapat means Golden Team, the nickname of the Hungarian team that became world famous in the mid-1950s and on which Ferenc Puskás played before he left Hungary after the 1956 Hungarian revolution.)

The prime minister’s father also purchased part of the former estate of Archduke József of Habsburg. The summer palace of the Hungarian Habsburg family was destroyed during the war and the 7,000 acres that went with it was distributed among the local landless peasants. Only the manor house and 13 hectares were retained by the Hungarian state. Perhaps we shouldn’t be terribly surprised that both the manor house and the 13 acres ended up in Győző Orbán’s hands. As far as I know, the manor house is under renovation. Rumor has it that it is being converted into a luxury hotel.

And then there is the Orbán family’s controversial peat business. The first mention I found of the marshlands that are necessary for peat production was in the March 5 issue of HVG. Bernadette Szél (LMP) discovered that Fidesz was preparing a bill that would lift the protection of marshlands and allow the mining of peat.  By July it became public knowledge that the prime minister’s father and two brothers already owned about 200 acres of marshland in the County of Zala. Győző Orbán purchased the land in 1999 during the premiership of his son. The head of the Mining Authority was for a while a silent partner in this peat business. They and others purchased the land for practically nothing. In 2003 the area was declared to be protected, destined to be converted into a national park. All of the landowners were forced to sell their land to the state, with the exception of the Orbáns.

Bernadette Szél went to look at this land, which consists of several thousands of contiguous hectares of marshland. The Orbáns’ 200 acres that presumably were so different from all the others lie in the middle of this large area. It seems that the Orbán company will have a peat mining monopoly in these parts. At the moment the company, in addition to mining, is building a helicopter pad. Business is good. In 2012 there was half a billion forint profit.

And, as people say, “if we just knew the whole truth.” I think we would be astonished at the depth of corruption of the man who is currently the prime minister of Hungary.

Greed might be the undoing of Viktor Orbán and his regime

Today I’m going to look at two corruption cases that might have serious consequences for the Fidesz empire in Hungary. The first is the “seizure” of the profitable retail tobacco market and its redistribution among friends and families of Fidesz politicians. It seems that the government may have gone too far here; there are signs of internal party opposition. We know only about small fry at the moment, but that doesn’t mean that dissatisfaction isn’t present in the highest circles of the Fidesz leadership.

The other scandal is not new at all. For years Közgép, a company owned by Lajos Simicska, a childhood friend of Viktor Orbán, has won practically all government projects financed by European Union subsidies. But it came to light only now that Brussels suspended payments on two very important “operative programs,” one dealing with the environment and energy and the other with transportation.

First, the response of  two party faithfuls to the tobacco shop scandal. On April 26 HVG received a letter from a Fidesz city council member in which he said that in his town the Fidesz members of the council decided who would get the tobacco concessions. At that point the informer didn’t want to reveal his identity, but two days later he was ready to give an interview, name and all. It is a long interview from which I will quote the key sentences.

Ákos Hadházy is a veterinarian in Szekszárd, the county seat of Tolna. He considers himself to be a conservative, but “this tobacconist shop-affair broke something in [him].” The Fidesz members of the council looked at all the applicants and suggested who should get favorable treatment.” Mostly friends and relatives. Hadházy struggled with his conscience. He felt that the way the selection was made was wrong, but at the same time he realized that “many would consider revealing his doubts a betrayal” of his party. Finally he decided that although “perhaps in the short run the party might lose a few percentage points, in the long run these revelations might actually be good for this party.”

In his opinion “the 2010 landslide victory was a fantastic opportunity, but at the same time such a large victory is harmful for a party.” A well functioning opposition is “a basic necessity…. If there is no opposition, sooner or later [the party leadership] will be unable to control [its] own decisions. There will be no reaction when [they] make wrong decisions.” Unfortunately this is what happened in Fidesz’s case.

Hadházy even went further and announced that the problem is that there is no opposition within the party either. The members of parliament are no more than voting machines because after 2014 there will be fewer seats available and naturally everybody would like to keep his job. “One can’t expect negative opinions from them…. If there are no debates within a party … then there are only two possibilities: either [the party] does something fantastically well or something is not right.” Most often decisions are unanimous. Ordinary party members are not consulted. Maybe once a year there is a meeting of the local party members, but that’s all.

corruption2Fidesz is indeed a very disciplined party, but he thinks they “went too far.” Such discipline was fine when Fidesz was in opposition. Then “the para-military structure was acceptable, but when in power the party should have moved in a more democratic direction.” Hadházy believes–I think wrongly–that Fidesz has fantastic “intellectual capital” but doesn’t try to use this capacity and doesn’t listen to them. “This in the long run is a suicidal strategy because the members of the intelligentsia  are the ones who can influence public opinion.”

As far as he is concerned there are two possibilities: the party will not take kindly to his going public and then his political career will be over. If, on the other hand, he is spared he “will be very glad to know that Fidesz is full of real democrats, even if this is not always evident given how decisions are made now.”

The other rebel is András Stumpf of the pro-government Heti Válasz.  Don’t think that András Stumpf is a “soft” Fidesz supporter. He is no Bálint Ablonczy, another reporter for the same weekly, who is a moderate right-winger. Stumpf is pretty hard-core. He aggressively defends the government at every opportunity–for instance, when he appears on ATV’s Start. Even in this critical article he expresses his belief that Sándor Laborc of the Office of National Security hired Tamás Portik to spy on the opposition, meaning Fidesz. Yet it seems that the tobacconist concessions and the amendment to the Freedom of Information Act were too much for him. Not even he believes that the quickly amended piece of legislation has nothing to do with the concessions and the government’s attempt to hide the truth from the public. In Stumpf’s opinion, the amendment is most likely unconstitutional and what the government is doing is “frightening.” If they have nothing to hide, make the documents public.

Moving on to the withheld EU payments, a new internet website, 444.hu, published an article entitled “Secret war between Budapest and Brussels” on April 30. According to the article, last summer the European Union suspended payment for cohesion fund projects. The apparent reason was that Brussels discovered that there is discrimination against foreign engineers. Only engineers who belong to the Hungarian Society of Engineers can be hired.

With due respect to the journalist of 444.hu, I can’t believe that this is the real reason for the suspension of billions of euros. Instead, I recall that about a year ago Ferenc Gyurcsány’s Demokratikus Koalíció turned to the European Anti-Fraud Office (OLAF) to call attention to the fact that Közgép, Simicska’s company, had received an incredible number of government contracts, all financed by the European Union. The suspicion is that Közgép through Lajos Simicska is actually owned by Fidesz. Or at least a substantial percentage of  its profits ends up in party coffers. I remember that sometime during the summer of 2012 OLAF’s investigators took possession of Közgép’s computers. I suspect that the suspension of funds has more to do with Fidesz government corruption than with discrimination against foreign engineers.

By now opposition politicians are openly accusing Közgép of being a front for Fidesz. Gábor Scheiring (PM) said that “the essence of Lajos Simicska’s firm … is financing Fidesz from its profits.” Gyurcsány considers “Lajos Simicska  the most notorious and most influential person in Fidesz and the business establishment built around it.” László Varju, the party director of DK, in one of his press conferences talked about the need to investigate the possible “role of [Közgép] in the financing of the government party.” If it could be proven that Közgép and Simicska are just a front for Fidesz, Orbán might find himself and his party a lot poorer.