The Fidesz robber barons. Part III: The Orbán family’s enrichment 1998-2002

Today I will return to József Debreczeni’s book on “The Fidesz robber barons.” This time the topic will be the enrichment of the Orbán family, which included Viktor Orbán’s father, Győző, between 1998 and 2002–that is, while he was prime minister.

Debreczeni, who for years  taught high school history before he became a politician and subsequently a writer on politics, notes that although political corruption has had a long history in Hungary, the highest political dignitaries did not dirty their hands with money grubbing. Not so Viktor Orbán who, as investigative journalists discovered, systematically exploited his position for financial gain.

Just to put things in perspective, here are a couple of figures. In 1998 Orbán and his wife had 5.5 hectares of agricultural land. Four years later they had 11.5 times more. In 1994 the couple purchased an apartment for 563,000 forints in downtown Budapest. In 2002 they purchased a villa in the most elegant section of Buda for 75 million forints, which they enlarged and renovated to the tune of tens of millions.

Viktor Orbán’s father Győző–which by the way is the Hungarian equivalent of Viktor–had two smallish quarries worth 98 million forints. Four years later, he was worth 666 million forints.

The Orbáns were involved in two separate business ventures. Neither is pretty.

Their first business venture took them to Tokaj. Dezső Kékessy, a wealthy Hungarian businessman from Switzerland who left Hungary after the 1956 revolution but returned to Hungary after 1990, was looking for business opportunities. Tokaj seemed like a good prospect. During the socialist period Tokaj, which had had a very good name before the second world war, lost its luster due to the general deterioration of viticulture in Hungary. The stock was old, so vineyards could be had for relatively little money. Kékessy and Orbán met and became friends and eventually business partners. Well, that’s not quite precise. On paper Kékessy’s business partner was Orbán’s wife, Anikó Lévai. I might add that Orbán eventually named Kékessy ambassador to France.

The Orbáns’ share in the company that Kékessy formed was relatively small, but the Orbáns naturally became key business partners due to Orbán’s position. First, he made sure that the grapes the company produced found a market. There was an ailing state company in Tokaj that was still the major buyer of grapes in the region. Since the head of the state bottling company was appointed by Orbán, they had a ready market for their grapes. In fact, in 2000 the state company bought grapes only from the Orbán-Kékessy vineyard. Orbán also made sure that the state bottling company had money to buy their grapes.  In 2000, the government financially strengthened the ailing company with the injection of 1.5 billion forints. In 2001 another 2.5 billion was invested in the company. And it kept buying the prime minister’s grapes, even though there was a glut in the wine market.

Tokaj wine region / Wikipedia.org

The Fidesz government also offered what amounted to a “friends and family” package. István Stumpf, who headed the prime minister’s office in those days, had a large, extended family in the region, some of whom owned vineyards. In 1998 the Stumpf family managed to sell only 5 million forints worth of grapes, but after cousin István became an important man in the government they did exponentially better. In 2000 their sales were 17.7 million and in 2001 30.6 million. Two Stumpfs were actually employees of the bottling company, and it was their cousin in Budapest who approved pumping billions into the state company.

But that wasn’t all. The Orbán-Kékessy company asked for state subsidies for the improvement of their vineyards. The owners got together to discuss business matters, often in Viktor Orbán’s apartment. It was during one of these meetings that Orbán warned his business partners to be cautious about the subsidies: “we shouldn’t be the ones who get the most.” Obviously he was worried about someone discovering his interest in the company. So they didn’t get the most, only the second most. In 2001 570 people received subsidies for vineyard improvements. Only two got over 40 million forints. The first received 44,636 forints, and the second, the Orbán-Kékessy concern, 41,475. In addition, on two other occasions their company received an additional 64.5 million forints in subsidies.

The other setting for the growing Orbán empire was Felcsút, the village where Orbán spent his early childhood. Of course, nowadays we hear mostly about the Puskás Football Academy and the huge stadium for 3,500 in a village of 1,800 inhabitants. But twelve years ago the expansion of Orbán’s holdings was still in its infancy. Here too, the launch of the Orbán empire was shady. In 2001 the Orbáns purchased 54 hectares of agricultural land for half the price of what land sold for in those days in the County of Fehér. Anikó Lévai purchased the land from Sándor Bognár, the head of a large state farm in the vicinity (an Orbán appointee). Two weeks after Bognár sold the land to the Orbáns, the state farm without competitive bidding was privatized. And who became the majority owner of the farm? Sándor Bognár.

But that is not the end of the story. Felcsút and five villages around it received a 2.7 billion forint state subsidy for water control. Apparently flooding is not a problem in the area. In fact, these villages receive less than the average amount of precipitation. The ministry in charge put the Felcsút application in thirtieth place on their list of ranked applications. Sándor Pintér, minister of the interior, stopped the discussion and made the documentation of the parliamentary commission a state secret. Against the recommendations of the ministry he placed the Felcsút project at the head of the list.

After Felcsút received this subsidy, the puzzle of the low price of the land that Sándor Bognár sold to the Orbáns was solved. It turned out that Bognár had purchased the land from two sisters who had additional acreage, which now the local government purchased on the government subsidy for the purpose of building rain collectors. The sisters received 10 million forints for about three hectares, seven times the average price of land in and around Felcsút. This is how the two sisters got compensated for selling their land for half price to the Orbáns and the Hungarian taxpayers footed the bill.

As a result of the large government investments in and around Felcsút, real estate prices have skyrocketed. The land the Orbáns bought for 5 million is today worth 34.4 million. It is also possible that the status of this land might be changed from “agricultural” to “land for development.” In that case it could be worth 400 million forints.

And finally, a few words about Győző Orbán’s business ventures. Dunaferr, a steel plant, was in those days still a state company. After Orbán took office the management of the company was changed. Soon thereafter Dunaferr signed a five-year contract with Győző Orbán’s quarry to supply gravel and concrete for Dunaferr. He was the low bidder but later it turned out that the contract didn’t include transportation costs that were separately billed. These costs had to be considerable because Orbán’s quarry was a great deal farther from Dunaferr than the company that had supplied the materials previously.

It turned out that the elder Orbán also supplied material for road construction as a subcontractor. His son later denied his father’s business connection with Vegyészgép, which received the construction job without competitive bidding. But Viktor Orbán didn’t tell the truth. Győző Orbán, in anticipation of the large order from Vegyépszer, managed to get the rights to quarry rock and gravel. Once his son warned him about the dangers of getting state orders, he passed these rights on to one of his men, who established a new company called Femol Kft.

As the saying goes, the apple doesn’t fall far from the tree.

Viktor Orbán and his fellow oligarchs

The Orbán government has given up the idea of solving the forex loan problem quickly and in one fell swoop. For a couple of weeks it looked as if Viktor Orbán was thinking of a radical solution that would have meant making the banks pay the difference between the exchange rate at the time of the issuance of the loan and the current exchange rate. This could have been a tremendous burden. Just to give you an an idea, if someone took out a loan in Swiss francs in 2008 he paid 143.83 forints for one Swiss franc. Today the exchange rate is 241.51 forints to one Swiss franc.

The original idea was borrowed from the Croatian government’s decision a few weeks ago. There is, however, a huge difference in the number of people with forex mortgages in Croatia and Hungary.  Apparently the “nuclear option” was abandoned because the government realized that the entire Hungarian banking sector could go under as a result.

In no small measure Sándor Csányi was responsible for this change of heart or at least for the government’s realization of the possibly grave consequences of such a move. After all, he sold a large number of his OTP shares which by itself prompted some panicky follow-through on the Budapest stock exchange. By now most observers interpret his move as a warning to Viktor Orbán. This is what can happen, and on a much larger scale, if the government goes through with its plan.

Those who don’t quite believe this scenario point out that no one knows how many OTP shares Csányi actually owns. A German source claims that what Csányi sold amounted to no more than 1% of his holdings. So, the argument goes, this shouldn’t have made a great impression on Viktor Orbán, who surely knows the details of Csányi’s finances.

But Ferenc Gyurcsány, who was interviewed on the subject, dismissed this argument. Csányi’s sale of this allegedly tiny portion of his holdings was not itself a threat. But implicit in this sale was the threat that if the government goes through with its plans he may dump the other 99%, the consequences of which might be immeasurable.

Gyurcsány knows Csányi only too well. When he was prime minister he had quite a bit to do with him because, after all, “he is a big player … with a tremendous amount of power.” In fact Gyurcsány agrees with János Lázár that Csányi and the other oligarchs have far too much power, which a prime minister must keep in check.  He himself normally sent them away and told them that they cannot expect special treatment from him. He admitted that as a result his relationship with Csányi and the others was not the best. He didn’t sit with them with in the VIP section at soccer games spitting out sunflower seeds, a reference to Viktor Orbán’s not exactly elegant habit.

As for János Lázár’s reference to Csányi as an octopus, apparently Orbán suggested that his chief of staff sit down for coffee with Csányi to smooth things over but Lázár ignored the suggestion. When Orbán inquired about the meeting, Lázár told the prime  minister that he has no intention of ever apologizing to Csányi. Orbán didn’t press the issue. I guess by then he decided that Csányi didn’t really deserve an apology, especially since he learned that Gordon Bajnai’s foundation had received a small grant from him. I’m sure that this “sin” will not be forgotten by the vengeful Viktor Orbán.

The relationship of Csányi, and the other oligarchs as well, with Orbán is complicated. For one thing, Csányi doesn’t seem to like him as a person. When Orbán was in opposition, Csányi often talked about him disparagingly in Gyurcsány’s presence. Admittedly, it is in the interest of these oligarchs to seek close relations with the powers that be. And yet if they feel that the government is working against their interests and that no amount of pressure will cause it to change its ways, they will not hesitate to abandon the prime minister and his party. Orbán cannot trust Csányi, Demján, and some of the others because they are not his men the way Lajos Simicska is. The behavior of Sándor Demján, who is up in arms about the nationalization of the credit unions, and Sándor Csányi seems to indicate that these oligarchs are fed up with the unpredictable, anti-business policies of the Orbán government.

There is another aspect of the relationship between the oligarchs and Viktor Orbán that has received very little attention. One mustn’t forget, Gyurcsány said, that the Orbán family’s wealth puts him and his family among the top five richest families in Hungary. Orbán has cleverly hid his and his family’s wealth, but he cannot hide behind front men and legal tricks forever. One day he will be caught. He became an MP practically straight out of college and today he is a billionaire. He is using his position to enrich himself and his family. That is not only immoral, it is a crime.

This is not how you become a billionaire

This interview took place with Olga Kálmán on ATV, and the reporter was visibly shaken by the news that the extended Orbán family may have become one of the five richest families in the country. Therefore she decided to follow up on the story. The next day she invited Mátyás Eörsi, a former SZDSZ MP and an old acquaintance of Viktor Orbán. Eörsi was also one of the members of a parliamentary committee that was supposed to find out how the former prime minister managed to acquire so many assets in a few years, allegedly from his modest salary. Unfortunately, creating these investigative committees in Hungary is a waste of time because they have practically no enforcement authority. They can’t even require witnesses to appear. This particular committee was just as useless as was, for example, the investigative committee on the sudden and unexpected decision of the first Orbán government to purchase Gripen fighter planes. Although the family’s enrichment was highly suspicious, the committee didn’t manage to pin anything on him. Olga Kálmán also took a good look at Orbán’s financial statements, the kind every MP must fill out yearly. These statements indicate that, especially given his five children, he could have led at best a modest middle-class life.

Like Gyurcsány, Mátyás Eörsi is convinced that the Orbán family is among the richest in Hungary. In fact, he is pretty certain that way back in 1992 when Fidesz sold the half of a very valuable building it received from the Antall government, the whole amount landed in the Orbán family’s coffers, laundered through about twenty phony companies. These were the companies that were later sold to two phantom buyers for one forint each.

Prior to becoming a member of parliament in 1990 Eörsi had a fairly lucrative legal practice. He didn’t start with nothing as Orbán did. Moreover, Eörsi’s parliamentary salary was a great deal higher than average. He claims based on his own experience that there is no way that Orbán could have saved enough money to buy the house he did after he lost the election.

Eörsi as a lawyer is especially interested in the “legal techniques” by which Orbán manages to hide his immense wealth with the assistance of his front men. As long as he is prime minister he has no problem controlling whatever is being handled by others. But what techniques did he use to guarantee access to his wealth once he is out of office?

One reason for Orbán’s many political successes is that his followers believe that he is a man of modest means who takes their side against the bankers, multinationals, and oligarchs. But what will happen if his people find out that their beloved prime minister is in fact one of those hated oligarchs?