Országimázs Központ

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