UD Zrt.

The plight of a Hungarian whistleblower

It was a month ago that András Horváth, a former employee of NAV (Nemzeti Adó- és Vámhivatal/National Office of Taxation and Customs), turned to the prosecutor’s office to report a breach of fiduciary duties committed by the top management of this 23,000-employee office. He claimed that large-scale cheating goes on with fictitious VAT reimbursement payments, especially in the case of large commodity distributors and food chains, both multinational and domestic. The figures Horváth was talking about are staggering. He estimates the loss of revenue at 1.7 trillion forints a year.

Since then András Horváth has been in the news constantly. There has been hardly a day that he wasn’t in the electronic media, and thousands of articles have appeared about what is called the NAV scandal. Some people predicted that this affair might bring down the Orbán government, which I very much doubt. These guys are far too foxy to trip over such a “trifling” item as a 1.7 trillion forint fraud.

On November 19 I reported about the affair in as much detail as was available at the time. Predictably, since then politics entered the fray. The first party that offered assistance to Horváth was András Schiffer’s LMP. Schiffer is a lawyer who made sure that Horváth had good legal counsel. At the same time LMP began an effort to get the 78 signatures necessary to set up a parliamentary committee to investigate Horváth’s allegations. MSZP and DK were reluctant to join forces with Jobbik in calling for the committee, which I think was a mistake. I understand that the overwhelming majority of DK’s membership shared my opinion. Well, by the end they managed to get the 78 signatures without current Jobbik members, but Fidesz boycotted a hearing that was supposed to question Horváth on the details. Later Fidesz thwarted the opposition’s effort to set up the committee, claiming  that the existence of such a committee is illegal when a criminal investigation is already underway. I don’t want to delve into the legal complexities of the issue, but legal experts claim that Fidesz as usual was not exactly on the up and up on this issue. Moreover, as it turned out, Horváth was never informed of the investigation launched against him, and his report to the prosecutor’s office on the wrongdoings of the management of NAV wasn’t followed up with any investigation.

Meanwhile direct evidence was mounting that underscored Horváth’s claims. Economic Minister Mihály Varga, under whose ministry NAV operates, admitted in response to a question posed to him by a couple of LMP MPs that NAV investigated only the distributors, not the food chains themselves. This is exactly what Horváth was talking about.

For two years Horváth tried to call attention to the wholesale tax fraud at NAV. He approached several top Fidesz politicians. For example, Antal Rogán and János Lázár. I don’t know why he didn’t go to the Ministry of National Economy where Gábor Orbán, no relation to Viktor, is the undersecretary in charge of taxes and finance in general. Perhaps he had his reasons, although yesterday he said that it wasn’t the government that put pressure on NAV but influential businessmen, oligarchs as he called them.

Yesterday was no ordinary day for the poor Hungarian whistleblower. Out of the blue, at 7:30 a.m., four detectives arrived at Horváth’s apartment and took his famous green dossier, which he carried everywhere he went, claiming that all the information he has is in that folder. For good measure they also took the hard drive from his computer as well as his notebook with the names and telephone numbers of journalists, politicians, and lawyers with whom he has been in contact lately. The sudden and apparently illegal raid reminded people of the surprise visits from the state security authorities during the Rákosi period. They usually arrived at the crack of dawn to arrest people. Everybody agrees that the aim of yesterday’s raid was intimidation. Indeed, Horváth seemed to be genuinely shaken last night when he talked to Olga Kálmán of ATV, although he promised to fight on.

Source: cherispeak.wordpress.com

Source: cherispeak.wordpress.com

It was during during his encounter with the detectives that Horváth learned that a charge had been filed against him: breach of confidentiality. Considering that up to this point Horváth didn’t divulge any details about those companies which were, according to him, purposefully not investigated, it is really questionable whether this charge can be maintained. Later it also became clear that NAV already on December 11 filed a police report against Horváth with the Emergency Police’s National Detective Section, not only in connection with the breach of confidentiality but also with the abrogation of fiduciary duties. They only neglected to inform András Horváth of the charges against him.

A right-wing blog gleefully announced that Horváth might receive a three-year jail term. On the other hand, TASZ, the Hungarian equivalent  of the American Civil Liberties Union, alongside other groups active in the defense of the law like Transparency International, considers the police search most likely illegal. Whistleblowers have appropriate protection in Hungary. According to a 2009 law (Law  CLXIII, Act 21 § (5) “filing for breach of confidentiality cannot be applied unless it was done in bad faith .” That is, if it turns out that Horváth made malicious and unfounded charges. But first his charges must be investigated.

Others rightly compared the case to the UD Zrt. scandal in which the victim, Ibolya Dávid, president of Magyar Demokrata Fórum, a since defunct right-of-center party, ended up being the accused. UD Zrt., most likely at the behest of Fidesz, spied on her and on her party. That was in 2008. By the summer of 2009 she was a defendant, and as of today she still hasn’t been able to clear her name in court. Only recently, after she and her co-defendant Károly Herényi were acquitted, a judge ordered that the whole procedure be started again from the very beginning. Viktor Orbán doesn’t forget easily. He blamed her for his defeat in 2006 when she refused to go along with a joint Fidesz-MDF ticket. But Dávid knew what she was doing. Her experience in a Fidesz-MDF-Smallholders coalition when she was minister of justice taught her a thing or two about how Orbán deals with those whom he needs to acquire power and how he subsequently ruins them.

Viktor Orbán naturally has been fairly quiet on the subject of the possible tax fraud at NAV.  He spent the last two days in Brussels. During the press conference after the meetings he was asked about the scandal. He made no mention of the search and seizure at Horváth’s apartment yesterday morning. Instead he explained why “the state machinery hasn’t moved yet.” He would like “to have answers to three simple questions: who committed what and when.” Can you imagine what would have happened to Horváth if he had obliged and answered these questions? Surely, given how the Hungarian system works, by now he would be in pre-trial detention.

Former Gyurcsány officials convicted of espionage

According to one of the definitions, a “show trial” is “a public trial of a political offender conducted chiefly for propagandistic purposes.” In Hungarian there is a similar word for a show trial, “kirakatper” (kirakat = shop window), but more often than not it is called “koncepciós per,” which in my opinion better describes the nature of such trials. The accusers strive during the investigation to achieve a certain end; they have a concept that guides their procedure and they force the facts to support the charge.

The show trial I’m going to talk about today isn’t a show trial in the literal sense of the word for the simple reason that the court proceedings were conducted in secret. We will not know any details for a very long time because the material gathered against the accused and the transcript of the trial will not be made public until 2041.  Moreover, a gag order was imposed on the accused. If they reveal anything whatsoever related to the case they will be charged with divulging “state secrets,” which may mean another trial and another sentence. It is a true Catch-22 situation.

In the summer of 2011 four people were accused of spying. These so-called spies were all in one way or the other involved with counterintelligence. So, the charge read, men who were supposed to defend the country against spies were actually spying themselves and passing on information to a foreign power. Four people were accused: Lajos Galambos, head of the National Security Office between 2004 and 2007; Sándor Laborc, his successor between 2007 and 2009; György Szilvásy, minister without portfolio in charge of national security; and someone who is known only as László P.

A right-wing Internet news site, Alfahír, was ecstatic at the possibility that “the shammeses of Gyurcsány might be going to jail after all.” In case you don’t know, a shammes is a sexton in the synagogue, but in Hungarian the word also signifies a lowly subordinate; it has a derogatory tinge. Magyar Hírlap, even before the verdict became known, imposed their own verdict: “Spies in the Debrecen Courthouse,” heralded the paper this morning.

Indeed, the case was sent to the Military Court in Debrecen although under normal circumstances it should have been tried in Budapest. Surely, Tünde Handó must have had good reason to send the case to Debrecen. And indeed, she should be satisfied with the results. Lajos Galambos and György Szilvásy each received jail sentences of two years and ten months, Sándor Laborc a suspended sentence of one year, and to everybody’s surprise László P. was found not guilty.

László P. was the head of a computer security firm that was hired to make the National Security Office’s computer system safe. There were too many leaks and Laborc suspected that the leaked information was ending up in the hands of the Fidesz leadership. It was Szilvásy who recommended László P. He didn’t know him personally but  heard that he was good at what he did.

espionageThose Fidesz apparatchiks who were entrusted with finding some kind of an excuse for getting even with Galambos-Laborc-Szilvásy, who were trying to put an end to Fidesz spying, must have been delighted when they discovered that László P.’s mother was a Russian whom his father married when he was a university student in the Soviet Union. Moreover, one of László P.’s  associates was “also Russian speaking,” as Magyar Nemzet discovered. Thus the plot, the concept, was hatched upon which a case could be built. Spying for Russia via László P’s firm. Yet László P. was found not guilty. I leave it to my readers’ imagination to hypothesize what might be behind this very surprising outcome.

So, let’s see what the charges were. Galambos was charged with and convicted of espionage, Szilvásy with abetment, and Laborc with complicity. Since everything surrounding the trial is secret, it is impossible to figure out what these people were really accused of.

Spying is certainly a very serious offense. According to ¶261§(1) of the Hungarian Criminal Code, someone who gathers intelligence for a foreign power will receive a sentence of from two to eight years. ¶261§(2) states that if the information passed to a foreign power happens to be top secret then the sentence will be harsher, between five and fifteen years. In this case Galambos couldn’t have revealed top secret information to anyone. As far as Szilvásy is concerned, the charge most likely was that he ordered Galambos to commit a crime. As for Laborc, we have not a clue what the charge of complicity actually means or in what way he was supposed to be complicit in this alleged affair.

The case has a long history. In the last two years hundreds of articles have been written and all sorts of conspiracy theories hatched. Many of them turned out to be sheer speculation. Unfortunately we are still speculating due to the secrecy that surrounds the case. I suspect that the decision was made early in the game to make the trial secret because the charges were bogus. I remember that sometime in late 2011 or early 2012 the parliamentary committee on national security matters convened to hear what the prosecutors had to say about this spy case. At that point Ágnes Vadai, still a member of MSZP, was a member of the committee. Of course, she couldn’t say much about it, but she indicated that the whole affair was unbelievable. Laughable, I think she called it.

One thing is sure. The National Security Office discovered that Fidesz had hired a company, UD Zrt., headed by former national security officers, to spy on the National Security Office. The telephone conversations that the National Security Office recorded proved beyond a reasonable doubt that Fidesz was setting up a kind of shadow national security office of its own. For a little while it looked as if the people involved on Fidesz’s side, László Kövér and Ervin Demeter, were in serious trouble. But if you have the prosecutor’s office in your pocket, a lot of problems can be solved.

Moreover, Viktor Orbán doesn’t forget. Once in power he decided to jail those people who tried to expose Fidesz’s illegal dirty tricks. I’m sure that originally they were hoping to implicate Ferenc Gyurcsány, but that proved to be impossible. His old friend György Szilvásy could, however, be dragged in because he recommended  László P.’s firm to the National Security Office. One could ask: why didn’t the Office itself take care of the problem? Because the top brass in the agency didn’t trust their subordinates. Some of them, they believed, were in the pay of Fidesz.

Perhaps a few years ago one could say that such speculations about Fidesz couldn’t possibly be true, but by now we’ve seen enough of the party’s mafia-like ways to understand that their earlier spying on the National Security Office was true to form. And what do you do with your political enemies? Just ask Putin.