×
↓ Freedom Centers

Hungary’s Sick Constitutional Order: The Time of the Political Gangsters

By Dr. Miklos K. RadvanyiFrontiers of Freedom

International Anti-Corruption Day is observed annually on December 9, to fight and raise awareness of corruption across the globe. In Hungary, the one party rule between 1948 and 1990, established wholesale corruption on the political, social, economic, cultural, and ethical levels. The result of such a total corruption was that the entire country irretrievably fell into the deep abyss of an all encompassing immorality. In politics, it manifested itself in mental schizophrenia that, in turn, led to “doubletalk” and to “doublethink.” When liberation came in 1990, and the hope for a peaceful democratic revolution seemed to be real, very few realized that the overwhelming majority of Hungarians, even members of the young generation, were in their mentality already “Kadar’s children.”

Political power is like honey. It attracts the addicted to the sweet taste of control over the people. The young people who coalesced around Istvan Stumpf, the son in law of the then Interior Minister Istvan Horvath, in the late 1980s were no exception. Today, after having exercised absolute power for almost eight years, they have become exactly as dictatorial as their communist predecessors were. History teaches that when corruption becomes a way of life, both politics and the legal system suffer irreparable damage. Drunk with its unlimited power, FIDESZ passed a new constitution on April 18, 2011. With this unilateral act, the restoration of the one party state has commenced. To add insult to injury, the main provisions of this constitution were tightened in March 2013, when several new amendments have cemented the death of democracy, the rule of law, and the ability of the opposition to ever win an election by respecting the hypocritical political processes of the ruling party.

To understand how the political and legal tools of democracy have been used in Hungary to re-establish an old fashioned dictatorship based on existential corruption, one has to first square the vicious circle of unlimited power, coupled with the absolute absence of societal and ethical controls. The sudden and largely unexpected collapse of the Soviet Union found Hungary and all the other formerly socialist/communist countries of Central and Eastern Europe unprepared for democracy. In Hungary, for the motley crowd of self-appointed politicians, freedom meant an opportunity to become famous and rich within a relatively short period of time. Fame was defined as being elected to politically and economically influential posts, and to be known to the general public through the media. Richness amounted to existential prosperity as displayed in the numerous American films that flooded the movie theaters of the region. While during the one party system prior to 1990, Hungarian politicians were mainly motivated by political interests of various pressure groups and powerful individuals, the country’s independence has opened the floodgates of legally legitimized unscrupulous personal enrichment to the detriment of the public interest.

Contrary to broadly held perceptions in the West and even in Hungary, these newly emerging political classes have not built “mafia” states. What actually transpired under the watchful eyes of American and European politicians was the legitimization of wealth-based dictatorships through seemingly unassailable democratic elections. Once in power, these so-called politicians have embarked on securing by all means available to them their own and their descendants existential survival. As long as these processes were restricted to the individual states, the harm to the international community was minimal. However, with the expansion of NATO and the European Union, the larger common interests of these organizations have faced broader challenges and more serious threats.

Clearly, the current Hungarian government, has done its utmost to undermine the creation of common European policies for the sole purpose of solidifying its iron grip over all aspects of the country’s political, economic, and cultural life.

In light of such instinctive existential corruption, recent developments in Hungary have proven that in a nation’s political life there is no more dangerous menace than politicians who are corrupt and vile. In Viktor Orban’s world, the end, namely to enrich himself and all members of his family, justifies the means, namely the establishment of a police state and the impoverishment of the country’s citizenry. The list of glaring corruption cases has been so numerous that an entire library would not suffice to house their documents. However, the saga of the upgrading and the expansion of Hungary’s only nuclear power plant in Paks that involves the Russian government and its agency Rosatom, the irresponsible flirting with the People’s Republic of China through the creation of the so-called “resettlement bonds” (letelepedesi kotvenyek), and the most recent scandal surrounding the utilization of Microsoft’s software licences and the marketing of LED lamps deserve heightened attention, because the elaborate official disinformation campaign, the glaring arrogance of the Orban administration, and the potential security threats that they pose to Hungary, the European Union, NATO, and especially to the United States of America.

The Paks Nuclear Power Plant is the sole nuclear power station of Hungary. Commissioned on December 28, 1982, and located 62 miles to the south of Budapest, it supplies more than fifty percent of the country’s electricity. In its design, it is a Soviet/Russian pressurized water reactor. Its Soviet/Russian designation is VVER-440 Model V213. Each of its four operational reactors contains forty two tons of lighty enriched uranium dioxide fuel. Legally, the plant is wholly owned by the Hungarian government, more specifically by its wholesaler the Hungarian Electric Works and operated by its wholly owned subsidiary, the Paks Nuclear Power Plant Ltd. In 2000, a feasibility study, commissioned by the management of the plant, concluded that Paks could remain in operation for another twenty years beyond the original thirty year design lifetime. Accordingly, unit 1 was granted a licence extension to 2032, unit 2 to 2034, and unit 3 to 2036. The licence extension of unit 4 by the Hungarian National Atomic Energy Office is pending. As of today, five out of the nine Ganz power generators were refurbished by GE’s Power services.

On March 30, 2009, the Hungarian Parliament voted in principle to approve the preliminary works on the possible new units. Accordingly, the Hungarian Electric Works prepared an expansion plan of Paks with the price tag of two thousand billion Hungarian Forints. Unexpectedly, in June 2012, the FIDESZ government designated the Paks expansion as a “high priority project of the national economy.” Simultaneously, it established a committee, the Nuclear Power Governmental Committee, to work out the concrete steps toward the expansion. The committee is chaired by the Prime Minister. The two other members are Mihaly Varga, the Minister of National Economy, and by Zsuzsanna Nemeth, then Minister of National Development. Again unexpectedly, the latter signed a non compete, unilateral agreement on January 14, 2014, with the chairman of the Russian state company Rosatom, Sergey Kiriyenko. This was done in spite of the government’s repeated assurances that an international tender will be issued for the expansion and also that a referendum will be held about the desirability of the expansion. After much political and professional haggling, the European Commission blessed the agreement on March 6, 2017. Following this approval, Russian President Vladimir Putin personally announced that his country will finance in credit hundred percent of the expansion. In May 2017, Janos Suli, the former CEO of the Paks nuclear power plant was appointed minister without portfolio to oversee the planning, construction, and commissioning of the two new units to be built after 2018. The projected costs of the expansion are officially fixed at twelve and a half billion Euros. The deadline for the completion of the construction of the two new units is ten years. The full text of the agreement and most of its accompanying documents are not available to the public, because they have been classified top secret by the Hungarian government.

Under these circumstances, Hungarians cannot be blamed to be extremely cynical about the real intent of the Prime Minister and his colleagues concerning the Paks project. Fuel to the speculations has been provided recently by Imre Marton, the former CEO of the Hungarian Electric Works, who questioned the lack of transparency in the decision making process, the haste with which the agreement was signed, the cost estimates, the safety of the plant in general and the reliability of Rosatom’s brand new and untested VVER-1200 reactors, and the profitability of the entire project. His warnings have included the possibility of an earthquake, the fluctuating water levels of the Danube, the almost certain cost overrun, the unrealistic projections concerning the future price of electricity that Hungary hopes to sell it for, in order to offset the high costs of the expansion, the optimistic feasibility studies about future market expectations, and the irresponsibility of the government to mortgage Hungary’s political and economic future to Russia.

Another prominent critic of the Rosatom deal has been Benedek Javor, a Hungarian member of the European Parliament. Having been opposed by the Hungarian government, the Russian government, and the European Union, Mr. Javor has done a yeoman’s job in shedding light on the possible political and financial corruption at the core of the the Paks nuclear plant expansion. His revelations that have been disseminated widely almost on a daily basis in the non-governmental independent media have only raised suspicions concerning the ethical purity of the Paks expansion deal. Dated 2014, his complaint claimed that the Paks expansion project was unlawfully awarded to Rosatom without competition. While the Hungarian government argued that there was no alternative to Rosatom, because the Russian government alone was willing to finance the entire project, the European Union remained sceptical and commenced infringement procedures against Hungary.

This infringement procedure was suddenly dropped when the Hungarian government invoked “technical exclusivity”, as the main reason for its unilateral action. Here the Paks saga is becoming more complicated. Enter the muddled waters of Paks Klaus Mangold, a German businessman, the honorary Russian consul in Germany, also known as “Mr. Russia of the German economy.” The latter description makes it abundantly clear that Mr. Mangold is very close to Vladimir Putin. Nina Katzemich of LobbyControl, a German NGO, stated: “If you want to do business in Russia and Eastern Europe, you cannot, practically speaking, do it without him.” On May 19, 2016, Klaus Mangold arrived in Budapest to attend a conference entitled “The Car of the Future.” He was accompanied by Gunther Oettinger, then Commissioner for Digital Economy. Yet, when the Hungarian government first announced its deal with Rosatom, he was responsible for the energy portfolio. A colorful figure on his own right, Commissioner Oettinger himself has been a controversial politician. Before landing in Brussels in 2014, Oettinger was the Prime Minister of Baden-Wuerttemberg. Then, Mangold was Russia’s honorary consul in Stuttgart, the capital of Baden-Wuerttemberg. Their joint trip to Hungary sparked a separate scandal in Brussels, because it was fully underwritten by the Hungarian government. Moreover, the Hungarian government had to admit that Mangold has been its paid consultant for years past. Counted as a competent politicians, Oettinger has wielded considerable power within the European Union. Their trip to Budapest was a success. About six months later, the Hungarian government had the green light to proceed with the deal.

Mr. Javor and others in Hungary suspect that a complex deal has been struck among the three principal participants. While Rosatom remains the general contractor, European companies, including US subsidiaries, will be rewarded with sizable and thus profitable contracts too. Hungarians suspect that their politicians have also profited personally. Basis for such an assumption was delivered recently by Lajos Simicska, who until 2015 was Viktor Orban’s closest associate. The publicity shy Simicska has given an interview on December 1, 2017, to RTL Club, an independent television station, in which he recounted two conversations with the Prime Minister. In the first, Viktor Orban informed him of his intention to purchase the RTL Club. Simicska, always the businessman, asked him about the money. According to him, Viktor Orban answered that Rosatom will pay in full for the transaction. Simicska delivered his answer a week later. In it he told Viktor Orban that his action is treason and he is a traitor to his country. Thus far, there has been no official or private rebuttal to Simicska’s version of events.

Finally, opponents have listed the many personal encounters of President Putin with Prime Minister Orban. Beginning with the 2009 visit of the then opposition leader Orban to Moscow, after which he suddenly metamorphosed from a staunch anti-Russian to an admirer of Putin and everything Russian, and continuing with several visits of Putin to Budapest and Orban to Moscow, the two have piled up more official and private meetings between themselves than Orban has managed to have with other Western leaders combined. According to an old Hungarian saying, one cannot buy happiness with money. However, according to another Hungarian saying, the money of an ugly girl can also be beautiful. Thus, money might not buy happiness, but it surely can purchase hearts and minds. At least in today’s Hungary.

The undeniable fact that Orban’s and his clique’s shameless greed knows no limits is also demonstrated by the invention of the utterly corrupt resettlement bonds, which are in reality government securities. First envisaged by Attila Rogan, former chairman of the Parliament’s Economic Committee, and codified by Law CCXX of 2012, as an Amendment to the Law II of 2007 on the Entry and Stay of Citizens of Third States, states that permanent residency can be awarded to citizens of a third country whose entry and stay in Hungary is justified by his or her investments on the basis of economic interests. The petitioner can only invest in government securities that are explicitly so designated by the responsible member of the cabinet. The resettlement bonds are issued by the State Debt Management Center, initially each was worth two hundred fifty thousand Euros, which in 2015 was raised to three hundred thousand Euros. The State Debt Management Center sells it to selected private brokerage companies for two hundred seventy one thousand Euros. The twenty nine thousand Euros and the commissions to the brokerage companies, which fluctuates between forty five and sixty thousand Euros, are pocketed by the designated brokerage companies. Out of the five thus designated brokerage companies only one is Hungarian based. The rest are registered offshore in the Cayman Islands, Liechtenstein, Malta, and Cyprus.

Proof that the entire resettlement bond business is a scheme is best illustrated by the fact that the so-called investors neither receive their bonds from the State Debt Management Center nor from one of the designated offshore companies. Plainly speaking, the so-called investors do not own their bonds. As of March 2017, over five thousand bonds were issued and over sixteen thousand non-European citizens gained access to the European Union based on the Schengen Agreement. Theoretically, the bonds must be redeemed by the Hungarian government after five years. However, the thus paid monies have never gone into the Hungarian treasury. Charitably speaking, thus far most of the monies have been unaccounted for. They have landed on the offshore accounts of five or more private companies rumored to be controlled ultimately by Viktor Orban. In this context, the name of Arpad Habony, a close associate of Viktor Orban has been all over the few documents unearthed by Atlatszo (Transparent), an investigate blog in Budapest.

In addition to Mr. Habony, the names of Attila Rogan, Janos Lazar, both members of the cabinet, and Gyorgy Matolcsy, the chairman of the Hungarian National Bank, have been mentioned most prominently as having financially benefited from this scheme.

Finally, it is worth to remember that the entire resettlement bond business has started upon the urging of Chinese and Russian government officials. For this reason, it is suspected that both governments have been using the resettlement bonds to penetrate economically and financially the European Union from within. Coupled with the tangled webb of numerous offshore companies, these governments’ involvement with Viktor Orban have presented, and will present in the future, an existential threat to the national security and the financial and economic stability of the European Union. The European Union cannot tolerate corruption. Corruption even on a much smaller scale could lead to global political, financial and economic catastrophe. Undoubtedly, the existence of corruption goes to the core of who the Europeans are as united people under a continent-wide organization.

The historically unprecedented scale of corruption has entered a new dimension with the international scandal involving Microsoft’s Hungarian subsidiary. After a thorough investigation that most probably has started in 2014, Microsoft Corporation cancelled the selling rights of its software and other products from its Large Account Resellers, Humansoft Ltd., Racionet Ltd., and Euro One Closed Stock Company, citing “ethical reasons.” Humansoft Ltd. has had a long and profitable relationship with FIDESZ and its leading functionaries, including Viktor Orban. Euro One is by Hungarian standards a large company, also closely tied to FIDESZ and its leading personalities. The same applies to Racionet Ltd.

According to the modus operandi of the parent company, its subsidiary Microsoft Hungary has only acted as a marketing and management company. It has conducted business with the Hungarian government through its Large Account Reseller partners, who enjoyed a high level of business independence. Between 2011 and 2015, business was booming for Microsoft in Hungary. As a result, the head of its subsidiary Istvan Papp was promoted to the post of Vice President for Sales, Marketing, and Services in the Asia Pacific in August 2015. His employment was short lived. It was abruptly terminated in August 2016, without any public announcement. However, he did not remain unemployed for long. In September 2016, he became Vice President for Business Development of the Hungarian Investment Promotion Agency, a government organization under the Ministry of Foreign Affairs and Trade. To add arrogant insult to the insider injury, Mr. Papp left this position and in August 2017 established his own company, named Thriveo. In its website Mr. Papp advertises himself and his new company thus: “No Bullshit here. We build and enhance your strategy and engage in execution. We do not apologize for any inconvenience.” Certainly, Mr. Papp will be a man of his words. No doubt that for the appropriate amount of money, he will deliver the goods for his clients and his former colleagues inside and outside the government.

The other dubious character in the Microsoft scandal is Viktor Sagyibo. Repeatedly promoted by Microsoft, he oversaw the sale of its products to the government and also supervised its business with large corporations. As suddenly as Mr. Papp, Mr. Sagyibo was unceremoniously fired by Microsoft. Again, there was no public announcement. Months later, Microsoft appointed Gabriella Babel to Mr. Sagyibo’s position. Eerily similarly as Mr. Papp, Mr Sagyibo parachuted to become to CEO of 4iG Nyrt. This company designs customized software based on Oracle and Java technologies. Its customers are overwhelmingly government organizations. Yet, his tenure at that company was short lived. Only two weeks after he landed the job, he abruptly resigned, allegedly for “unforeseeable personal reasons.” Currently, Mr. Sagyibo is a Government Commissioner under Janos Lazar, the Minister of the Prime Minister’s Office.

Another Microsoft product, the marketing of the new LED lamps, miraculously ended up with companies closely tied to the son in law of Viktor Orban, Istvan Tiborcz. The scheme was familiar. Those companies, primarily the one named Elios, sold the LED lamps to the mostly FIDESZ controlled local governments for an inflated amount of money that was significantly above the customary market price. To add insult to injury, the purchases of the LED lamps were subsidized by the European Union. Finally, to illustrate the scope of insider trading, Janos Lazar, the

Minister of the Prime Minister’s Office, has taken charge personally of the distribution of European Union monies in 2014.

According to unanimous sources, the Microsoft investigation is still ongoing. The same sources have also revealed that the FBI has also been involved. The Microsoft scandal deserves particular attention. In this case, a global company in a virtually monopolistic position in Hungary, has felt obligated to call attention to the outrageous degree of corruption involving the marketing of its products. Presumably, Microsoft judged that it could not afford to be tainted by the corruption so prevalent in Hungary.

Corruption as a human behavior is as old as humanity itself. The Hebrew Bible is replete with warnings and admonitions concerning lies and bribery. Exodus 23:7 states: “Distance yourself from a false word.” In Deuteronomy 16:19 Moses advised his people not to take bribery, because doing so “blinds the vision of the wise.” From King David to Solomon, Jeremiah, the two Isaiahs, Zephaniah, and to several other secular leaders and prophets, warnings against corruption are numerous — strongly emphasizing the importance of honesty for the sake of the survival of the body politics.

The supreme tragedy of Hungary is the existence of historically unparalleled corruption that has already contaminated the entire society. Moreover, even those who have raised their voices against corruption, and also those who supposedly have been fighting corruption, have been themselves inflicted with the devastating virus of corruption. In Hungary, hardly a day passes by without some revelation about embezzlement, bribery, racketeering, and money laundering by prominent figures and their strohmen. The ultimate proof that corruption in Hungary is systematically entrenched is the judiciary, in which the Chief Prosecutor, Peter Polt, and the judges at all levels are obedient executors of the Prime Minister’s political will.

Clearly, Hungary is overdue for a thorough cleansing from this systematic corruption. Whether Viktor Orban, his minions, and all the strohmen are guilty of various crimes ultimately must be determined by impartial judicial processes. Perhaps the upcoming national elections, to be held in April or May of this year, might bring the political change that is necessary to activate the criminal justice system. Yet, regardless of the outcome of the next elections, sooner or later Hungary will have to face the deadly political gangrene of corruption. For there is no alternative to such a historic reckoning. Otherwise, Hungary and its people will never experience true freedom, justice, prosperity, and social harmony.