The position of Fidesz-Hungarian Civic Union on the so-called "brokergate scandal" and its political ramifications
Dátum: 2003-09-11 13:31:00, eredeti URL: http://archiv.fidesz.hu/index.php?Cikk=14508
KCMDB-be feltöltve: 2024-05-04 18:47:27.755715, Feltöltő: fidesz_hu_scraper_v2
Introduction:
This summer marked the onset of the biggest scandal that has ever rocked Hungarian politics since the fall of communism in 1989. The complex array of financial crimes, uncovered by a routine investigation into an unlawful acquisition attempt in a chemical firm, involves embezzlement, illegal securities trading and money-laundering that has been going on for several years at certain Hungarian commercial banks. Evidence shows that the illegal financial dealings continued with the participation of large sums of public money during the tenure of the Medgyessy-government. Further evidence indicate the implication of a hub of business interests around the Hungarian Socialist Party and key members of the government, including Prime Minister Péter Medgyessy and Finance Minister Csaba László. This assumption is further reinforced by the obvious determination of the government, disgracefully in a parliamentary democracy, to remove from his office the head of the independent financial authority uncovering and investigating the affairs, Mr Károly Szász.
I. The Pannonplast-affair
On 16 June 2003, the president of the Hungarian Financial Supervisory Authority (PSZÁF), Mr Károly Szász, was brutally beaten up by unknown perpetrators in the street early in the morning. In an interview given in the hospital, Mr Szász talked about a politically motivated attack and referred to a resolution prepared by his Authority which was due to be published the next day.
The resolution in question, published the next day, detailed an unlawful acquisition of shares at the stock exchange by two private firms, Britton Ltd (the Hungarian affiliate of an off-shore firm registered in the United States called Britton Interinvest LLC, ownership structure unknown) and Pevdi Ltd (a figurehead for Britton), in the chemical firm Pannonplast in early February 2003. The resolution went on saying that this illegal transaction was aided by taxpayers' money, originating from the National Motorway Management Corporation (ÁAK Rt), and was carried out by the brokerage house of the Commercial and Creditbank (K&H Bank), K&H Equities. (K&H Bank was privatised in the early 1990's and is now owned by the Dutch ABN Amro and the Belgian KBC.)
Although the presence of public money in the case was vigorously denied in the beginning, the National Motorway Management Corporation (ÁAK) admitted in July to have lent HUF 500 million (USD 2 million) to a client at K&H Equities for the Pannonplast purchase (a false contract was used to legalise the deal, which turned out to have been dated back).
The resolution also revealed that the brokerage house was not only a technical mediator, but an active player in the affair. In fact, the Pannonplast-acquisition was apparently carried out with the help of intermediate players who eventually sold their shares to Britton Ltd and realised gains in the process. These intermediaries, either off-shore firms with unknown ownership structure or firms and private persons with well-known connections to the ruling socialist party, all turned out to be clients on a VIP-list handled by an investment broker at K&H Equities, Mr Attila Kulcsár.
II. The K&H-affair
Internal investigations launched at K&H Equities in the wake of the Pannonplast-purchase revealed the existence of a VIP-list of about 200 private persons, firms and institutions enjoying special benefits (yields of 15-20 %) and exclusive treatment by Mr Kulcsár. (Among these key clients could be found all the firms acting as intermediaries in the Pannonplast-purchase, well-known businesspersons with close ties to the socialist party.) The investigations discovered that the VIP-list was in fact the register of a large-scale, recently collapsed pyramide-scheme operated by the investment banker, with a police estimate of HUF 10 billion effectively stolen from 60-70 of the bank's clients.
In mid-July it was also revealed that, again, public money was involved in this illegal business, as well. And yet again, it was the National Motorway Management Corporation (ÁAK) which invested illegally a total of HUF 13 billion (USD 55 million) at K&H Equities between January and May 2003. (This money was transferred from the National Motorway Corporation (NA Rt), under the direct supervision of the Ministry of Economy, on free use.) The amount was further transferred by K&H Equities to certain VIP-clients participating in the Pannonplast-acquisition, as well as to other third parties for unknown purposes. These transactions were made possible by a government decree which significantly laxed regulations on financial transactions from 1 January 2003, only a month before the Pannonplast-acquisition. The huge losses at K&H Equities became apparent as this money was redirected to ÁAK.
III. The Inter-Európa Bank Affair
Late July, new chapters opened in the ever-widening scandal. It was revealed that the Hungarian affiliate of the Irish off-shore company Montrade Establishment Ltd transferred, in several installments from May 2000 until June 2003, over HUF 6 billion to the accounts of two Syrian businessmen at Inter-Európa Bank. They withdrew this money in cash, in regular sums of HUF running into the tens of millions. Transfers continued unabated even after Montrade had ceased to exist in December 2000, whereas its Hungarian affiliate was eliminated in March 2003. Interestingly, Montrade was one of the companies which directly helped finance Britton Ltd's acquisition of Pannonplast shares this January and February, in spite of having ceased to exist two years before. A further link was established between the original "K&H-affair" and the money-laundering at Inter-Európa Bank as the police announced late August, following initial investigations, that the money transferred for the two Syrian businessmen originated from K&H Equities.
IV. Political attempts to hinder the independence of the investigations
After the first details of the affairs became public, but right before the end of the spring session of Parliament, the opposition demanded the setup of investigation committees, a move that was rejected by the coalition's majority. Further on, two months of public revelations in this complex hub of criminal activities triggered increased government anxiety, with offensives against the institution which in fact explored the case. A few days after PSZÁF launched on-the-spot investigations into money-laundering at Inter-Európa Bank late July, prime minister Medgyessy strongly criticised the Authority's activities, saying that PSZÁF could have had the means to explore the criminal activities at K&H Equities much earlier. On 18 August, the very same day as PSZÁF initiated a police investigation on charges of money-laundering at Inter-Európa Bank against unknown perpetrators, the prime minister was quoted as saying in an interview that "people have run out of patience" and the PSZÁF-chairman must be removed. Other statements by key government persons, as well as an investigation launched by the Ministry of Finance, also indicate that the socialists and the free democrats are determined to get rid of Mr Károly Szász. The dismissal of the PSZÁF-chairman could be based on the report prepared by the Ministry of Finance and could be carried out through Parliament with a simple majority vote. However, the measure would evoke serious constitutional concerns, as the government must prove that Mr Szász is incapable of carrying out his functions. The case has already had some international reverberations: Mr Elmar Brok, chairman of the European Parliament's Foreign Affairs Committee, considered it surprising that the Hungarian government intended to remove the leadership of an independent authority investigating large-scale money-laundering and indicated that his Committee might place the issue on its agenda.
V. Political connections
The government's communication is stressing the non-political nature of this series of scandals, despite the apparent political links:
- Key persons in the current government were high(est)-ranking executives in the banks involved during the period of the criminal activities: Prime Minister Péter Medgyessy was CEO of Inter-Európa Bank from spring 1999 to 30 September 2001, Finance Minister Csaba László and Chief of the Prime Minister's Cabinet, Tibor Draskovics were Deputy CEOs at K&H Bank in the same period.
- Persons and firms on Mr Kulcsár's VIP-list feature business circles with well-known connections to the socialist party. The common denominator among these companies and financial institutions is the fact that either a full or partial owner, a member of the Board or CEO, or some other former company officer had once served as an apparatchik in the old state party machinery and is currently part of, or at least has ties to, the socialist party or indeed the current government itself.
- Mr Attila Kulcsár had a permanent pass into the buildings of the Prime Minister's Office, which was issued for him after the current government took office in May 2002, whereas his forged broker's licence was fabricated on the basis of that of the domestic partner of the finance minister's chief of staff. Mr András Tóth, Political State Secretary supervising the secret services, admitted to have personally met Mr Kulcsár following the outbreak of the Pannonplast-acquisition scandal in June, by-passing routine rules of intelligence operations. Following the meeting, Mr Kulcsár was allowed to leave Hungary unhindered.
- Several personal links have become public between socialist politicians and Britton Ltd, the key player in the Pannonplast-purchase, and apparently the key player in the whole series of scandals: the husband of Interior Minister Mónika Lamperth admitted to have rented his attorney's office from Britton Ltd. The quaestor of the Hungarian Socialist Party admitted of using a car he received from Britton Ltd. Two socialist mayors in Budapest (2nd and 10th districts) admitted of having business relations both with Mr Kulcsár and with Britton Ltd. It goes without saying that Britton was in business relationship with several VIP-clients on Mr Kulcsár's list. Moreover, according to press reports, Mr Kulcsár's assistant was quoted by a protocol prepared by the internal investigation at K&H Equities as saying that "since he
VI. Police investigations
Mr Attila Kulcsár, having been interrogated by State Secretary Tóth, was allowed to escape in mysterious circumstances, in spite of ongoing investigations against him. He was caught in Vienna on an international research warrant in July, his interrogation is pending on the extradition process. One of the two Syrian businessmen involved in the money-laundering at Inter-Európa Bank also managed to escape from Hungary, the other is in police custody. The head of Montrade's Hungarian affiliate also managed to escape abroad.
Early September marked the arrest of the former CEO of the National Motorway Management Corporation (ÁAK) delegated by the smaller coalition party SZDSZ, Mr Miklós Bitvai, as well as that of Mr Kulcsár's former boss, Mr Tibor Rejtő, former CEO of K&H Bank. (Both resigned at the onset of the scandal.) Gábor Garamszegi, CEO of one of the firms on Kulcsár's VIP-list in the highway construction business, a former Socialist councillor in Budapest, was also arrested. A few days ago, police searched the bureau of Britton Ltd in Budapest and confiscated material.
VII. The position and questions of Fidesz regarding the series of scandals
It is obvious that the illegal attempt to purchase stakes in Pannonplast, the so-called brokergate-scandal at K&H Equities and the money-laundering at Inter-Európa Bank are in close connection with each other that must be investigated as soon as possible.
Members of the presidency of Fidesz and members of the former Orbán-government have declared in mid-July that none of them had had any position in K&H Bank and authorised the bank to publish any information in its possession related to their person.
It is incomprehensible why Prime Minister Medgyessy is pursuing a campaign against the president of the authority which, in fact, uncovered this complex array of criminal dealings?
Who is responsible for the escape of key players in the affairs (Mr Kulcsár, one of the Syrian businessmen and the head of Montrade's Hungarian affiliate, the latter two charged with money-laundering)?
Why is the socialist party hindering the setup of investigative committees in Parliament?
Has there Prime Minister Medgyessy been at any time in any relation with Britton Ltd or Britton Investments LLC? Is it not a somewhat delicate detail, in the eyes of Mr Medgyessy, that Britton Ltd appeared in business life right after he was nominated as prime minister-designate by the congress of the socialist party in June 2001?
Budapest, 11 September 2003