Chief Prosecutor’s Office opens investigation into sale of District 5 real estate

April 16, 2015

Juhász Péter

Opposition party Together co-chair and Budapest 5th District assemblyman Péter Juhász reported the district government for “systematic fraud causing an especially high amount of damage” on 29 December 2014.  In his complaint Juhász accused the district government of forgery, abusing its power, misappropriation, fraud and of causing billions of forints in damages to the district by selling district-owned property at below market prices to tenants within months of their signing the lease.

In response to the allegations, the district reported Juhász to authorities for slander on several occasions.

After some bureaucratic fuss, on 12 February the National Office of Investigations (NNI) rejected the claim on the grounds that everything was perfectly legal. Investigators also determined that the reason the District 5 administration sold properties at below fair market value was not to favor certain tenants but because the district is poor and needed to raise funds to meet the co-finance requirements of certain projects part-financed by the European Union.

Juhász then complained to the Chief Prosecutor’s Office, claiming that “the decision of the investigation office does not even meet the minimal professional requirements”.  Among other things, he objected to the fact that NNI investigators did not examine the method of formally appraising the value of the property, and their decision referred to non-existing local government ordinances.

As the one who filed the complaint, by law Juhász himself had no right to challenge the decision of the investigation office. Meanwhile the mayor of the district could complain without any problem.

In its decision rejecting the initial complaint, the NNI mentions the property located at 26 Károly körút was rented out through public tender. After the National Office of Investigations rejected his complaint, Juhász asserted that the finding was demonstrably false, and the general assembly had actually approved a decision to rent out the property in the absence of a public tender.

The Chief Prosecutor’s Office appears to have recognized that NNI did not properly investigate the case. On 31 March it nullified the decision stopping the investigation and ordered the start of a new investigation into “misappropriation causing especially high amount of damage.”

In its decision, the chief prosecutor cites the fact that the investigation office did not examine a number of issues and that the documents gathered are incomplete. The office also mentions that during the investigation they did not examine the possible re-sale of the properties, or whether the sale price included the 27 percent value added tax or not.  “Even if the rental agreements were concluded for an unspecified period of time, the declaration of intent for the purchase was usually submitted soon thereafter, for this reason, the rental appears to have been a mere formality, with only one possible aim: obtaining a discount on the purchase price,” they wrote.

Another problem identified by the Chief Prosecutor’s Office is that the district did not examine whether the appraiser, CCA Zrt., was certified to perform appraisals. Nor did investigators obtain any documents regarding the legal connection between the district and the company.

The office also refers to the fact that investigators falsely referred to an ordinance of the local government, writing that “it is impossible to define on what grounds the investigators examined the case, as they refer to an ordinance which did not even exist at the time of the sales.”