Expert says Quaestor emptied of assets and documents implicating politicians destroyed

March 27, 2015

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Quaestor CEO Csaba Taroly (left) with Hungarian Prime Minister Viktor Orbán

Nearly three weeks after Quaestor informed Hungarian financial oversight and governmental authorities that it was in trouble, and well over two weeks after the National Bank announced that the financial services company had sold HUF 150 billion of “fictive bonds”, Quaestor owner and former CEO Csaba Tarsoly was finally taken into custody Thursday evening.  An expert suspects that during this time the company was “emptied of its assets”, and documents linking Quaestor’s directors to leading politicians were destroyed.

According to Tarsoly’s lawyer, Gábor Papp, Tarsoly and two other Quaestor employees have been formally charged with fraud, a charge they vigorously deny. An investigation is being conducted by the Budapest chief prosecutor’s office.  In addition to detaining Tarsoly, police reportedly conducted a number of house searches Thursday afternoon and “initiated measures to recover assets.”

What took so long?

According to an expert who spoke to the Budapest Beacon on condition of anonymity, in the two weeks preceding the arrest of the company’s leaders “virtually anything” could have happened.   He thinks it likely that substantial sums were sent abroad and documents linking Quaestor’s directors to the political elite were destroyed. “For sure anything linking Tarsoly with Orbán or [Minister for Foreign Affairs and Trade Peter] Szijjártó was made to disappear,” opines the expert.

“In a normal country, such a case would have immediately resulted in the entire leadership being taken into custody so as to prevent them from destroying evidence or influencing witnesses.  Furthermore, they would have immediately frozen those bank accounts over which the company leadership had control.  By contrast, this man was allowed to remain free for two weeks,” said the expert.

Meanwhile, he said, shortly after announcing that the company had declared bankruptcy (in fact this only happened weeks later), the company formally dissolved its board of directors and engaged as CEO a public worker with a prison sentence who is not believed to have completed eight years of education.

The expert we spoke with says the decision to do so was deliberate and that Tarsoly is lying when he says he took the advice of an advisor when entrusting the company to this person.  He believes Tarsoly knew precisely what he was doing.  “I am certain that over the course of those few days, while Tarsoly was no longer director, the company engaged in a number of unlawful affairs and transactions.  But because Tarsoly’s name no longer appears on paper, he cannot be held responsible.” In the expert’s opinion,  Tarsoly’s successor, Béla Orgován, is a “strawman with nothing to lose” who, for stripping the company of its assets, stands to get “two years in prison and another three years suspended sentence.”

As for what Tarsoly might get in terms of a prison sentence, our expert cited the example of US broker Bernard Madoff, who was sentenced to 150 years for a similar crime.

Index reports that according to a letter sent to Szijjártó, Tarsoly accepts full responsibility but asks that his family be left alone.  He also asks that the government compensate small investors.

After the article appeared, the Foreign Ministry denied Szijjarto had received a letter from Tarsoly or been contacted in any way before the company announced this month that it had defaulted on a bond payment.

Where did the investors’ money go?

Quaestor Financial Hrurira is a company with registered capital of HUF 10 million which issued tens of billions of forints of bonds in its capacity as an authorized securities broker under the supervision of state authorities.  The money raised from the sale of bonds was lent to other members of the Quaestor group, including a number of special purpose vehicles funding loss-making projects.  The expert did not believe any of the missing HUF 150 billion would be recovered, adding “it is inconceivable that the National Bank of Hungary (MNB) or prior to that the Financial Organizations State Oversight Authority (PSZAF) did not notice that there was nothing behind the bonds being issued.  It should have seen that something was not right.”

Quaestor’s owners have a direct ownership interest in over 25 companies and an indirect one in nearly 100 companies, according to the Opten data base.  A random check of a few of the companies reveals substantial inter-company debt and suggests that for a long time substantial sums have been moved from here to there within the network of companies.

Nothing in Tarsoly’s name

BorsOnline reports that Tarsoly took care not to keep assets in his own name.  His imposing Budapest home is owned by a Swiss company. The Budapest District 17 home owned by his father, who is also an owner of Quaestor, is registered in his mother’s name.  As she is neither an owner nor a company director, none of her assets risk being seized to compensate the victims of what appears to be the largest pyramid scheme in the history of modern Hungary.

Earlier this week a bill was submitted to parliament which makes owners personally liable for damages caused depositors or investors in the case of fraud.  The bill also calls for the examination of contracts concluded after March 6 affecting the assets of the company and its owners.  This pertains to those transactions approved by the interim CEO, Béla Orgován.

References:

http://www.police.hu/hirek-es-informaciok/legfrissebb-hireink/bunugyek/kozlemeny-6

http://www.police.hu/hirek-es-informaciok/legfrissebb-hireink/bunugyek/kozlemeny-frissitett

http://index.hu/belfold/2015/03/26/tarsoly_megadta_magat_szijjartonak_irt_levelet/

http://www.borsonline.hu/20150327_kimentette_vagyonat_tarsoly_csaba

http://www.blikk.hu/blikk_aktualis/tarsoly-titkara-polt-lanyaval-jar-2341479

http://hu.budapestbeacon.com/kiemelt-cikkek/dagad-a-brokerbotrany/

http://en.wikipedia.org/wiki/Bernard_Madoff

http://www.opten.hu