Forbes: What happened with all this EU startup money?

September 14, 2016


Funds managed by Morando, a startup fund run by the prime minister’s former advisor, landed in the pockets of a narrow group of people. We travelled 1,200 kilometers around Eastern Hungary. We were able to find Synergon. But what happened with all this EU startup money?

Translation of “We open the Jeremie files” appearing in the September Hungarian edition of Forbes (pp., 90-99).

“They moved last year,” we are told by the care-worn office manager of a business that provides corporate headquarters services. We ask from the inner courtyard of the office building, the ground-level unit is so small we cannot fit inside.

“Did you bring a letter for the executive director?” The office manager asks with suspicion after we inquired about several companies that received a total of HUF 800 million (USD 3 million). We have just travelled 800 kilometers.

This is not the first place we visited on our unsuccessful quest to find traces of innovation. But after visiting a house in the Mátra mountains and a winery in Tokaj, nothing surprises us.

Here, at least, we were able to speak to someone.

Let’s start at the very beginning.

The European Union launched a startup venture capital program in Hungary called “Jeremie.” In 2009, 28 investment funds successfully applied to take part in the program.

The scheme is quite simple. The fund manager, together with a commitment from a private investor, agrees to invest in startup companies. The funds operate on a 30/70 rule, with 70 percent of the funds coming from the EU.

But Jeremie has strict rules. Money cannot be invested in the central Hungary region, shares in companies can only be held for up to three years, a maximum of EUR 1.5 million can be given to these companies per year, and certain sectors may not be invested in (agriculture, real estate). The most important requirement, however, is that the funds must be invested in innovative companies.

The fund’s owners (that is, the private investors) and the fund managers (those whose professional decision it is to make the investments) must be separated, and neither can be tied to the companies receiving the investment. The purpose of the program is to help innovative companies (which are still quite fragile) gain access to capital (because banks are not in the habit of financing such projects).

This scheme became popular because the EU matched and (more than doubled) the amount of funds put up by the private investor, and therefore absorbs a portion of any incurred loss. Furthermore, the EU would hardly get anything in return when the funds manage to sell their shares in companies for a profit.

There have been several phases to the Jeremie program and several calls for tenders to take part in the program since 2009, but the HUF 130 billion (USD 480 million) investment stage of the program ended earlier this year. Now, the EU is calling on all the investment funds to provide a list of the businesses they invested in. The EU will then take a sample of this list and perform an audit (there have been audits, but not many). If the number of irregularities in the sample audit exceeds 2 percent, the EU will order an in-depth audit. The harshest punishment the EU can dish out is to require the state to pay back the amount unlawfully spent by the funds.


No information about who puts up HUF 2 billion

Forbes filed a lawsuit a year and a half ago to find out on what grounds the investment funds are selected to take part in the Jeremie program, thereby entitling them to receive billions. After a second-level court also ruled in our favor, the Hungarian Development Bank (MFB) sent us the investment fund tenders. With this information, we started looking into their portfolios. Based on corporate registry information, the Morando fund appeared to be the most interesting.

When we started to investigate the investments of the HUF 6.5 billion (USD 24 million) fund, our journey took us from the Mátra mountains to the Tokaj wine country, and we eventually tried to find some innovation in Nyíregyháza, next to a car dealership.

The Morando capital fund was founded by Gödöllői Üzleti Park Zrt. (Gödöllői Business Park Inc.). GÜP was originally a state-owned enterprise founded as a regional development company by MFB, and it built the Gödöllő industrial park. Later, GÜP was sold to private investors. When GÜP submitted its tender to take part in the Jeremie program in 2009, the city of Gödöllő was an investor, but its main shareholder was László Mészáros. Today, the company is owned by Árpád Herbst.

In their tender application to take part in the Jeremie program, GÜP stated that it provides “a complex business development service package for [its] partners”, for example “locker rooms, rentable meeting rooms, and even an ATM.”

GÜP founded Morando Zrt. in 2008 for the express purpose of taking part in the Jeremie program. The fund was initially launched with HUF 10 million in capital, but it stated that if its tender to take part in the Jeremie program was approved, “private investors would also invest in the fund within six months.”

Aside from the HUF 4.4 billion (USD 16.3 million) it received from the EU, Morando also secured HUF 2.1 billion (USD 7.8 million) in private capital. In Morando’s tender, which was released to Forbes by the MDB, there is only one sentence mentioning that other private investors would join the fund, but there was not even a signed letter of intent to indicate that the fund was serious about attracting private investors. That did not stop those evaluating the tender from approving it. (Back then, MV Zrt. was responsible for evaluating the tenders. MV Zrt. later became part of the MFB).

Morando was not required to show that it had private capital when it submitted its tender, and even in the tender application the company indicated that it would first call down funds from the Jeremie program and only later contribute funds provided by private investors.

The HUF 2.1 billion in private capital was contributed by three investors – at least, according to the tender – and each investor contributed HUF 715 million (USD 2.6 million) to the Morando fund. One investor was (Századvég Economic Research Zrt.’s-tran.) Péter Heim, and the other two, Gyula Gansperger and Zoltán Jutasi, were investors and directors at Kész Holding, the same two men who would later end up at Synergon (more about this later).

A man by the name of András Tombor would eventually replace Heim. GÜP’s board of directors and executives are tied in many ways to the Budapest Metropolitan University (and the fund was even registered to that address for some time) and the Századvég Foundation (the two organizations have a shared political training program). According to corporate information, Morando is currently owned by László Mészáros and András Tombor (a former advisor to Hungarian prime minister Viktor Orbán-tran.)

In its tender application, Morando wrote that it wanted to “primarily invest in highly knowledge-based, high value-added production of natural science, commercial agriculture, environmental protection and energy efficiency [small and medium sized] businesses.” But none of this ever took place. In fact, most of the companies that Morando invested in had either no, or very little, business activity in recent years. Furthermore, most of these companies had no employees, despite the fact that the Jeremie fund, like most EU-funded projects, has the express goal of creating more jobs.

The same pattern everywhere

Morando followed the same pattern with most of the businesses in its portfolio. Individuals with ties to Morando founded companies in which Morando would eventually purchase a 99.9 percent stake for several hundred million forints. Then, the money would be moved along.

This scheme also allowed the parties involved to sidestep the very stringent investment rules concerning the Jeremie program.

Similar to other investment funds allowed to take part in the Jeremie program, Morando would incorporate companies in the rural countryside to sidestep the geographical restriction of investing in companies operating in the central Hungarian region.

In reality, these companies operated in Budapest. What really stands out with Morando is that it would incorporate these companies with individuals in its immediate circle and, in many cases, it provided these companies with capital without knowing where the money would end up. But intermediary companies were not really necessary, because the investment funds received all kind of support from the EU to research ideal investment opportunities, and even received additional funding for this purpose.

We asked Morando about its rural fund managers. They told us that there was never a conflict of interest because, “as a general practice” these companies are not technically considered the intended recipients of the investment.

“Using [these intermediary companies] allows the investors to respond more quickly to the sectoral changes and financing needs affecting their investments. That said, it must be clear to you, too, that Morando has been investigated by the European Commission, EU TAF and MV Zrt. (later the MFB) and the use of SPVs does not constitute an investment, as investments are in every case given to the final company being invested in,” Mondano wrote to Forbes.

Special Purpose Vehicles (SPV), as the Morando calls its rural holding companies, are only considered “standard practice” in Hungary. The MFB and the Jeremie program’s Directing Agency informed all Jeremie program investment funds in January 2013 that funds cannot be parked in holding companies and the funds must be allocated in accordance with the Jeremie program’s rules. But the vast majority of Morando’s funds had been invested before this announcement came — primarily in holding companies.

But Morando did not mention its plan to use this scheme in its tender. In fact, they stated the opposite.

“The fund manager will primarily make offers to provide capital directly to the [product],” they wrote in 2009. Regardless, the first investment they made was to an SPV they formed in 2010.

Even the EU investigated

Even more alarming, several of these SPVs have been investigated for the illicit use of the Jeremie program funds (both EU investigators and the Hungarian program’s overseeing MV Zrt. conducted investigations). Earlier, the MFB told Forbes that, in Morando’s case, there were investigations in 2012 and 2015, but they did not disclose exactly what the problem was.

“The MFB carried out a physical inspection of two portfolio businesses. The inspections found the unlawful use of funds at one portfolio business, and on two occasions at the intermediary (i.e., Morando),” they wrote.

A document submitted by Morando in 2014 shows that three SPVs were suspected of receiving money. Aurum Horatii Kft. and two other companies connected to the Netfon group received some HUF 1.7 billion (USD 6.3 million). Aurum Horatii eventually paid back the remainder of its unused funds to Morando. According to the MFB, action was taken in 2015, but the state-owned bank refused to provide information regarding who action was taken against. When asked about this, Morando told Forbes that “there are no final decisions regarding the 2014-2015 investigations.”

A large portion of the investments – if we look at both SPVs and final companies – show that the funds ended up with a small group of people.

Morando’s accountant, Zsuzsánna Sándor, received an investment, as did her son’s company (several hundred millions forints), which, at one point, was also owned by Tibor Grácsmann. Grácsmann is a close confidant of Gyula Gansperger, and his sons also received investments one month later. Beyond this, lawyers also incorporated companies, as did László Barboják, whose name popped up as an outside partner in the Morando tender.

Zsuzsa Schmidt not only received an investment, she also happened to be the liquidator of one of Morando’s other companies. Information technology companies registered to her address in Mór currently have HUF 1.2 billion (USD 4.4 million) of these funds invested into them.

The majority of companies in Morando’s portfolio can be tied, one way or another, to Morando’s past and present owners or their companies. But the vast majority of these companies are already wound up or are in the process of being wound up.

The winery did not receive money, but its partner did

1. GTR Investment

Amount invested: HUF 419.4 million (USD 1.6 million)

Where was the money invested: In a wine trading company. One of the owners in the wine trading company also owns a winery in Erdőberénye.

Who owns the winery? András Tombor, who also happens to be one of Morando’s owners.

Why is this suspicious from the Jeremie program point of view: Because the funds were indirectly given to Tombor’s company.

Innovation: There is no innovation at a wine trading company.

Our first stop was the “headquarters” of GTR investment. We travelled to the small, almost hidden village on roads in a terrible state of disrepair. The address we visited, a family house in Mátraballa, was empty when we arrived. Neighbors told us that locals live on the property.

GTR was incorporated in 2011, and its financial statements were prepared by Zsuzsánna Sándor, the same person who pops up as an owner in several other portfolio companies. She also prepares Morando’s financial statements. The 2011 financial statement for GTR was signed by the company’s only owner, Richárd Sziklay, who just happens to be Zsuzsánna Sándor’s son. Morando decided to get behind Sziklay’s company in 2012. Prior to that, the business did not show any signs of life.

That same year, the majority of the money transferred to GTR from Morando was invested in a wine company. In total, HUF 417 million was spent in this manner. GTR made a capital injection into Első Magyar Borkereskedő Kft. (EMB, First Hungarian Wine Trader LLC), and they also acquired a stake in the Meszes Major Kft. through a “‘golden share’ that has the right to veto.” While the ‘golden share’ provides the shareholder with rights of a majority shareholder (despite having a smaller share), Morando says this does not constitute an investment.

Both companies are active in Tokaj, and are tied to a former advisor of Prime Minister Viktor Orbán, András Tombor.

“My heart beats for Tokaj,” Tombor told Hungarian news site Origo last month. It appears EU funds play a role in encouraging his excitement. Forbes tried to sit Tombor down but Morando has not responded to our request. Meszes Major and EMB are registered to the same Erdőberénye address.

We drove down from Mátraballa to Tokaj-Hegyalja on a road full of twists and turns. We were greeted by a tidy house with a beautifully renovated exterior. In one of the windows we could see a sign that said the building was renovated with HUF 55 million in EU funds. But we know of another HUF 417 million that came here.

It is quiet everywhere. We ring the doorbell, but to no avail. The neighbors tell us that no one has been here for quite some time, but that earlier a young man had sold wine in the store. A huge sign at the gate of the house reads Bardon Wines. That is no coincidence, Tombor named his “small winery” after his mother Beatrix Bardon.

According to the website of an organization in Tokaj that gives wine-related awards in the region, Bardon Wines was incorporated in 2006. We did manage to contact this organization and they confirmed that Meszes Major is behind Bardon Wines, and EMB is a business partner. But corporate filings tell a different story: both companies are owned, in part, by GTR. Bardon Wine says Meszes Major did not receive any funding from the Jeremie program.

GTR says these companies are only trading partners, despite both being registered to the same address. According to Jeremie program rules, the Erdőberénye winery should not have been able to directly or indirectly receive money because agricultural companies are prohibited from taking part in the program. Furthermore, GTR have a stake through its “golden share” in the Tombor winery.

Tombor has also served as the chairman of the Tokaj Wine Region Development Council. He is no longer chairman of the council and, according to news reports, his departure from the post may be the result of steps he had taken to reform the local wine industry. He is still a member of the council and he still holds a post in the state-owned wine company, Tokaji Kereskedőház Zrt.

GTR also holds a stake in an investment company named Vinum Patrium, which in turn holds a stake in a Transylvanian sparkling wine operation. According to, which reported on the 2013 opening of a sparkling wine plant in Transylvania, “the sparking wine plant was built with private investment and EU grants furnished by Hungarian investors.”

Morando denies that the Jeremie program was used for this project (this, too, would have been unlawful as the fund operators are only allowed to invest within Hungary). According to Morando, GTR financed the sparkling wine operation in Romania through other sources.

Most of the money, therefore, ended up with the wine trading company. But as their HUF 7 million (USD 26,000) in revenues shows, the several hundred million forints invested in the company did little to increase business. For the time being, only Tombor’s wine and the sparkling wine from Transylvania are being sold by the company (at least, according to the company’s balance sheets, the company certainly has inventory). As far as innovation goes, the company has not even bothered to make a website for itself.

Hundreds of millions wander through empty companies

2. Companies owned by the Grácsmann boys

Amount invested: HUF 450 million (USD 1.7 million) + HUF 450 million (USD 1.7 million)

Where is the money? They sat on it for a while, but then sent it back to the fund.

Their connection to the fund’s owners: Family members of the fund’s then-owner received the investments.

Was this listed in the tender? Energy efficiency was listed in the tender, but it never happened.

Innovation: Nothing, the companies never found anything to invest in.

Two year ago, Morando told Forbes that one of their portfolio companies, London Halifax 1886 (LH 1886), manufactures wooden pellets. “The company is focused on discovering renewable natural resources,” they wrote. They added that the fund manager got rid of its stake in the business in summer 2013.

LH 1886’s earlier owner is Tibor Grácsmann’s son, Tamás Grácsmann. Here, too, the company’s accountant is Zsuzsánna Sánta. The fund owned the company for one and half years, now the company is being wound up.

We went to the company’s Miskolc address to inquire about the company, perhaps someone knew something about LH 1886. But no one at the address could remember anything about the company.

According to a corporate document, there were no “personnel costs incurred” at the location, that is, there were no paid employees working for the company. LH 1886 did not have any subsidiaries, nor did it have a stake in other business, so it is hard to figure out how the company could have manufactured wooden pellets. In any case, this is not the only company with close ties to the Grácsmann family.

Aurum Horatii was also incorporated to an address in Miskolc. The company belongs to Grácsmann’s other son. Morando invested HUF 450 million in this company shortly after it was incorporated. The two brothers managed to get their companies a total of some HUF 900 million (USD 3.3 million) within the span of one month.

Earlier, Morando, in response to a question about Aurum, told Forbes that the purpose of the company was to finance energy efficiency development projects (LED lighting, installing modern heaters).

The company was registered to the same Miskolc address as LH 1886 and it, too, is now being wound up. It never had more than one employee. Aurum never had any subsidiaries, nor did it operate at a different address.

Official corporate filings show that Aurum wanted to invest in companies dealing with energy efficiency. The company received HUF 450 million (USD 1.7 million) for this purpose, but lent this money back to the fund while it found suitable businesses to invest in. But they found no company to invest in. The question raised here is why the money was given to SPV because, according to Morando, the SPVs were needed to make sure that the fund could “respond more quickly to the sectoral changes.”

On the border of Fehérgyarmat

3. Brikett Investment

Amount invested: HUF 450 million  (USD 1.7 million)

Where is the money? The investment ended up at a company tied to the fund’s owner in the form of a loan.

Was this listed in the tender? Retail was not listed in the tender.

Innovation: None.

A briquette production plant was built with HUF 270 million (USD 1 million) in EU funding in Fehérgyarmat. The address we visited happens to also be the address of another Morando portfolio company.

Finally, a real working company, we thought. But we could not find Brikett Investment Kft. (BI) anywhere. And the sign bearing the EU funds listed Garage Kft and Brikettgyártó Kft as both Budapest companies. The operational address for these companies is also the headquarters for BI Kft. One of its subsidiaries, Brikett Trade, gave a loan of HUF 175 million (USD 650,000) to Brikettgyártó Kft., according to a corporate document which shows that in 2013, the loan ballooned to HUF 240 million (USD 890,000) together with interest. The briquette operation – through its two Budapest companies – belong to Zoltán Szabó. Szabó is also a member of GÜP Zrt.’s board.

Garage Kft. was once a shareholder of the industrial park, and Szabó was once a shareholder in the Metropolitan University real estate company, Carine Kft. Therefore, Szabó’s companies, which are tied to Mészáros in numerous ways, received loans from the Brikett Trade business which happened to be capitalized with Jeremie program funds.

Locals say there is no production at the plant. Individuals at the neighboring industrial park say that we came to wrong place if we are really interested in buying briquettes. We could not buy briquettes there or anywhere.

We were able to speak to one of the plant’s employees over the phone and we were told that maybe one or two tons of briquettes shipped, but “the merchandise is not for sale.”

Corporate documentation of Brikett Trade shows that in 2014 they estimated the plant would be enough to produce 10-12,000 tons of briquettes. According to the fund manager, briquette production was down due to seasonal reasons.

The pattern here is the same as it was with the winery. The fund pumped a freshly-created company (Brikett Trade) full of money, funds that were then transferred to people with close ties to the fund’s owners.

Furthermore, Morando’s SPV in this case, Brikett Investment, not only gave money to a trading company, it also gave a loan of HUF 67 million (USD 250,000) to another company, Geoterm Kft., with a completely different profile in 2015 — all the while investing in the company to the tune of HUF 812 million (USD 3 million).

In the shadow of Synergon

4. Amount invested: HUF 1.2 billion (USD 4.4 million) (Newsource) + HUF 863 million (USD 3.2 million)

Where is the money? In a group of companies registered to the address of a lawyer in Mór, and in Synergon’s IT service providers.

Reason why this is problematic for the Jeremie program: One of the “startup” companies did not develop software, it only purchased it for HUF 420 million (USD 1.6 million)

Was this listed in the tender? No.

Innovation: It is hard to say. It is hard to explain how these companies could have developed software without actually having any employees

In 2012, Zoltán Jutasi’s Navigator Investments Zrt. bought into Synergon Nyrt. (Nyrt. is the designation for a publicly-traded company). Jutasi later became the CEO and, later, president of the reorganized company. Dr. Zsuzsanna Schmidt, an attorney from Mór, founded an IT company in 2012. The company, Newsource Kft, was quickly added to Morando’s portfolio. At first glance, these two events may seem unconnected.

Jutasi and one of Morando’s shareholders, Gyula Gansperger, know each other from way back and even owned a business together. Jutasi acquired a 15.8 percent stake in Synergon, the company where he would become CEO and president. In the beginning of 2013, Gansperger joined the company’s board of directors.

At that time, the struggling Synergon’s biggest client was the Budapest Transportation Authority (BKV), and Syngergon provided outsourcing services to the BKV as part of a 10-year project worth HUF 33 billion (USD 122 million). This contract was somewhat of a godsend for the struggling company.

Jutasi came in and reorganized Synergon, and he also carried out a HUF 1 billion business acquisition — that was the price that was paid to purchase the Navigator companies (NAV-Invest, Navigator Informatika) that Jutasi founded.

2013 was an eventful year, Jutasi joined Gansperger and bought into the Morando fund as an investor. But by autumn, he was forced to leave Synergon after the struggling company failed to deliver an announcement system on time. Gansperger took over Jutasi’s seat, and he soon sold off several companies.

Synergon sold its then recently acquired outsourcing companies. The companies are now owned by Newsource, along with another formerly Jutasi company (Adatvilag Kft).

Newsource corporate filings show the company was incorporated to “provide software development services for the outsourcing sector, and to provide equipment and contractual services”. In other words, Newsource would have had to compete on the same market as Synergon or the Navigator companies.

Meanwhile, in 2013 Morando sold several IT investments which all ended up with Synergon. Assisting in the transfer of companies between Synergon and Morando (and vice versa) was a company incorporated in 2013, Centerdata Zrt. Both bought and sold these companies through Centerdata Zrt.

Morando says Centerdata Zrt. gave them the best offer. Centerdata purchased a portfolio from Synergon, which also came with HUF 2.3 billion in liabilities in their consolidated balance sheet, and then sold the companies to Synergon.

As the IT giant’s mandatory stock market filings show, Morando companies were purchased for a total par value of HUF 1.6 billion, and the IT companies pumped full of EU funds ended up with Synergon (these companies were later bought and sold between subsidiaries). Because the personnel connection between Morando and Synergon were plainly obvious, Centerdata played a key role in orchestrating the transactions.

Centerdata, founded by Zoltán Nádasdy, ended up in the hands of another Morando owner in 2014 — it is in the hands of László Mészáros.

But what kind of companies did Synergon buy? Do you remember that little cramped office building I mentioned in the beginning of the article? That is the address listed on the October 2012 incorporation document for ITSSM Kft.

“The company is focused on bringing transportation IT error signal systems to the market,” Morando wrote about ITSSM in response to a question posed by Forbes.

While Morando refers to ITSSM as a startup, the company chose a unique way to be innovative: they purchased an IBM-developed base software as well as several upgrades from a company called Highlevel Ltd for a total of HUF 420 million. The exact amount Morando invested in ITSSM.

Morando did admit to Forbes that the entirety of the investment was spent on acquiring this software. The IBM Tivoli software packaging company offers various solutions and can be used for error signaling. According to ITSSM corporate documentation (the company ended up being purchased by Synergon at the end of 2013) this software could be “a software, named Investmen, that is rented to Synergon’s outsourcing projects.”

The cost of the software was surprisingly high — that is what virtually every market player told Forbes. Together with the development costs, it is difficult to imagine there exists a company in Hungary that could purchase this kind of software for that price. For products like these, the price is determined by the number of people using it. At that time Synergon had only one such large business partner: the BKV.

A source wishing to remain anonymous told Forbes that the Syngeron’s Tivoli-based programs were used in the project, but HUF 420 million (USD 1.6 million) is unreal.

We contacted the BKV’s managing authority, the BKK. BKK told us that the transportation company never had any relationship with any of the Morando companies, and it never even used the Investmen software.

The Mór-based Newsource was combined with another portfolio company, KÖZIT Informatika (which received an investment of HUF 420 million) but immediately spent the money (HUF 413.5 million) to purchase another recently incorporated company called Közlinformatika. This company would later be combined with Game Server Invest, which was another company in Morando’s portfolio. Despite Közlinformatika being incorporated by casino owners and one-armed bandits to provide IT services, both companies ended up at Synergon after passing through Centerdata — and the companies are being used on the BKV project. This was revealed after a very convoluted statement included in Game Server documents.

“Game Server Invest Kft. through its interest in Közlinform Kft, whose equipment is being used on the BKV project by the Synergon group, provided external financing for Synergon’s operations for a total sum of HUF 345 million,” the company wrote.

The strange software acquisition was carried out by ITSSM, which today is owned by Game Server. Both companies currently have court liens against them. We contacted Synergon because several of the companies it owns have been liquidated or are undergoing liquidation proceedings.

Liquidator Ádám Nagy Fintha could not explain why Synergon acquired these companies. In any case, it is strange that Morando’s IT companies did not really have any employees.

Heading back to Mátraballa!

5. Two companies, one group

Amount invested: HUF 1.3 billion (USD 4.8 million)  (Netfone companies) 

Where is the money? In telecommunication companies.

Reason why this is problematic for the Jeremie program: Investments exceeding the permitted amount were placed into two companies connected by the same owners.

Was this in the tender? No. 

Innovation? Not much. They offer telecommunication services and sell smartphones.

One of the portfolio companies built a small building in Nyíregyháza to house a wire weaving machine. The company also won EU grants to carry out production, but Morando showed up here later, too.

Morando, though another company, invested HUF 120 million in Huzal Products Kft. The manufacturer is currently being liquidated and we did not find anyone at their site. Two other Netfone companies moved away from the site, and both are also Morando portfolio companies. The fund manager says these companies really did operate out of that site until the beginning of the year, but the Netfone businesses actually have offices in Budapest.

Netfon Mobil and Notfone Invest Kft. also share the Morando pattern. The fund owns 99.9 percent of both companies, along with attorney Viktor Varnyú. The companies both received investments incrementally. Both clearly belong to the same group of owners, and three years ago they received HUF 450 million and HUF 445 million, respectively. Both companies received the money right when the Jeremie program’s rules were being made more stringent in order to prevent so much money from being given for similar activities.

Morando says that is no problem because the companies were not target-companies (investments). Corporate documents show that the funds were, in fact, transferred further. Companies belonging to Netfone Telecom received the funds.)

The question here is why there are even rules when it is so easy to circumvent them?

But maybe these rules aren’t so easy to sidestep. An audit of Morando found that the company had launched inquiries into two SPVs for unlawful use of funds. MFB did not confirm that these suspicions arose with the Netfone companies, and the Netfone companies refused to answer our questions. Aside from that, it is worthwhile to point out that one of the telecommunication companies owned by the Netfone group listed the Mátraballa family house’s address on its incorporation documents.

They shifted strategies after their first three purchases

Morando had some investments where it directly acquired an ownership stake, and some where an intermediary invested, but not a 99.9 percent stake. One such case was the controversial Makó thermal water project.

Morando invested in a company founded in the city of Makó and a professional entity — and this was perhaps the first loud Jeremie scandal.

Makó was awarded an EU grant worth HUF 444 million to start using geothermal energy, and it undertook the project with another regional company. The remainder of the money was invested by one of Morando’s SPVs, Geoterm Invest.

HVG reported then that the SPV would have increased its stake from 75 to 99 percent. The company allegedly forged the corporate minutes and squeezed out the minority shareholders in the project. The other parties have not commented on the story, the conflict has since been resolved, the project completed.

On top of this, Morando also invested in the Metapay festival payment card (and system), and digital signage (large poles with huge televisions on them), but market conditions forced it out of those businesses. These were the fund’s first three investment from 2010-2011. From 2012, Morando only made investments (in exchange for a 99 percent stake) through SPVs.

The goals it set out for itself in its tender have hardly been realized. According to Morando, whenever it could get out of a position while still in a good position, it could only do so with the network of its owners (for example, the Synergon connection). After visiting the headquarters of these companies and reviewing their corporate documents, it still is not clear how the funds invested in IT companies have been or will be used. The companies invested in own commercial rights and trade in software primarily with companies that are somehow tied to GÜP Zrt. or companies owned by Morando’s former or current owners.

When the time came for Morando to exit from these companies, new players with close ties to the fund managers popped in the companies — as was the case with a company owned by Lajos Törő. He, too, is a director at GÜP Zrt. He was also an executive at Carine Kft., and served as a supervisory board member at Morando Zrt.

His company, Dalta Bt., has stakes in five companies once owned or currently held in Morando’s portfolio. His stakes are generally under 1 percent.

If a company in the portfolio goes under, the loss is absorbed by the fund. If it exists successfully, the fund must pay a 5 percent success fee. In its tender, Morando forecasted annual growth of 22 percent, and it agreed to provide fund management services for 2 percent per year. It now seems Morando was very optimistic, having squandered its investments by 2013.

The EU will now launch a sample audit of the companies that were invested in. Serious on-the-spot investigations are performed five times per year at the most. And the final report of this seven-year program does not explain how well the Jeremie program actually worked. But there is a need for that. The dubious investment practices by Morando proves this.*

Personalities named in this article:

András Tombor: This former foreign policy advisor to the prime minister ended up as an executive at companies tied to oligarchs Lajos Simicska and Sándor Csányi. He was involved in the UD Zrt. scandal. As uncovered by tax authority audit, Tombor, along with Andy Vajna, is one of Árpád Habony’s financiers. In 2009, Tombor gave Habony HUF 20 million. According to, Tombor plays an important role in Budapest’s public procurement through his influence over a recently incorporated city-owned company.

László Mészáros: Together with Árpád Herbst, Mészáros is the founder and a former owner of the Budapest Communication and Business College (now named Metropolitan University). He is also a member of the GÜP Zrt.’s supervisory board. Morando’s tender to take part in the Jeremie program was submitted by GÜP.

Zoltán Jutasi: Jutasi served Synergon as chairman of the board between 2011 and 2013, but was replaced by Gansperger following the failed BKV project. Jutasi and Gansperger both served as executives in KÉSZ Holding, and both held an interest in LC Invest Kft. He joined the fund in 2013, and several companies he founded are now owned by Morando.

Gyula Gansperger: This Fidesz business potentate served as the chairman and CEO of the state-owned then privatized ÁPV Rt. (Interesting fact: when ÁPV Rt. was privatized during the first Orbán government, Századvég founder turned minister of chancellory István Stumpf supervised the transaction). He served as president of Synergon, a company that has multiple ties to Morando. He is a longtime business partner of Jutasi.

Dr. Árpád Herbst: Many consider the Gödöllő professor to belong to the Századvég crowd. He served as the president of Századvég Political College and as an advisor to István Stumpf. He is the majority owner of GÜP Zrt., the company that submitted Morando’s tender to take part in the Jeremie program.

Tibor Grácsmann: Grácsmann is a confidant of Gansperger and has served as an executive at several of his companies. He is considered to be a supporter of the right wing. He served as an executive in several Morando-funded companies, and his sons’ companies also received funding from Morando.

Péter Heim: He is the founder and president of the Századvég Economic Research Institute. Heim is no longer involved in the fund. He later separately submitted a tender to take part in the Jeremie fund, but that tender has since been taken away from him.