Translation of Krisztián Magyar’s article “Sniff around somewhere else” (“Szaglásszanak máshol”) appearing in the October 15th edition of Magyar Narancs (pp. 11-13).
The Hungarian state is not exactly willing to cooperate with the European Union Anti-Fraud Office (OLAF) despite the risk of corruption in Hungary being among the highest in the EU. OLAF’s Director-General, Giovanni Kessler, personally handed over documents to Hungary’s chief prosecutor last summer hoping that something would happen. OLAF operates on a very tight leash and in most cases it can only make recommendations. These recommendations are either accepted by the Hungarian state or not. Mostly not.
In cases involving the supervision of European Union structural funds , the Hungarian state doesn’t exactly open its doors to OLAF or its employees. Cooperation would be a good idea because more and more stories are surfacing in the media which show that OLAF has investigating cases in Hungary. The Hungarian public hears these stories and thinks the EU is finally going to do something about Hungary but, unfortunately, that is far from the truth.
OLAF, which belongs to the European Commission (EC), should be taken seriously. But it simply lacks the kind of influence that can obstruct the mechanism which has allowed Fidesz-linked companies to prosper so conspicuously from public procurements projects in recent years. This is the fault of Hungarian authorities–the same authorities that have avoided investigating cases of corruption despite having a strong and established suspicion of corruption. This is probably why people like the Orbán’s pipe-fitter friend turned millionaire Lőrinc Mészáros, Orbán’s son-in-law István Tiborcz, Orbán’s former classmate Lajos Simicska have avoided any scrutiny, as well as the system that has allowed them to prosper so unusually.
It is true that Lajos Simicska may have some hard times ahead. But these hard times will mostly likely be the result of Viktor Orbán seeking revenge rather than the result of Hungarian authorities doing their jobs.
OLAF, which has been operating since 1999, is primarily tasked with supervising the use of EU funds to reduce the risk of their being squandered on corruption.
The state doesn’t think there is any corruption
OLAF acts as a protector of the EU’s financial interests and therefore has the authority to carry out internal audits at every EU-financed organization and agency to uncover inappropriate use of EU funds. Any abuse of funds is reported to the European Commission which, in turn, decides whether or not, and to what extent, it will take action based on OLAF’s findings.
The story becomes much more complicated when OLAF uncovers issues related to the misuse of EU funds in individual EU member states. OLAF cannot actually act as a prosecutor in these cases. It cannot tap phones, raid offices or tag along with member state investigators if cases are being investigated.
The EC is responsible for aiming sanctions in cases uncovered by OLAF. It can suspend funding for certain projects, and it can halt funding or demand funds be repaid. But the dishing out of sanctions is far less than the number of cases opened by OLAF.
In Hungary’s case, the most recent such case involved funds tied to the Economic Operative Program which the European Commission stopped disbursing because of the manner in which the public procurement tenders were awarded was not in line with EU regulations, among other things. The debate, which started in April, went on for months between the Hungarian state and the EC. Finally Hungary managed to convince the EC and HUF 100 billion (USD 370 million) was released to Hungary to use up before the end of 2015.
There are other systemic problems the Commission has found with how Hungary has used EU funds. Currently, Hungary risks having sanctions that would halt the payment of 2 percent of the HUF 700 billion (HUF 2.6 billion) of EU Economic Operative Program funds. The two parties are still negotiating.
OLAF has a hard time working with Hungary, where many of their investigations never result in anything beyond a tidbits of information being leaked to the press. All OLAF can do in these cases is recommend that Hungarian prosecutors open investigations into the cases they uncover. A few countries, including Hungary, are not so keen to partner with OLAF in such cases. The recommendations are not binding and OLAF cannot require that the member states launch an investigation based on its findings.
Despite statements coming from the Prime Minister’s Office, the response of the Hungarian government to OLAF’s recommendations is very telling in that neither the government nor its agencies are keen on officially working with OLAF. It’s also worth pointing out that working with OLAF isn’t a one-way street. Member States and their governmental agencies also have the power to turn to OLAF if they themselves suspect corruption taking place. In 2014, the Hungarian government made no such effort to report suspected cases of corruption to OLAF. Germany, on the other hand, reported 10 such cases, Belgium 28, and even Italy reported 7 such cases to OLAF.
Reporting cases of corruption in Hungary was strictly limited to the work of private citizens, businesses, and NGOs. In such cases, Hungarian entities reported 28 such cases to OLAF. When this happens, OLAF is the one who decides whether to open an investigation based on the information provided by the private entities.
According to information published OLAF, Hungary had the second highest number of OLAF investigations closed out of all EU Member States after Romania. In 2013, OLAF wrapped up 13 cases in Hungary, but nothing is known about the final outcome of the cases. It isn’t known whether Hungarian authorities opened investigations based on OLAF’s findings.
OLAF doesn’t published figures related to the number of cases it has opened in Hungary. But Nándor Csepreghy, an undersecretary at the Prime Minister’s Office, said at the end of March that OLAF is investigating 50 public procurement cases valued at more than HUF 500 billion in EU funds.
It’s no mistake, writes Magyar Narancs, that OLAF’s division that focuses on Hungary is one of the largest in the organization. It has four such employees that focus exclusively on Hungary, compared to much larger countries where OLAF has only two or three country-specific employees. Beyond the country-specific employees, OLAF employs a vast number of experts to assist the organization in its work.
“Giovanni Kessler, director general of OLAF, has over of the course of numerous background discussions said that Hungary receives more than the average amount of attention in OLAF’s work and that Hungary has a high risk of corruption,” a source in Brussels familiar with OLAF’s work told Magyar Narancs. The source also said it’s rare that the director general himself would personally deliver OLAF’s findings to a given country’s chief prosecutor as he has done in Hungary’s case.
Kessler visited Hungary’s chief prosecutor Péter Polt in June to let him know about three particular cases. One these cases, according to Magyar Narancs, had to do with a company belonging to Prime Minister Orbán’s son-in-law, István Tiborc. The company, Elios Zrt., has been incredibly successful in projects related to public lighting… Another case discussed by Kessler and Polt had to do with financial abuses in the “Heart of Budapest” city renovation project. The third case was related to projects awarded to Közgép Zrt., a company owned by Viktor Orbán’s former classmate and Hungarian oligarch Lajos Simicska.
According to Magyar Narancs, Giovanni Kessler scheduled the meeting tell Polt that he doesn’t take kindly to the Hungarian prosecutor’s inaction on these highly important cases anti-corruption cases.
OLAF, in the first six months of 2015, has opened more than 20 cases in Hungary. European authorities are becoming much more interested in the financial abuses taking place in Hungary.
“The two parties informed each other of progress each was making in cases they were working on, they discussed what kind of progress they would like to see and information they would like to exchange. OLAF handed over material related to their most recent findings….The two parties agreed that OLAF and Hungarian authorities have an outstanding working relationship that has proven to be successful in numerous cases so far,” read a statement released by the Hungary’s chief prosecutor regarding the Kessler–Polt meeting.
The final sentence of the statement was especially interesting because, unlike the vast majority of EU Member States, not a single Hungarian authority has signed a cooperation agreement with OLAF. The point of a such an agreement is to agree that a Member State agrees that its public administration and law enforcement agencies would work closely together with OLAF.
Benedek Jávor, a Dialogue for Hungary (PM) MEP, thinks OLAF would have a much easier time working in Hungary if the Hungarian government would stop obstructing its investigations. He says that OLAF doesn’t have big problems in places where the fight against corruption is taken seriously. The problem starts in countries like Hungary where only an expanded jurisdiction of OLAF can have an impact. Unfortunately, such a solution would cause countries like Hungary to cry foul about a loss of sovereignty, says Jávor.
Democratic Coalition (DK) MEP Csaba Molnár says the current Hungarian government has been one of the loudest opponents of the European Commission’s call for the creation of a European Prosecutor’s Office which would have the authority fully investigate and prosecute against financial abuses in all Member States.
Molnár says the only Fidesz’s corrupt practices can be exposed is if an independent fully-authorized entity has the power to investigate such criminal matters.
The creation of a European Prosecutor’s Office, if the EU ever gets around to it, would take many years to become operational. OLAF itself won’t become more effective from one day to the next.
Things will continue to remain the same: the Hungarian government will continue to act like its law enforcement agencies are only investigating cases recommended by OLAF that are tied to Közgép.