Ligeti: Hungarian prosecutors can investigate tax officials if they want to

November 9, 2014


Weeks after the United States informed Hungary’s Ministry of Foreign Affairs and Trade that six Hungarian individuals had been temporarily banned from entering the US, the Hungarian Chief Prosecutors Office has yet to formally launch an investigation, even though Hungarian law provides for a pre-investigative procedure to determine whether there are grounds for suspicion of criminal activity, according to Transparency International’s Miklós Ligeti, a former state prosecutor-turned-legal activist.

Presidential Proclamation 7750

The temporary suspension of the right of six Hungarians to travel to the United States took place on the basis of Presidential Proclamation 7750 which bars

certain persons who have committed, participated in, or are beneficiaries of corruption in the performance of public functions where that corruption has serious adverse effects on international activity of U.S. businesses, U.S. foreign assistance goals, the security of the United States against transnational crime and terrorism, or the stability of democratic institutions and nations.

According to unnamed sources speaking off-record the proclamation was issued by President George W. Bush in 2009 in response to the fact that “the Foreign Corrupt Practices Act doesn’t reach the kleptocrats — it applies only to bribe-payers and not bribe-takers”.

When anti-corruption NGOs furnish evidence of corruption, a decision to designate is vetted across several bureaus at the State Department and is approved by a high-level Department of State official. US officials are not required to inform the targeted individuals what evidence was utilized in the decision. Nor are they required to provide specific information to the government of the targeted individuals’ country.

US Embassy Charges d’Affaires in Hungary André Goodfriend has pointed out on several occasions that the Hungarian government has sufficient information to investigate cases of official corruption should it wish to do so. The Hungarian government has responded somewhat disingenuously that it cannot open an investigation unless the US government furnishes it with detailed information and evidence supporting allegations of corruption.

Tax fraud, bribes

Shortly after news of the ban broke, rumours started circulating that Ildikó Vida, the head of Hungary’s Tax Authority (NAV), was one of the individuals on the list.  Vida left the country on a “previously planned” vacation and could not be reached for comment.

Upon her return, Vida gave an interview to pro-government Magyar Nemzet acknowledging being one of the six but denying any wrongdoing and claiming she had informed her superiors in a timely manner.  Since then one of Vida’s deputy directors has also acknowledged being on the list.

Although the US Embassy has refused to disclose details citing US law, the ban appears to be related to the failure of Hungarian authorities to investigate allegations made in October 2013 by former tax inspector-turnedwhistleblower, András Horváth.

Horváth publicly claimed that NAV had been conducting “discriminative audits” and “turning a blind eye” to tax fraud on the part of multi-national companies with good political connections.  He calculated this practice deprived the treasury of some HUF 1 trillion (USD 4.6 billion) a year, or roughly 5 percent of Hungary’s GDP.  At a press conference jointly held with investigative journalism website átlátszó.hu, Horváth displayed a green dossier containing documentary evidence supporting his allegations, or so he claimed.  The dossier was subsequently confiscated by police during a search of Horváth’s home. Nothing has been heard of the matter since.  Although charges were brought against Horváth, no charges were brought against his former employer.

It may also be related to attempts to solicit bribes from US companies doing business in Hungary.

Prosecutors refuse to act

Last week Hungary’s Chief Prosecutors Office issued a statement according to which it cannot investigate whether any criminal conduct occurred that might explain why Vida was barred from the United States.

Miklos Ligeti, Director of Legal Affairs for Transparency International Hungary, thinks the Prosecutors Office is wrong.

According to Ligeti, a criminal investigation may take place if there are reasonable grounds for suspicion of criminal activity. He says that in the absence of grounds for suspicion, prosecutors may launch a pre-investigative procedure to determine whether there are grounds for suspicion. Ligeti says that if the pre-investigative procedure reveals grounds to suspect a crime has taken place, then the prosecutor may launch a formal investigation.

Ligeti believes prosecutors have ample reason to open an investigation to determine whether NAV has been selectively enforcing VAT laws affecting specific agricultural products sold in Hungary, such as cooking oil.

Enlightened self-interest

A legal expert wishing to remain anonymous tells the Budapest Beacon that the Prosecutors Office would be wise to open an investigation for two reasons. First, the Prosecutors Office could drag the investigation out for one or two years, during which time it could refuse to comment on an “ongoing investigation”.  Secondly, opening an investigation would “prove” there is no political motivation behind their refusal to act to date.  According to the expert “crimes of corruption in Hungary involving political elements have always been problematic for prosecutors to investigate. In this particular case, denying that there is any reasonable suspicion to launch an investigation indicates that any step taken by the Prosecutors Office will have political consequences”.