Meet Andy Vajna, film industry commissioner and casino mogul

October 20, 2015

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“(Andy Vajna’s) success as a businessman is can be attributed entirely to the good will of the state.  In the end he perfectly embodies the state capitalism built by the present government, or if you like the National Cooperation System (NER).”

Translation of István Váczi’s article entitled “Winner in the National Cooperation System” (“Nyerő a NER-ben”) appearing in the October 15-21 edition of business weekly Figyelő.

From sugar daddy to casino mogul—Andy Vajna has a range of investments in Hungary.  However, he has the casino concessions from the government to thank for his businesses successes, at least those measured in money.  Here he reaps profits in the billions.  If it is necessary to help him, then state revenues are not so important.

The culture of jealously is not compatible with the culture of the current cabinet.  András Giró-Szász came up with this statement while still undersecretary when asked along with János Lázár what they think about the profits made by his casinos being repatriated to Andy Vajna’s Luxembourg company.   János Lázár drove the point home later when the Minister overseeing the Office of the Prime Minister reported that the national security examination of the government commissioner for the film industry had been delayed four years.  (Which was concluded with acceptable results).

Seven fold increase in dividends

What’s for certain is that the government cannot be even remotely accused of jealousy, if we are talking about such actions that enrich the enterprises of the transplanted former US dream maker.  There is no doubt that Vajda laid the basis for his fortune on the other side of the sea independent of his Hungarian connections.  But as to how much that might be, perhaps even the American tax authorities would not undertake to determine.  The authorities there had enough problems with him, when they examined what happened to the taxes arising from the sale of shares in one of his companies though his offshore companies.  The outcome of that matter, as reported in 2011 by Magyar Narancs, was that he paid USD 6.5 million in tax arrears.

It would be extraordinarily surprising if a similar inspection were to take place in Hungary, even though MSZP recently urged an audit of his personal assets.  It is certain that Vajda’s prosperity in Hungary took on newer and newer momentum under the Fidesz government.  For example the Las Vegas casino, which continues to operate, got its concession in 1999 under the first Orbán government.  However, that is nothing in comparison to what came in 2010.  Judging from the data, it appears that under the second Orbán government companies in which he has an interest paid seven times as many dividends, which increased to HUF 3.2 billion (USD 11.8 million) (see graph).

It is not necessary to dig too deeply at home to find the source of this: the dividends are entirely due to the Las Vegas casino.  After relatively modest profits initially it started to take off once the government banned the operation of slot machines outside of the casinos.  This was the most important thing.  But apart from this there was a series of government measures that helped Vajna’s prosperity grow.  Meanwhile the rapid banning of slot machines makes it conceivable that the state will have to pay damages to companies that were ejected from the business.  But that does not bother the cabinet, nor, as apparent in the introduction, the fact that Vajna’s profits find their way to offshore companies, and that, despite an extremely exotic company structure, he still managed to qualify as a reliable gambling operater.  (According to critical opinions, it is expressly useful to the government’s economic supporters that the trail of money cannot be followed by mortals.)

Free market failure

As our magazine has reported on several occasions, Vajna obtained the right to operate an additional four casinos in the capital city, which started their operations this year.  In other words, there is a good chance that the profits will be larger and achieved more easily and might even exceed the HUF 7 billion (HUF 26 million) foreseen by our publication (at the end of last year-ed.).  Apart from the gambling business, Vajna’s other business endeavers here have failed, judging solely on the basis of numbers.  He closed his fashion house.  The company operating the Nobu restaurant has lost half a billion forints (USD 1.8 million) in under 5 years.  Film distribution company InterCom Zrt. has lost a total of HUF 2.3 billion (USD 8.5 million).  In short, the situation is that Vajna has failed in the domestic free market.   His success as a businessman can be attributed entirely to the good will of the state.  In the end he perfectly embodies the state capitalism built by the present government, or if you like the National Cooperation System (NER).

However, this does not damper his mood to measure himself in new areas.  Apart from TV2 in the media field he could obtain or start a radio company.  And it is also known that, together with his wife, he has gone into the diamond business: The Dorottza Diamon Palace Kft. shop opened its doors one and a half months ago.  It is certain that his wife, Timea Vajna, likes the resplendence.  She regularly posts photographs to Facebook that reflect her standard of living, for example of her husband’s private airplane or driving a Lamborghini in the French Riviera.  Anyway, on the basis of this, János Lázár and András Giró-Száz can relax because among the comments there isn’t a single one that is malicious or jealous (although this may be the result of thorough moderation).  It was also revealed on the social media website that not only Andy Vajna is on good terms with right wing communication guru Árpad Habony and soon to be minister Antal Rogán, but that Tímea Vajna is on good terms with the latter’s wife.

New source of income

In any case, it probably won’t cause a problem if, God forbid, the diamond businesses only generates losses for a number of years.  Parliament has already arranged for certain organizations to reap the benefits of online gambling in addition to their traditional casino profits.  These websites presently operate in Hungary in the gray or black, and naturally it serves the public interest that we pay the taxes after what is paid in by the Hungarian players.   After previous attempts the legislators—in a bizarre manner—said that the online casino games can only be operated by those who operate traditional forms of gambling.  In Hungary today that is Andy Vajna and Gábor Szima, the businessman and operator of the Debrecen and Nyíregyhaza casinos known for his Debrecen football club.

The Sopron casino is jointly owned by Casinos Austria and Szerencsejáték Zrt., but the concession rights expires at the end of the year.  The state kicked its own company out of the business when Szerencsejáték Zrt. wasn’t even allowed to keep the Tropicana in the capital city.  After some modifications Vajna was able to reopen it.  It appears that the state stands on such stable legs financially that the nearly HUF 5 billion in dividends paid out thanks to the Tropicana are not missing.  Nor will the deductible HUF 3.8 billion (USD 14 million) concession fee.  (The Ministry of National Economy believes it helps the business make more money and pay more taxes this way).  So the state company won’t even be a competitor of Vajna’s in the online gambling industry.

The development of a website for a casino minimally involves an investment of many hundreds of millions of forints.  But it occurred to both Népszabadság and Magyar Nemzet that, according to the law (prohibiting foreign online gambling websites from operating in Hungary-ed.) Vajna and Szima can make the websites of international services available in Hungary.   This does not require a large investment, and the profit in the form of commissions is guaranteed.