Off-shore companies profit from the sale of Hungarian settlement bonds

September 30, 2016


While the government is causing mass hysteria about refugees, its support of those paying for the right to settle in Hungary is without precedent. On top of this, it is not the state but rather primarily a privileged circle of companies that is profiting.

Translation of “There’s more room inside” (“Belül Tágasabb”) appearing in the September 22nd, 2016 edition of print weekly hvg, pp. 8-10.

Not all too concerned with reality, Fidesz national assemblyman József Attila Móring sounded the alarm on the obligitory resettlement of a hundred thousand migrants when trying to explain to the press why he is trying to convince mayors in the region of Marcal to review empty real estate. Migrants rarely stay here, and presumably wouldn’t want to populate Hungary even if the October 2 quota referendum doesn’t end in the result the Orbán government has been so vigorously pushing. Gradually, however, a small city could be filled by monied foreigners who, with the purchase of government settlement bonds – out of turn as a kind of VIP citizen – gain rights for settlement in Hungary for an indefinite period. Those who come up with the face value of a EUR 300,000 investment – more than HUF 90 million at today’s exchange rate  – can bring with them their direct family members, spouses, dependent children and parents, too. This way three or four times as many settlers can be expected as those who actually invested – according to Government Debt Management Center (ÁAK) data, now nearly 4,000 have paid a face value of EUR 1.1 billion. Interior minister Sándor Pintér has previously announced to the press that 18,000 people had invested, to which the Government Information Center, in their own special humor, commented to HVG that “half of that number isn’t even true.”

The bond scheme, dreamed up by cabinet minister and former chairman and advisor to the Parliamentary Economics Commission Antal Rogán, lurched into action in 2013, but now is in full swing. The ÁAK informed HVG that this year 3,354 state bonds were applied for by foreigners, 798 of those in August alone. This means more than 500 people have won settlement in 2016 – together with their family members, this is more people than asylum seekers that would have to be temporarily accepted until the processing of their applications according to the EU quota regulations.


The purchasers of settlement bonds – mostly Chinese businesspeople and entrepreneurs – probably don’t desire abandoned real estate in Somogy county villages. That is, if they stay here at all and don’t bounce over to another EU member state. But the phenomenon has become a political scandal several times in the past weeks, about which the bond purchasers cannot do any more than can refugees about the suggested connections between themselves and terrorism which the government has used to turn propaganda against them. Although it is accepted across Europe that in exchange for serious investments – in state securities, real estate, and business – settlement rights are offered to third country nationals, the Hungarian system lacks transparency, encourages corruption and shady deals, and from the point of view of the state, is distinctly disadvantageous, which is why it is constantly and deservedly attacked. MSZP [Hungarian Socialist Party] and LMP [Politics Can Be Different] demand the immediate cessation of the program, DK [Democratic Coalition] called for an investigation by the Chinese anti-corruption office, while Jobbik preaches about the risks to national security and the selling-out of the country.

The last thing to stir the scandal was when a supposed Canadian brokerage firm advertised the settlement bonds by saying that, compared to the eight years laid out in the regulations, citizenship and a passport could be obtained within five years, even without a language exam. Chairman of the Parliamentary Committee on Economics Erik Bánki called the news a “press diversion.” He didn’t, however, react to the information published by Magyar Nemzet two weeks ago that a Russian convicted of fraud in Russia was also able to cleverly circumvent the system and receive settlement in Hungary, and launder his money with Hungarian bonds. He was issued a Certificate of Good Conduct in an offshore paradise where he had once resided. Secretary of the Prime Minister’s Cabinet Office Csaba Dömötör called the accusation “unserious,” saying that the Hungarian authorities have 30 days to screen the bonds, and they don’t award settlement permission to those “unworthy.” A law expert asked by HVG said that several Hungarian authorities (the immigration and constitutional protection office, counter-terrorism services, police) screen the foreigners, and the process often drags on for more than 60 days, but there can be such countries which don’t have reliable information on their citizens (India, for example, with 1 billion inhabitants.) This way, criminals can sometimes slip through the filter, but not in larger proportions than, let’s say, the banks being investigated on suspicion of money laundering. The case is also juicy, however, because as news site 444 already wrote in April, referencing the interior minister, a bonds program recipient living in St. Kitts and Nevis is probably none other than the cited Russian.

The opposition can only milk the scandal brought on by these dubious cases while the brokerage companies involved in the elimination of market competition are still able to work in the settlement bond business. Only the economics commission can appoint them, based on unknown criteria. An exception strengthens the rule: while the government visibly complains about the tax-evading offshore businesses, with one exception of the Fidesz-dominated economics commission, the offshore companies partially or entirely owned by Hungarians, are authorized as intermediaries, the market being distributed on a country by country basis. The only Hungarian firm is reportedly led by a university friend of Antal Rogán, who, along with his Bulgarian co-owner, took more than EUR 300 million worth of forints in dividends from the company. More than 90 percent of turnover is through a Chinese brokerage, and to keep things interesting, a company registered in the Cayman Islands is represented by the Chinese banker who reserved a sightseeing helicopter tour of Hong Kong for mysterious government adviser Árpád Habony. Another little gem is that there have already been three such brokerage firms, and a newer Cyprus-based firm just got permission, so now there are five. This one is led by János Bodó, known from his gallery on Falk Miksa utca in Pest, whose business partner in his Hungarian company is Gábor Földvári, also the owner of a Cyprus-based bond brokerage firm, who says that this is merely the work of coincidence. Bodó told HVG that he was cut in on the business thanks to “regular customers” arriving from Asian countries.

The network is confusing in relation to ownership, income and taxation, and is therefore excellent for redistributing part of the money of those wanting to settle. This suspicion is strengthened by the fact that in the background – like in all worthwhile government business recently – Habony is lurking. The foreigners do not even buy the Hungarian bonds, only the brokers can provide them at a discount price defined by law. The state is paying the face value of the five-year papers issued until now, which expire in 2018, which have a guaranteed annual yield of 2-2.5 percent, higher than the Euro market. The state is losing many billions of forints while the brokers win. Bánki, however, doesn’t see it this way. The bond, he said, “doesn’t raise interest expenses, because you don’t have to pay interest on it for five years.”

The foreigners aren’t coughing up the EUR 300,000 and buying the settlement bonds from the brokers. Instead they are investing into the brokerage firms’ own registered five-year securities. The conditions of these securities are unknown. Beyond this is a EUR 45-60,000 per person fee that must be paid, something on the order of over HUF 10 million, which the broker distributes among the domestic and foreign lawyers offices, tax advisers, visa case workers and other services working with them. To avoid going too far, the marketing of the bonds is propagated by – naturally for a commission – honorary Bahrein consul Balázs Garamvölgyi, shepherd to Ráhel Orbán and her husband István Tiborcz. As an attorney told HVG: it is self evident from the chosen brokers that the Kosik Attorneys Office is linked to the Rogán-Habony pair and working with them to distribute the fees. The Kosik office didn’t answer questions by HVG by the time of publishing. However a Hungarian director of one of the brokerage firms – without giving his name – denied that there is any such arrangement. However, he did acknowledge that he gives the Kosik team certain responsibilities since “there are tasks here which require such expertise, which only a select few can perform.”