Pallas Athéné foundations fined HUF 84 million for violating public procurement law

August 10, 2016


Foundations owned by Hungary’s central bank have been fined HUF 84 million (USD 300,000) for systematically violating public procurement regulations after the Constitutional Court ruled that the funds with which they had been endowed constituted public funds.

At the the behest of prosecutors and the National Bank of Hungary’s own Pallas Athéné foundations, Hungary’s Public Procurement Committee found that the latter had violated public procurement law in 66 out of 112 examined cases.

The following announcement was posted to the foundations’ website.

“The Public Procurement Committee completed its examination in a satisfactory and reassuring manner within a short period of  time.”  According to the website, the committee examined 112 cases out of over 1000 contracts signed by the foundations since their inception.

The investigation was prompted by numerous scandals of late involving the expenditure of central bank funds, as accused by former deputy governor Zoltán Bodnár.  Bodnár told ATV’s Straight Talk on Tuesday that, in his opinion, these were not simple mistakes but rather symptomatic of the systematic theft of public funds taking place at the central bank under its governor, György Matolcsy.

Bodnár believes the mistakes were deliberately committed, for which the foundations’ directors and trustees should be held to account.

In his opinion, the committee’s decisions clearly show that state organs are engaged in a coordinated attempt to whitewash crimes committed by the Pallas Athéné foundations.

The penalty, which will be paid from the USD 900 million transferred to the foundations from the central bank, amounts to 3 percent of the value of the contracts, a “symbolic” amount according to Bodnár considering public procurement law permits penalties of up to 15 percent.

Bodnár believes the committee should have filed a civil lawsuit to invalidate the 66 contracts as it had on numerous previous occasions.

“Although nothing can be done about the contracts that have already been fulfilled or expired, I suspect there are a number of contracts among them that are still active,” he said.

The former banker-turned-politician says the reason the foundations consider the outcome of the investigation “reassuring” is because prosecutors are not considering charging its directors and trustees with criminal malfeasance.

He says that rather than referring the matter to the Hungarian Public Procurement Committee, prosecutors should file charges of criminal malfeasance.

“The responsibility of the foundation oversight committee and board of trustees can be determined as they are the ones responsible for ensuring the foundations operate lawfully,” said Bodnár. He added, sarcastically: “Try to imagine Hungarian head prosecutor Péter Polt bringing charges of criminal malfeasance against the Pallas Athéné Domus Animae (PADA) foundation, where Gyögy Matolcsy himself is the chairman of the board of trustees.”

Polt’s wife works for the National Bank as the director of human resources, for which she reportedly receives an annual salary of HUF 60 million (USD 220,000).

The Public Procurement Committee opened its investigation after the Constitutional Court ruled that the funds with which the foundations had been endowed constituted public funds and, as such, were subject to public procurement regulations.

Political analyst László Kéri said of the situation:

“The MNB is disinterested.  Gyögy Matolcsy is disinterested.  The model is interesting because for the past six years the entire government has been built over centers of income distribution.  So long as they do not begin systematically investigating and criticizing this, Matolcsy, the central bank and the like can rest at ease, who receive eight to ten million forints for their books nobody reads.”