Hungary’s Constitutional Court has struck down that part of the law passed by parliament earlier this year for victims of the collapsed Quaestor brokerage house to be compensated up to HUF 30 million apiece, that is, well beyond the HUF 6 million provided for by law.
When Quaestor crashed this year (several ministries and government-owned companies managed to withdraw their holdings just before it closed its doors for good) the government (Fidesz) decided it would be a good idea to promise all the victims compensation for losses up to HUF 30 million per person. Sure enough, the decision defused mounting political tensions at the time.
Critics of the decision pointed out that Hungarian law only provides for HUF 6 million of compensation, and this was the amount the victims of the BudaCash collapse preceding the Quaestor one received and to which Quaestor victims were entitled.
Following revelations that Quaestor’s CEO and founder, Csaba Tarsoly, was closely linked to a number of Fidesz politicians (and even did business with the government in other areas), and that the questionable remittances to government bodies and government-owned companies in the days leading up to the collapse may have added to the company’s woes, Fidesz MP Antal Rogán submitted a bill — the so-called Lex Quaestor — providing for all victims of the scandal to be compensated for losses of up to HUF 30 million.
Because the victim compensation fund had already been largely depleted over the course of compensating the victims of earlier scandals (BudaCash, Széchenyi Bank), the law required financial brokerage firms and banks trading in securities to advance sufficient funds to cover most of the projected outlays.
The banks responded by filing a lawsuit. In addition to arguing that it was wrong to require them to compensate the victims of a former competitor which acted irresponsibly or even criminally, they also pointed out that it was unfair to compensate Quaestor victims up to five times more than BudaCash victims.
Today the Constitutional Court struck down the part of law providing for the compensation of victims holding between HUF 6-30 million.
Some 31,000 Quaestor customers have already been compensated for losses of up to HUF 6 million at a total cost of some HUF 88 billion. The court decision reportedly represents a saving to the government of around HUF 100 billion.
In a statement issued to the Hungarian news service yesterday, János Halász, Fidesz’s parliamentary fraction spokesman, blamed the banks for challenging the law but said his party will respect the court’s decision.
With the law being struck down in its current form, the Hungarian government must now try to manage the fallout from the Quaestor disaster. Now that Lex Quaestor mastermind Rogán has been promoted to minister chief of staff responsible for government communications and given an annual budget of USD 92 million, he should have little difficulty finding ways to blame others for the government’s failure to properly regulate the financial industry and safeguard the interests of depositors and investors.
Previously, experts accused the government of complicity in the collapse of the financial brokerage and of being involved in insider trading and asset-stripping. In the wake of the collapse, MOMA chairman and former finance minister Lajos Bokros told the Beacon:
“At the same time when the small investors were gathering in front of the closed doors of Quaestor, they were told that the company was under bankruptcy protection and consequently could not get their money. So there was a clear distinction to be made between small investors and state organs, and if that was truly what was happening, then it was not only an insider trading type of criminal offense but also asset stripping….Stripping assets out of a bankrupt company in order to minimize the losses of one type of investor while at the same time as a consequence increasing the losses of another type of investor. Not only small investors but also state organizations lost a fortune because the Prime Minister notified only some groups of state organizations, some ministries, but not others, and deliberately not the local governments. Many local governments lost their money. Local governments are part of the state.”