In the wake of yesterday’s acknowledgement by Prime Minister Viktor Orbán that he personally ordered ministries to withdraw funds on deposit at Quaestor, Hungarian opposition politicians demand to know how the government knew the financial services company was on the verge of collapse and why it didn’t do more to protect the firm’s non-governmental clients.
Unlike with Buda-Cash Broker House Zrt. or Hungaria Securities Zrt., whose collapse preceded (and perhaps even triggered) that of Quaestor, the Hungarian government maintained highly questionable ties with the latter, which may explain why Quaestor’s owner and former CEO, Csaba Tarsoly, has yet to be taken into custody despite his firm allegedly issuing some HUF 150 billion worth of counterfeit bonds.
Quaestor was much more than a brokerage house
Hungarian news outlets, including Index.hu and 444.hu, have recently published articles about the Hungarian government’s deep relationship with Quaestor. It turns out that in addition to providing brokerage services to Hungary’s state-owned enterprises, Quaestor also played an important role in the Hungarian government’s controversial “eastern opening”.
Together with the government, Quaestor operated the National Trading Houses of Hungary in places such as Istanbul and Moscow. The government’s partnership with Quaestor to boost foreign trade with Hungary was manifest through the brokerage’s relationship with the Ministry of Foreign Affairs and Trade.
Quaestor provided brokerage services to a number of state-owned enterprises tasked with boosting Hungary’s foreign trade, including the National Trading House of Hungary (Magyar Nemzeti Kereskedőház Zrt), the Hungarian Import-Export Bank (Eximbank, Magyar Export-Import Bank Zrt) and the Hungarian Export Credit Insurance company (Magyar Exporthitel Biztosító Zrt).
When asked why it didn’t just keep its funds with the Hungarian State Treasury, the Ministry of Foreign Affairs and Trade said in a statement that “based on [the ministry’s] preliminary studies, of all the financial brokerages Quaestor was the only company which would provide the Ministry of Foreign Affairs and Trade with services free of charge”.
The ministry withdrew all state-owned enterprise funds managed by Quaestor just four days before the brokerage firm announced it had gone belly up.
Mixed messages from the government
The Ministry of Foreign Affairs and Trade admits that the National Trading House of Hungary had part of its capital (through its state-owned enterprises) on deposit with Quaestor.
Regarding whether the public funds on deposit with Quaestor were lost when the company went belly up, the ministry responded in a statement that “[the National Trading House of Hungary’s] executives had been watching trends on the financial market and saw the collapse of Buda-Cash and Hungária Értékpapír, and that’s why they decided to no longer keep their funds on deposit with the brokerage and therefore removed the funds from Quaestor.”
Despite justifying its decision to remove public funds from Quaestor based on ominous market trends, the ministry’s statement does less to quell concerns of its questionable relationship with Questor, and instead opens the door for even more questions.
On Wednesday Prime Minister Orbán announced that he personally ordered government ministries to withdraw their funds from the brokerages. His statement appears to contradict Minister of Foreign Affairs and Trade Peter Szijjártó’s earlier statement.
At a press conference in Sopron the Prime Minister was asked whether he thinks it’s odd that the Ministry of Foreign Affairs and Trade withdrew its funds from Quaestor just days before the company declared bankruptcy. Orbán responded by saying that he ordered the ministry to call down its funds when Buda-Cash collapsed because he had been briefed that the crash may trigger a “domino-effect”.
Hungarian news outlet Nepszabadság writes that his order (which had likely been given during a government meeting on March 4) was for government ministries to review whether public funds were being managed by brokerage firms, and if so, to withdraw the funds immediately because of “the risk of a domino-effect” taking place which would result in the loss of public funds.
Based on the Prime Minister’s statement, it certainly seems that way. If Orbán is telling the truth about personally ordering public funds to be withdrawn from Quaestor, then the Ministry of Foreign Affairs and Trade wasn’t being truthful in their earlier statement in which they claimed that the executives at the National Trading House of Hungary made the decision to pull out of Quaestor.
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