How Hungarian PM's supporters profit from EU-backed projects

While Viktor Orbán has criticised EU, some of his friends and family have won EU-funded infrastructure contracts

The train to nowhere, some dazzlingly expensive street lights and the pipe-fitter turned business mogul who happens to be the prime minister’s friend. One common thread links them all: Hungary’s combative leader, Viktor Orbán, and his bête noire, the European Union.

Orbán has attacked the EU relentlessly since he took office in 2010, comparing it to the Soviet Union and launching a “Stop Brussels” campaign. At the same time, some of his family and supporters have become rich, partly due to winning EU-funded contracts to build Hungary’s roads, railways, waterworks and other public infrastructure.

More than 80% of public investment in Hungary comes from the EU’s cohesion funds, which are intended to help poorer regions and countries catch up.

“Mr Orbán has been bashing the EU for years; at the same time his inner circle is getting rich through EU funds,” said András Pethő, a journalist who co-founded Direkt36, which investigates Hungary’s new crony capitalism.

Orbán’s son-in-law is one of the most prominent people to have gained from EU funds. István Tiborcz, who married Orbán’s eldest daughter, Ráhel, in 2013, owned Elios Innovativ when it won contracts to supply Hungarian towns with EU-funded street lamps.

In some cases the lamps proved to be 56% more expensive than usual, although prices of LED bulbs were falling at the time, Direkt36 found. Last month the EU’s anti-fraud office, Olaf, called on Brussels to recoup €40m after it found “serious irregularities” and a “conflict of interest” following a two-year investigation into street-lighting contracts that were signed when the company was owned by Tiborcz.

Olaf does not publish its reports or reveal who is named in them, but the Guardian understands that the irregularities relate to contracts signed in 2011-15, when Tiborcz was an owner of the company.

In 2016, Hungary’s police closed an investigation into Elios after concluding no law had been broken.

In a separate case, about €2m in EU funds helped pay for a tourist train from Orbán’s childhood village, Felcsút, to another hamlet three and a half miles away. Hundreds of people would need to travel every day for the project to break even, but most days the vintage carriages are nearly empty.

The handful of visitors taking the heritage train can visit a 4,000-seater football stadium in Felcsút, which could accommodate the entire village more than twice over. Orbán, a former five-a-side player, is a regular at the Pancho stadium, which is a stone’s throw from his house.

The stadium was built by the construction company of the Felcsút mayor, Lőrinc Mészáros, the prime minister’s friend and the eighth richest man in Hungary. A former gas fitter, Mészáros owns 121 companies that span construction, real estate, media, wine and farming. His companies and those owned by his family are some of the biggest beneficiaries of public procurement contracts in Hungary, according to the transparency website Átlátszó, which estimates that 83% of Mészáros family companies’ earnings come from EU sources.

In 2017, Mészáros’s wealth tripled to HF106bn (€327m), according to Forbes Hungary. Spokespeople for Mészáros did not respond to a request for comment. Once, when asked to explain his achievements, Mészáros answered: “God, luck and Viktor Orbán.”

Some beneficiaries are harder to trace because sub-contractors do not appear in public databases. A company owned by the prime minister’s father, Győző Orbán, was reported by Direkt36 to be supplying concrete and stone to two large EU-funded sewer projects and an EU-funded railway along Lake Balaton that is €54m over budget. Győző Orbán has not responded to the claims, while the companies involved have declined to comment, citing corporate confidentiality.

EU authorities are still waiting on Budapest to repay €283m that was misspent in building a new metro line in Budapest. Olaf, the anti-fraud office, has said it found “serious irregularities – fraud and possible corruption … in all phases of the project”, which was said to have cost €1.7bn.

The European commission declined to comment on whether the €283m recommended for recovery by Olaf had been returned, but an EU source said the EU was still awaiting the decision of Hungary’s national prosecutor. “The EU demands … that all EU funds for this project be paid back,” the source said.

Planning and construction of the Budapest metro extension began under the last socialist government and was completed after Orbán came to power in 2010.

Miklós Ligeti, head of legal affairs at Transparency International Hungary, said that since 2010 Hungary had seen “the disruption and dismantling of the checks and balances system in the country. One of the disruptions is the public procurement authority. It should be an independent institution, but it is not, it is a captured institution.”

He said Hungary was now in the grip of party state capture: “It is not influential lobbies or pressure groups capturing public power, it is more like a political clique made of certain politicians, influential people or oligarchs.”

Worries about oligarchs becoming rich on Brussels largesse could undermine confidence in EU spending just as the bloc is embarking on tortuous negotiations to agree its next seven-year budget. “It is vital that everyone from the incoming German finance minister to the finance minister of Greece can explain to the public that their money is delivering public goods rather than serving private interests,” said Heather Grabbe, a former EU official who now leads the Open Society European Policy Institute.

Some insiders worry that EU leaders are reluctant to challenge Orbán, who sits in the same centre-right political group – the European People’s party – as the German chancellor, Angela Merkel, and the European commission president, Jean-Claude Juncker.

The EPP stance was “one of the major issues”, said one senior figure. “If we made it clear to them that they no longer belonged to the family, their stance would be altered.”

A spokesperson at the Hungarian prime minister’s office rejected suggestions of any conflict of interest in spending public money, stating that the government had adopted relevant EU legislation and domestic legislation with “more stringent rules regarding conflicts of interest than the directives”.

Olaf does not publish its investigations, citing the protection of “legitimate rights of the persons concerned” and personal data, as well as ensuring confidentiality of investigations and judicial follow-up.

“The question that always comes to mind is what exactly is the EU doing about this,” Sáling said. “Such a big amount of money is thrown out the window, how is it possible there is not more spectacular reaction?”


Jennifer Rankin in Brussels

The GuardianTramp

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