After the scandal of the Budapest Public Transportation Company (BKV) in the summer, it would appear natural that the state's anti-corruption bodies would target the capital's companies or local government megaprojects. Especially if the value of the act perpetrated was in excess of the 3-4 billion in compensation money thrown away on paying consultants of the public transportation company. Heti Válasz has acquired proof that the Government Audit Office (Kehi) examined the preliminary documents of the central sewage clarifying plant in Csepel, where the trial operations started in August, and will soon prepare a report on the irregularities that have been uncovered.

Several facts justify the intervention of Kehi. Firstly, because of the local government's shady dealings, including the lack of an open tender, 40 million Euros in EU support had previously been withdrawn from the development on the northern tip of Csepel Island. 65 percent of the projects, totalling almost 500 million Euros - equal to a third of the cost of metro 4 - would have been financed by the EU, 20 percent by the Hungarian state and 15 percent by the capital; thus, at least three players had something to lose from allowing these corrupt dealings to take place. Secondly, the new sewage collection system came to the public's attention, at least from the point when - because of the laying of pipes - several sections of the wharf along the Danube were dug up. At the same time, Gábor Demszky's office has been spinning a positive campaign for a considerable time. Anyone interested has already been able to find out that the main objective of the Csepel plant is to prevent raw sewage from entering the Danube, i.e. that the city will be able to open up to the river through the expansion of recreation activities linked to the river and the riverbanks.

On hearing the news about the Kehi auditing, our magazine decided to help wash the dirty linen of the water-clarifying plant. The justification for this is that the power of publicity is the only thing that can prevent Budapest from losing billions in the case, to begin on 3rd December, which the private contractor for the plant, with a French background, the Csepel 2005 FH consortium, instigated against the Budapest local government. According to our experts, it is bordering on the legal category of incompatibility for a leading politician's wife to negotiate on the capital's behalf with a plaintiff consortium (the members of which are Degrémont SA, OTV France, Hídépítő Ltd., and Colas-Alterra Ltd.) in a closed arbitration procedure of the committee organised within the Hungarian Chamber of Commerce and Industry.

In the next section, we will seek to offer an explanation as to how Judit Molnár, the wife of Imre Lakos, got involved in the sewage affair. After this, we will look into whether people became suspicious that in her trials, Mrs Lakos deliberately lost billions of the capital's money".

Finally, we will demonstrate why it was conspicuous for Kehi that the Lord Mayor's Office approved 400 thousand Euros for the preliminary work of an investment, which it has been known since September last year, would not be realised.

I. Lawyer's secrets

Imre Lakos is the president of the Committee for Urban and Environmental Management of the General Assembly of the City of Budapest, as well as a member of the SZDSZ-MDF small coalition alongside András Bőhm, Kálmán Katona and Zoltán Hock, without which the liberal lord mayor would barely be able to achieve a majority in the public body. It has also come to light that Lakos - who is in a splendid bargaining position that despite his declaration of property wealth hardly suggests an opulent lifestyle -has moved into a chic villa in Buda, and is paying several hundred thousand forints a month to rent a BMW worth 30 million. The politician explained his recent prosperity by saying: "at the age of 56, I'm building a house, living, selling, buying, eating and sleeping".

While Lakos is officiating as an influential Budapest decision-maker, his lawyer wife is a paid commissioner responsible for implementing the public assembly decisions made by the Lord Mayor's Office. Family involvement in such affairs certainly violates the principle of the distribution of power. When the concept of incompatibility was introduced, the objective was, among other things, for married couples not to be able to "harmonize" the operation of a political body and a depoliticised office. What makes matters even worse is that the scopes of activity pertaining to Imre Lakos and his wife, Judit Molnár, overlap. While the former is versed in every kind of urban management issue, the latter provides the legal representation for Budapest in the management of public procurement megaprojects and legal proceedings (such as the Csepel sewage clarifying plant affair).

As far as we are aware, since 2006, Molnár has received 20.5 million Forints net commission from the capital but - in exchange for her consultation services provided in the metro 4 project - she also received 8.5 million from the local government-owned BKV Ltd. Her law office will represent BKV in the plot settlement case involving the vehicle plant in Kelenföld which will operate as a reception station. This is a bright example of "not even wanting to keep up appearances" since, as the president of the committee for urban management, Molnár's husband is also the quasi-supervisor of the metro project and the deputy-mayor of Újbuda (where the site of the Kelenföld plant can be found).

II. Soft arguments

The Csepel 2005 FH consortium commenced work on the construction of the central sewage clarifying plant on the basis of a commission received in December 2005 under Gábor Demszky's leadership. In August of this year, trial operation of the plant was started. However, there was a fly in the ointment. The French launched a law suit against the capital because, in their opinion, there had been a significant delay in the "carrying out of archaeological digs which pertained to the responsibility of the defendant". The basis of the case seems to be make-believe, especially since the large-scale works were finally finished on time. Despite this, the consortium demanded 3.9 million Euros in damages, as well as a subsequent 140-day extension of the deadline, which can only mean that they are even demanding money for the alleged efforts made to avoid the five-month delay.

This means that at least four to five billion Forints is at stake in the arbitral proceedings set to begin on 3 December. Accordingly, it would clearly be in the capital's interests to lower the amount of compensation. In accordance with this objective, the local government's background organisation, Enviroduna Ltd. composed a harsh written reply to the legal action launched by the French. However, Mrs Lakos, as the lawyer in the proceedings representing Budapest, did not direct this reply to the court but instead sent it a "softer" reply document although, prior to this, the capital's experts had associated themselves with the earlier version. Moreover, the public utilities authority did not have the opportunity to endorse Judit Molnár's version before it was submitted; thus, the Mayor's Office put itself at the mercy of a well-informed outsider.

The dramatic character of the situation is proven by a clerical error :  at the end of the petition submitted to the court by Molnár - the "prototype copy" of which is in our magazine's possession - the municipal lawyer mixed up the roles of defendant and plaintiff. This suggests to a reader who glances through the document that at the time when it was drafted, Judit Molnár did not even know herself whether she was representing Hungarian or French interests.

Why did we take the liberty of qualifying Enviroduna's written reply as rigorous and that of Molnár as soft? Heti Válasz asked three lawyers to analyse the document and all three came to the same conclusion: the earlier document would fundamentally shatter the consortium's legal suit, while the opportunity to lose the case is coded into Molnár's version.

However, our experts' reasoning is only clear if we provide an outline of the steps leading up to next week's arbitral proceeding. According to the contract signed by the capital and the consortium, an arbitrator is entitled to decide disputes arising between the two parties (such as the delay in beginning the archaeological digs which gave rise to conflict). The arbitrator is to be appointed by the president of the Hungarian Consultancy Association of Engineers and Architects in the absence of a consensus for an appointee. In September 2008, this arbitrator decided in favour of the Csepel 2005 FH consortium in the archaeological digs case. According to our information it was at this point that the process of political bargaining at high levels started and the parties began to resign themselves to the capital compensating the French an amount to the tune of 2.5-3 billion Forints. However, the experts of the Lord Mayor's Office continued to regard a maximum of half a billion Forints as reasonable compensation; thus, the water clarifying plant case came before the court of arbitration. This forum could be a suitable one for the French to raise the decision ruled in their favour to a quasi-legal force. (Since the arbitral proceedings are not public and they will certainly have reached their conclusions by the time of the local government elections in 2010, the consortium would be hard-pressed to find a more perfect means for its demand for additional compensation to be satisfied. This would mean that the capital will allocate billions without public procurement to one or more companies that high level politics favours.)

The anticipated defeat in the case could be avoided only if Judit Molnár were to accept the earlier, rigorous version of Enviroduna's document, since it proves that the arbitrator favoured by the French is neither a member of the chamber of engineers, nor that of architects, and therefore could not have made an expert decision. Enviroduna's document also confirms this: since the consortium did not have an operative and approved implementation schedule, it cannot be established in retrospect whether or not there was any entrepreneurial activity that was hindered by the archeological digs.

As far as we are aware, Gábor Demszky was acquainted with the above concerns by Zsolt Zoltán Wertán, a member of the Financial and Public Procurement Committee of the General Assembly of the city of Budapest. According to the Christian Democrat MP, the Lord Mayor, Gábor Demszky, should personally stand up for the interests of Budapest in the arbitration negotiations, since "the capital could lose billions if the lawyer does not try to win the case but merely to arrive at an interim solution at best."

The bargaining surrounding the Csepel water clarifying plant is not without precedent in the capital. The Budapest local government is preparing to apply the model of a plea agreement in the Orczy-kert case, too. The project, whereby the property complex in the eighth district (where Orczy-kert is situated) would be turned into a "city park", is hindered by the unfinished environmental settlement pertaining to the area of the former bus garage. The company responsible for carrying out the project claims that it performed supplementary work to the net value of 353 million Forints, for which the public procurement body of the Lord Mayor's Office did not allow payment. However, politics is planning again to intervene: even though a date has not been set for a trial in regard to the payment for the supplementary work, Miklós Hagyó's name is already there on the draft resolution that will open the way to a plea bargain, namely to a "tricky" payment of the 353 million. Of course this will need the approval of the city management committee, led by Imre Lakos, but such a decision will be made easier by the fact that Judit Molnár, who is part of the proceedings, immediately started consultations with the "opposing" lawyer.

III. And now for the encore

After the diversion of the Orczy-kert case, we must return to the water clarifying plant, since there are a large number of sub-projects in the Csepel investment that give rise to suspicion. Although it cannot be proven that the Lakos couple have been involved beyond the above-described extent, the Budapest local government has made numerous mistakes in the past, the price of which can be estimated at hundreds of millions of Forints. The most conspicuous of these is as follows: in April 2007 the Lord Mayor's Office signed contracts with two limited companies to the value of 400 thousand Euros for the planning and public procurement preliminary work on the composting plant connected to the water clarifying plant. There was no debate: the decomposable sewage sludge from the purification process had to go somewhere and one of the reception points selected by the "experts" was the distant eighteenth district. This decision was attacked by local residents at the beginning of 2008, and in October last year the European Commission called the capital's attention to the irrationality of this project and urged them to reconsider it. The General Assembly obeyed the order and cancelled the construction of the composting plant.

Despite this, the Public Procurement Bulletin reported two weeks ago that the capital had already paid 396 million net for the preliminary work on the plant, which comes to 99% of the amount originally calculated. Or in other words, Hungary "wasted" 110 million Forints because of an ill-thought-out plan. The public works department of the Lord Mayor's Office has now tried to console Heti Válasz's readers by stating that "the European Audit Office did not query the accountability of the contracts related to the preparatory works of the composting plant," i.e. if it is all true, it was partly EU money that we threw down the drain. Or was it? According to our information, the Kehi report under preparation disputes the EU accountability of the above expenses, and indeed the government auditors reckon there might be an additional six million Euro "correction" to be paid by the capital in addition to the 40 million lost as a result of irregularities committed in previous years. This means that in the worst-case scenario, the capital will lose out to the tune of 18 billion Forints because of the Csepel investment; five billion in the French construction company case and 13 billion Forints (i.e. 40+6 million Euros) for the "minor" public procurement contraventions.
          

Abiding by the law?

Imre Lakos is not the only politician who has let his own "crony" legal concerns, i.e. Judit Molnár's law office, near Budapest's coffers. For example, Miklós Hagyó, who resigned from his post as deputy lord mayor last week, ushered his favourite legal team into an "embedded" position in the deals of three local government-owned companies (BKV, Budapest Medicinal Baths and Thermal Waters Zrt., and the Metropolitan Public Maintenance Co.). As a result, the Horváth, Dóczi & Lehmann Lawyers' Office - linked to Hagyó's former business career and registered as the legal representative of Wirtass Ltd., owned by the socialist politician - aquired 229.5 million Forints in the past three years from the capital.