"There was nothing else we could do but rely on our instincts and trust that a fair business conduct would prove efficient in the long term." This is how Zsolt Fazekas shared the secrets of his successful career at the helm of Euronics, the chain that sells electronic devices, with his audience at a conference last year. These words of self-commendation, uttered by the man who is a well known leader and major promoter of Hungarian scientologists, did not prove to be the truth even then. At the time, a criminal procedure against Fazekas, based on a reasonable suspicion of tax fraud and initiated by the Hungarian Customs and Finance Guard, was well under way. The investigations started in 2006, court proceedings commenced last week. Heti Válasz - as the only outsider in the courtroom - could witness the start of a major trial at the Town Court of Veszprém against the owner of Euronics and three other defendants.

The significance of the case lies in the fact that although the followers of L. Ron Hubbard are often and repeatedly suspected of financial mismanagement and abuse, on no occasion so far could such serious charges be proved in relation to any of them in Hungary. Scientology leaders were sentenced for fraud in France just this week - a peculiarity of the case was that the court did not condemn the conduct of individual members of the gang, but the church itself as a whole. (see article in frame).

Five years in prison?

The stakes are high in the Euronics case: according to information received earlier from the Hungarian Customs and Finance Guard, this criminal offence could be punishable by up to five years of imprisonment. Not a coincidence then, that the primary defendant Fazekas did everything to win over János Bánáti, the influential president of the Hungarian Bar Association, to be his defence lawyer.

The charges listed by the prosecutor include - amongst others - the following tricks: unjustified accounting of expenses, illegally "tax-omptimised" remuneration paid to Euronics shop managers, concealment of income subject to taxes and social security payments - and these are just the 'smaller' items amounting to a minute sum of HUF ten million. According to the more serious charge, the chief of Euronics and his brother, Péter Fazekas, also a scientologist and now secondary defendant, received and recorded fictitious invoices in 2003-2004 from the defendants of tertiary and quaternary responsibility, businessmen István Gáspár and László Götz. The invoices were issued in connection with no real business activity.

The investigations have established that on occasions when Gáspár and Götz invoiced Vöröskő Ltd, which is a major shareholder in Euronics and is owned by the Fazekas brothers, for shop inspection, computer procurement, software installation, manufacturing of furniture and cleaning graffiti off shop walls, the activities listed on the invoice were in reality performed only in part or not at all. In total, the fictitious invoices issued amounted to HUF 124 million, causing financial damage to the state, since significant amounts of taxes and social security contributions were not paid and the criminal offences of tax fraud and forgery of personal documents were also committed.

Spying on employees

At the court session last Wednesday, Zsolt Fazekas pleaded guilty to the smaller offences. As for the more serious charges, he either denied being responsible or only admitted his responsibility in part; his brother denied all charges. They both tried to refute claims that they were operating an "invoice factory" and attempted to provide explanations for the invoices questioned. Zsolt Fazekas also offered another excuse: he said he did not have sufficient time to proceed with the necessary care and caution because of the expansion of his company in Hungary and Slovakia. He tried to make his actions look petty by saying that the amount of HUF 124 million in the charge is hardly one percent of the turnover of his shops and his businesses paid in a total of HUF 2.2 billion to the Treasury in taxes and social security contributions between 2003 and 2005.

There is an interesting statement in the explanation offered by the primary defendant, which might also help us to better understand the operations of Euronics as a scientology business. Fazekas justified the receipt of invoices for software installation by explaining that special computer programmes had to be installed onto the machines in the stores, which could then be used to reveal any mismanagement by staff. He said he was confronted with suspicious shortages in stock in some of his stores, with employees illegally making copies of videofilms; or even with a store manager buying radiators for his own home but invoicing them to the company. He added that on some occasions, business information was leaked to their competitors.

All the above could have been real problems, but the fact that István Gáspár - who already has a criminal record because of financial mismanagement - installed a computer programme on the machines running in his stores that registered and forwarded information on data traffic to the head office without the employees knowing, does raise data protection concerns. Why? Because the software, apart from revealing any mismanagement, could also have been used for spying on people.

A secret clause

This brings us to the repeated accusations made against scientology. The church and its related organisations are suspected to be controlling their members by using and abusing as they please the information gained on the members from personality tests or even secret observation. The fact that Attila Péterfalvi, former data protection commissioner, declared that the data management performed by scientologists in Hungary was illegal and the group was condemned for similar reasons in other countries, also supports this charge.

Former Euronics employees, who asked not to be named for fear of possible retaliation on the part of the chain, talked to Heti Válasz about another practice at the company, which helped to keep employees under control. Workers at the stores received part of their income as a certain 'dividend', a form of payment which keeps changing. Apart from this, they had to sign a confidentiality agreement, which can be interpreted in the widest sense to include everything possible, for example, should former employees dare to speak badly of Euronics, they breach the agreement and can be taken to court to pay their 'dividend' back to the company even years later. Personality development and other business training sessions, some organised by the scientologist advisor firm Admiral, make sure that all employees are committed to the company.

Not surprisingly, no one has yet aired the company's dirty laundry. This does not mean there is none: Euronics and related businesses are regular 'customers' of the Hungarian Competition Authority (GVH) for the misleading of customers. In the past four years, they were required to pay about HUF 70 million in fines because they misled customers in the advertisements of products on sale and they portrayed the prices of their products as more preferable than they actually were. Three years ago, the Fazekas companies were suspected of entering an illegal cartel agreement restricting competition on the market. GVH had indeed established the illegal 'merger' of three Euronics companies, Vöröskő, Bravotech and Elektro-Quality Ltd, however, they were exempted from the laws banning such market conduct. This is how they can freely dominate 25% of the Hungarian market of electronic devices - to the utmost delight of their owners and the scientologist church.

Deceit and delusion

Barbara Tószegi
itthon@hetivalasz.hu

On 27th October, a criminal court in Paris fined two major organisations of the scientologist church to EUR 600 thousand. However, despite expectations, it did not order the dissolution of the organisation. In its verdict, the court stated that the missionary activities carried out by scientologists constituted fraud committed by members of a criminal organisation. Still, apart from the EUR 400 thousand and EUR 200 thousand fines imposed on Celebrity Centre and its library, respectively, and the few years of imprisonment and fines that Alain Rosenberg, head of the company and his five accomplices were sentenced to, the organisation suffered no other inconvenience. "Should the organisation be banned, it might attempt to continue its activities illegaly," this is how the head of the court in Paris justified their decision and added that a serious fine is a better detterent.

The criminal procedure was launched more than ten years ago, based on the claims of two victims who were tricked out of several tens of thousands of Euros by scientologists between 1997 and 1999. The court said that scientologist recruitment practices were misleading, especially the personality tests used in the recruitment of new members, which have no scientific value at all.

The lawyer of the victims called the trial a historic milestone because this was the first time a legal person was sentenced in France for having committed fraud as a member of a criminal organisation. "This is the first time that scientology organisations that are legal persons have been sentenced not because of the conduct of their members, but because of the operation of the organisation itself," said Georges Fenech, president of MIVILUDES (Inter-ministerial Mission of vigilance and fight against sectarian drifts).

The only thing that saved the church from being banned was that the act which allowed for the dissolution of a legal person for fraud, was modified as of March 12th and this possibility was removed from it. Critics of scientology accused the organisation of having infiltrated the French National Assembly and the Ministry of Justice to hammer such modifications - favourable for the church - through the administration. Nevertheless, the counsel for the defendant was outraged at such accusations and said he might appeal so that the case went to a court a second time. An appeal would mean the suspension of the execution of the sentence until the new procedure is finished, which would probably take a year.  

An influential man

Zsolt Fazekas (pictured) first worked in stores and then in 1988 set up Vöröskő Ltd, a company specialising in the marketing of electronic devices. It was such a success that his stores joined the Euronic chain in 2001, which is present in 22 countries of Europe. The chain has more than 130 stores in Hungary today and is also expanding in Slovakia, with an annual turnover close to a sum of HUF 50 billion. The reason why Fazekas was placed high on the list of the one hundred most influential scientologists, put together by Heti Válasz in 2007, was because he contributed a sum of HUF 150 million to the purchasing of the new centre of the church in Budapest. Euronics is a sponsor of the Marathon for a Drug-free Hungary (an event also based on Hubbard's philosophy) and the MKB Veszprém handball team - our man is a member of the sports club's presidency.