Hungarian state property sold off in Moscow

It's ugly, but it was ours

Bálint Ablonczy
Last updated:
05:49 22-04-2014
Created:
15:15 19-11-2009

According to a Russian document that our paper has acquired, the damage caused to the Hungarian state with the selling of the commercial representation in Moscow is at least five billion Forints. We have already sent this evidence by mail to the authorities examining the conditions of the sale. It was János Veres, minister of finance at the time, who supervised the Hungarian National Asset Management Company, responsible for the transaction.

Will a new unit of measurement have to be introduced to measure the extent of waste of public finances? The damage caused by selling the Hungarian Commercial Representation of Moscow cannot be properly expressed with the terms hitherto used in connection with the Zuschlag case or the Budapest Transport Company (BKV). In the Zuschlag case, a "mere" 75 million Forints' worth of public finances disappeared, in the latter case, the Budapest Transport Company (BKV) paid 3.3 billion Forints in disputable redundancy payments in a matter of two years. The case of the Hungarian real estate in the Russian capital beats both by far. The public prosecutor's office found the circumstances quite suspicious: the building was sold for 3.5 billion Forints to an offshore company of unclarified ownership, while according to the document acquired by Heti Válasz, the market offerings ranged between 8 and 13.5 billion Forints.

The letter of the Russian consultancy firm which mediated at the sale of the property proves how weak governmental communication really is: there is no point in reasoning about how the catastrophic technical condition of the building resulted in a reduction of the price. We expected more from the former minister of finance, János Veres, who was formerly the supervisor of the Hungarian National Asset Management Zrt (MNV), responsible for the selling of state property, than to simply shrug off responsibility. (We sent the document to the public prosecutor's office after our paper went to press.)

The ambassador knew about it

But what was the desired property? It is a complex made up of a five-story office building and a seven-story guest-house in the heart of Moscow, which is one of the most expensive cities in the world. Those who used the building - 17 thousand square meters of floorspace, with a restaurant, parking lot and garage - did not like it because of its exterior (which is no different from other buildings that reflect the typical architecture of Socialism in the 1970's), but rather for its excellent location and services. The prime minister's office, several embassies and administrative buildings are just a kilometer away, Moscow's gigantic business quarter and the new building of the Russian Duma are being built in the neighbourhood. Hungarian companies were able to rent offices within the representation's building, at a much more favourable price than the average rates in the Russian capital. As for the hotel, Hungarian state delegations and commercial delegates could stay there, also at a more favourable rate than in other hotels in Moscow.

When asked by the Hungarian press why the buildings had been sold, Árpád Székely, Hungarian ambassador to Moscow between 2005-2008, and responsible for the transaction, tried to justify the sale by explaining that the building was in very bad technical condition. The actual facts seem to contradict what Székely - who is currently employed as the CEO of TriGránit Russia (Sándor Demján's company) - said. According to our information, the Foreign Ministry - which operates the representation - spent around 200 million Forints on renovating the building in 2004-2005 (in other words, just before the initiation of the sales procedure). The hotel area was renewed and part of the mechanical engineering system was replaced.

In view of the letter published in our paper, the argument of Székely, namely that "this was all they were willing to pay for it", is untenable, for the letter reveals that during the period when the transaction took place, the price of offices in Moscow were between 3000 and 5000 Euros per square meter. In other words, if we calculate at the current rate of 270 Forints per Euro, that's between 800 thousand and 1.3 million Forints. In contrast, the representation was sold at a price of around 200 thousand Forints per square meter, and according to the letter, Székely had been informed of other, far more favourable offers.

Who was the postman?

However, this did not stop the ambassador from signing a contract in 2005 concerning the selling of the representation, despite the fact that the Hungarian government decision authorising him to do so was only passed in 2006. They wanted to correct this in 2008, and in the repeated procedure, it was the same Air Diamond Ltd that won (registered in Luxembourg, with offshore tax-haven ties that can be connected to ownership in the Cayman Islands), as in 2005. There was a problem, however. Air Diamond had transferred the purchasing price of 3.5 billion to the Hungarian state months before the announcement of the results - as if they had known that they would win. The company's "instincts" were correct; it's just that the State Audit Office (ÁSZ) started investigating because of the unusual transfer. The procedure involved such serious findings that the prosecutor's office launched an investigation concerning the violation of the accounting system and maladministration, on the basis of this.

The Foreign Ministry is desperately trying to decline responsibility for this affair which is becoming more and more embarrassing. "We're not trying to point at each other, but the role of the Foreign Ministry in the transaction was simply that of a postman. Every important decision was taken at the Ministry of Finance and at the Hungarian National Asset Management Company (MNV)," said Márta Fekszi, former under-secretary of state of the foreign ministry, in the October 29th edition of Magyar Hírlap, pointing at János Veres, former minister of finance.

The one-time finance minister should give a detailed explanation of the circumstances of the transaction not only because of the statement stressing his responsibility. It is hard to imagine that the competent authority supervising the MNV (or its predecessor in title, the Treasury Property Directorate) knew nothing about this, as Veres likes to maintain in the press. What's more, the transaction in Moscow covers a territory dear to his heart: since April 2009, the former minister of finance is serving his country as a government commissioner in charge of eastern (in other words, Russian) economic relations.

According to the official version, the Hungarian state had no alternative but to sell the property to Air Diamond - for the Russians had a right to veto regarding the identity of the buyer. A treaty between the two nations, signed in 1973, provides that the Soviet party has a right of agreement at the sale. However, it is hard to imagine that the Russians would prefer to choose an offshore company with a shady background, and not the local government of Moscow.

A Hungarian connection comes to mind

The situation is different, of course, if a bargain has been struck which is disadvantageous for the Hungarian state, but extremely advantageous for the buyer, perhaps a Russian oligarch. For example Viktor Vekselberg, whom we have already mentioned in a former edition of our paper (Heti Válasz, October 15th). There may be another explanation, broached by Zsolt Németh, the Fidesz chairman of the Parliament's Foreign Affairs Committee. According to this theory, we should look for the buyer within Hungary's territory, and that is why the offshore company was needed for the transaction. We cannot decide this argument with the tools of journalism, the real owners' identity can only be revealed in the course of a criminal procedure.

Time is running short, however: there are many who fear that by the time the Hungarian authorities declare that the contract is null and void, Air Diamond may well have sold the property, making a profit of up to 10 billion Forints.           

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