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How EU-funded projects secretly contributed to the Orbán family’s enrichment, Direkt36 reports

Direkt36, an investigative journalism outfit from Hungary reports that a great many trucks were coming and going a few years ago in Érd – a city near the Hungarian capital of Budapest – where the sewerage system was being built at the time. The trucks delivered hundreds of concrete elements and tons of stones needed for the publicly financed construction, worth of 30 billion forints (96 million euros). In many cases, the trucks were coming from an industrial site lying by a curvy road close to a village called Gánt, an hour's drive from the capital.

The site belongs to one of the business interests of Hungarian Prime Minister Viktor Orbán's family, whose companies have produced spectacular growth in the past few years. The businesses owned by the father and by the two brothers of the PM, dealing with mining, manufacturing concrete products, and transportation, have nearly doubled their revenues since 2013 and their profits have risen even faster.

While in 2013 they gained only 15% of profit on their total revenue of 2.7 billion forints (8.6 million euros), their profit increased to 30% on 5.2 billion forints (16.7 million euros) of revenue by 2015. The profit gained during these three years was fully withdrawn from the companies. After deducting the share of the partners, Orbán's family members received nearly 2 billion forints (6.4 million euros) in dividends.

Direkt36 could not uncover every detail of this spectacular growth, but it is certain that the involvement of the Orbán-companies in several state projects, mostly funded by the European Union, a frequent target of Mr. Orbán's government, has contributed to the outstanding performance of the businesses. These companies were not the winners of the public tenders, but participated in them as suppliers of the companies contracted by the state. Thus, they do not appear in the tender-related public databases, which makes it difficult to get a clear picture about the scope of their involvement in the projects.

The Orbán companies' involvement in public projects has so far remained largely hidden, with only a few related stories published in the Hungarian press. In 2012, business weekly Figyelő reported that Dolomit Ltd., owned by Győző Orbán, the PM's father, delivered stones for a major railway refurbishment project. Last summer, concrete elements manufactured by the company appeared at the site of the sewerage system constructions on Budapest's Margaret Island.  Direkt36's investigation has revealed numerous new details about how the companies of the PM's family have been participating in public projects.
Direkt36 managed to obtain delivery notes and other documents that directly prove Dolomit Ltd.'s participation in two large-scale sewerage system projects in recent years: it did not only supply building materials in Érd, but also for the sewerage built in the outskirts of Budapest. It delivered the materials for a company belonging to Lajos Simicska – a close ally of Viktor Orbán at that time – and also for the firm of Lőrinc Mészáros, an old friend of the PM. According to sources involved in the projects, these companies ordered building materials from Dolomit Ltd. despite the fact that they were more expensive than the competitors' products (some sources added that Dolomit Ltd.'s products are of better quality).

the road from the mine

Other details also suggest that the Orbán-companies have ties to state projects. By tailing trucks loaded at the mine in Gánt we discovered that Colas, one of the biggest players in Hungary's state-funded constructions, is among the clients of the Orbán-companies. A freight company owned and managed by the PM's younger brother Áron Orbán mostly lists public projects among its work references. In 2010 Dolomit Ltd. received a technical license for the manufacturing of some products used for typically state-financed railway constructions. In recent years, one of the businesses of the successful public tender winner, Lőrinc Mészáros also appeared among the clients of a smaller Orbán-company.

Members of the Orbán family did not respond to the questions we sent them via e-mail, and they did not answer our phone calls either. Several other parties involved – including the press office of PM Viktor Orban – declined to answer Direkt36's question.

Agreement between father and son

Since the very beginnings, perceived or real ties with the state and with politics have cast shadows on the business activities of the Orbán family. During the privatisation process that followed the collapse of the socialist system in Hungary, in 1992 Győző Orbán and his business partners managed to get hands on a company operating the mine in Gánt. The purchase was helped by companies with ties to the Fidesz party, an article entitled "Boys in the mine" revealed in 1999. According to the article, a company close to Fidesz, previously capitalized from the party's money, bought a share in the mine company during the privatisation, then sold it well below its nominal value to Orbán's father and his business partners. Thus, Győző Orbán became the majority owner of the company called Dolomit Kőbányászati Kft. (Dolomit Rock Mining Ltd.), and currently holds 51.16% of the company.

The report created quite a stir. Viktor Orbán was serving his first term (1998-2002) as prime minister then and he was frequently criticized due to his father's businesses. Opposition politicians have brought up that Dolomit Ltd. was a supplier of the then state-owned Dunaferr, and some also alleged that the company supplied materials for state-funded motorway constructions. With regards to Dunaferr, Orbán's family emphasised that Dolomit Ltd. had already become its supplier in 1997, before the first election victory of Fidesz. They denied, however, the involvement of the father's business in the motorway projects.

In a TV interview in August 2001, Orbán tried to refute the accusations arguing that if he had really wanted to favour his father, he would have not only helped him to get orders worth of some tens of millions of forints, but he would have been able to help him build the whole motorway. Orbán also stated that his father had planned to get involved in certain motorway constructions, but dropped these plans at his son's request. "This was a very difficult conversation, by the way. He did not agree with this, but eventually he said that there must be certain correlations that I see better than him, and then he accepted it," Orbán said.

In 2010 Fidesz was re-elected, but the agreement between father and son appeared to have changed. Additionally, by that time the Orbán family could not only offer dolomite supplies for public investments, but had also added other products and services to its portfolio.

Expensive but good

Having expanded its portfolio of concrete products, Dolomit Ltd. – the operator of the mine in Gánt – could become supplier of sewerage investments. An employee of a company with similar profile told Direkt36 that as he recalled, the construction of Érd's sewerage system, which started in 2011, was the first major project in which Orbán's company first appeared with its new sewerage elements. According to the source who spoke on condition of anonymity, there are only a few major players on this market. As they keep an eye on each other's products and often apply for the same jobs, they can keep track of the competitors' activities.

The project management team of the Érd sewerage system construction allowed Direkt36 to look into the project's archive, which contains several documents that confirmed our source's claims. We found dozens of delivery notes that showed that among other companies, Dolomit Ltd. supplied concrete elements for the construction between 2012 and 2013. Other documents also revealed that besides these elements, crushed stone – which is typically used for road reconstruction after sewerage works – was also delivered from Orbán's company in Gánt to the construction site in Érd. According to the documents, in many cases Dolomit Ltd.'s products were ordered by Közgép Ltd., which played a leading role in the implementation of the project, and whose owner, Lajos Simicska was Viktor Orbán's close ally at the time.

This was not the only sewerage system project in which the Orbán company appeared as a supplier. In the last 4-5 years, sewerage system constructions have been carried out in several districts of Budapest, in many cases using the materials of Dolomit Ltd. The project documents that we have seen show that the Orbán-company supplied at least 8400 concrete elements during 2014 and 2015 for two companies.

One of these developers was Duna Aszfalt Ltd., which took the place of Közgép as the flagship construction company after Simicska's falling out with Orbán in 2014. Duna Aszfalt used the manhole elements of Dolomit Ltd. for channel construction in the 10th, 16th, 17th, 18th and 23rd districts. While in some instances Duna Aszfalt did not order manhole elements exclusively from the Orbán-company but also from other entrepreneurs, the firm of Lőrinc Mészáros – the Prime Minister's friend , whose wealth increased massively over recent years – exclusively ordered the concrete elements produced by Dolomit Ltd. for its constructions in the 17th and 18th districts. Besides these elements, Mészáros and Mészáros Ltd. also ordered gravel from Dolomit Ltd.

According to a source familiar with the details of the Budapest sewerage construction project, in case of similarly large investments, the contractors usually outsource the construction work to subcontractors, who are also entrusted with purchasing the necessary building materials. This was not the case during the Budapest sewerage construction, the source claimed, who asked us not to disclose details that could reveal his or his employer's identity. According to the source, at some point of the project the main contractor notified its subcontractor that, as opposed to the original plans, it rather prefers to take care of the purchase of the elements instead of the subcontractor. Eventually, these elements were supplied by the Orbán-company.

Each of the Érd and the Budapest sewerage system projects had a budget of tens of billions of forints (around 100 million euros), but probably only a smaller part of this amount was paid to the business interests of the Orbán family. The exact amount of payment is unclear, as the documents seen by Direkt36 did not include the price of the supplied elements.

The organisations responsible for carrying out the project claimed that they do not have information about the amount of payment received by the suppliers. At the same time, several sources familiar with the details of the projects claimed that Dolomit Ltd. could become a supplier of the projects in spite of the fact that its concrete elements are much more expensive than the competitors' similar products.

An employee of the organisation overseeing one of the projects said that, according to his knowledge, the price of Orbán's products could be about 30% higher, although he added that he believed that their quality was much better. An employee of one of the competitors also confirmed that Dolomit's products are indeed of high quality. At the same time, several sources involved in sewerage projects claimed that contractors are very sensitive to price and would therefore prefer to choose a cheaper supplier. "I was surprised why they bought the more expensive [product]," said the source involved in one of the projects, adding: "I thought they surely wanted to nuzzle up to them."

The Ideal Orbán Áron

Among the Orbán businesses, a freight and trading company has seen the most impressive growth in recent years. The company was originally called Ideális Áron Limited Partnership (translated as "At an ideal price", which might have been a Hungarian word game referring to the name of the company's manager, Áron Orbán). The firm was established in 2004, and was re-named to Nehéz Kő Ltd ("Heavy stone Ltd") in 2008. Its revenue had been around a couple of hundred millions of forints (some hundred thousand euros) for years, but it jumped to over 1.6 billion forints (5.1 million euros) in 2015. According to the company's website, it purchased its own trucks in 2012, but it also delivers goods by rail. Under the "main references" section, the website lists more than ten projects, most of them linked to public investments. The company delivered concrete products and stones for the construction of sewerage systems and motorways, and also for railway refurbishments.

The projects listed on the website, however, were typically investments from earlier years, some of them carried out prior to 2010. The archived versions of the site show that the list of work references has not been updated since 2013, although the company's rise started after that year. During Direkt36's visit to Gánt, we have seen that the trucks of Nehéz Kő Ltd. transport lots of materials from the headquarters of Dolomit Ltd. Direkt36 reports to have seen that sometimes 4-5 trucks arrived to the plant within an hour. Probably Nehéz Kő's close relationship with the stone and concrete producer company played an important role in the rapid growth of the freight business. After the purchase of its own trucks in 2012, Nehéz Kő Ltd. took over the transportation tasks of Dolomit Ltd., the website of Nehéz Kő shows. According to other market players, only those freight companies can work successfully that closely co-operate with a manufacturing company.

It seems that Áron Orbán, who became the sole owner of Nehéz Kő Ltd. at the end of 2016, sees even more potential in the market. In October 2016, he launched a new company called NAKK International Trading Company of Raw Materials and Finished Products. Áron Orbán did not answer Direkt36's questions sent to his business e-mail address.

From the mine to the asphalt mixing plant

Other companies' trucks also frequently visit the mine company in Gánt. During one of our visits there, we saw so many trucks arriving to the site at the same time, that a queue formed on the main road.

On April 18, Direkt36 followed a truck that had taken loads at the company in Gánt. The white dumper truck left the mine at 12:15 pm, then stopped for a 15-minute break in a nearby village. The truck arrived to its final destination in a town called Jászberény at 14:45 pm. It went to the asphalt mixing plant of Colas located on the outskirts of the town, where it unloaded its cargo that – from the distance – seemed to be a pile of rocks.

France-based Colas is one of the major players on the Hungarian construction market, especially active in public projects. The majority of the work references listed on its website is state-funded projects. Their two currently running projects are both road constructions commissioned by a state company called NIF (National Infrastructure Development Company). We asked Colas for which investments they will use the rocks from Gánt, and how they co-operate with the Orbán-companies in other projects, but the group said that "unfortunately they are unable to answer" our questions.

The buyer from Felcsút

Direkt36 also found that the Orbán-companies have a number of clients on the market that are not connected to the state. A truck of Nehéz Kő Ltd. that we followed in January, for example, delivered materials from Gánt to the now privately owned Dunaferr's plant in Dunaújváros.

The business records of a smaller Orbán-company, Gánt Kő és Tőzeg Termelő és Kereskedelmi Ltd., also show a number of clients that are not connected to public investments, according to our research. A list of the clients of Gánt Kő Ltd. is available in the business registry because the company merged in 2014 with another business owned by the Orbán family, and the company submitted a final statement about its accounts to the business registry. The document lists 14 companies among the clients of Gánt Kő. However, this does not necessarily give a complete picture of the clientele of the Orbán-companies: the annual revenue of Gánt Kő Ltd. is below that of the rest of the family's companies, and the document found in the business registry only included the clients that had debts towards Gánt Kő Ltd. at the time of the merger

The majority of the 13 companies are smaller private businesses, but there are also two well-known companies that frequently participate in public projects. One of them is the Austrian construction company Swietelsky Magyarország Ltd., a frequent winner of high-value public tenders. The other one is the Mészáros and Mészáros Ltd., which – besides the already mentioned sewerage system construction in Budapest – has also won several valuable public assignments in recent years.

Swietelsky Magyarország Ltd. told Direkt36 that "as a family business" they cannot provide an answer about its ties to the Orbán companies as the data we had requested refers to the "internal affairs and trade secrets of the business", which are not made public "due to strategic reasons and out of principle."

They are well on track

The Swietelsky group also ordered crushed stones from Dolomit Ltd. for one of the biggest railway refurbishments of recent years, carried out between the towns of Szajol and Püspökladány. In an article published in 2012, Figyelő quoted the state-owned NIF Ltd. saying that as far as the company knows, "Dolomit is a major supplier to Swietelsky". NIF had already stressed at the time that it had no detailed information about the suppliers, a statement that the state company reiterated to Direkt36 when they asked about the identity of suppliers involved in other public supervised by NIF.

It seems, however, that Dolomit Ltd. was planning to participate in railway refurbishment projects not only by supplying stones, but also other materials. A document published on the website of the state-owned ÉMI Construction Quality Control Innovation Nonprofit Ltd. shows that in 2010 the company of Orbán's father had received technical approval for manufacturing certain concrete products used for rail construction. This license was valid until February 2015.

It seems that the Orbán family continues the production of concrete elements at full blast. At the Gánt plant, there are big piles of concrete products similar to those that appeared at the site of the sewerage system construction of Margaret Island last summer. As Dolomit Ltd. did not react to Direkt36's e-mail and phone calls, they also did not let them know for which projects they plan to use these products.


Source: direkt36.hu; 444.hu

Last Updated on Tuesday, 09 May 2017 16:25

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