Budapest plays the blame game over metro fraud

Budapest plays the blame game over metro fraud
Viktor Orban's government blames all corruption on its Socialist predecessor.
By Blanka Zoldi in Brussels January 20, 2017

The construction of Metro 4 – which runs 7.4 km under the Hungarian capital linking Buda to Pest – was not only the largest development during Hungary’s 13-year history in the European Union, but has now become its greatest corruption scandal, government officials claim, based on investigations by the European Anti-Fraud Office (OLAF).

The €1.7bn project, partly EU-funded, was built between 2006 and 2014. That saw it steered by governments controlled by both the Socialist and currently ruling Fidesz party. While Fidesz blames all wrongdoings on its predecessor, the opposition says it suspects the current government is cherry-picking information from the OLAF probe.

The M4 metro line project - planning for which began in the 1970s – was hugely criticised for its long line of missed deadlines, cost increases and contractor disputes. According to an initial feasibility study in 1996, a 10.6 km line was to be built by 2007 for HUF180bn. With seven years of delay and the bill more than doubled, a line 3.2 km shorter than planned was opened in 2014. The route currently runs at well under capacity.

Serious irregularities

“Brussels has rendered a telling account of the performance of the MSZP-SZDSZ governments [the Socialist and Free Democrat coalition in office in 2002-2010] and MSZP-SZDSZ Budapest city leadership,” Nandor Csepreghy of the Prime Minister’s Office claimed at a press conference on January 16, as he presented details of the OLAF report sent to the Hungarian government in December.

OLAF found that HUF272.8bn worth of contracts - or over 60% - on the project were affected by corruption and irregularities. “Some HUF167bn was stolen or embezzled,” the official added. From this amount, HUF76.6bn was disbursed as EU development funds, which Brussels could reclaim from Hungary.

“The report reveals a series of international leftwing crimes, jointly committed by the Socialist and Free Democrat city leadership and multinational corporations,” Lazar Janos, leader of the Prime Minister’s Office railed.

Several companies were involved in the construction of the metro line. Many of them “have been named” in the OLAF report, according to Csepreghy, but he did not provide further details. The companies have not made any comment.

BAMCO consortium - led by the French-owned Vinci Construction and comprising Strabag of Austria and local partner Hidepito - was responsible for the construction of the tunnels and the excavation of one station out of 10. Austria's Swietelsky constructed four stations. A consortium including Bilfinger, Porr and Vegyepszer built three. France's Alstom, which provided the trains, was also named in the report.

The latter company was already charged last year by the UK's Serious Fraud Office (SFO) with paying bribes of up to €2.3mn to officials from the Budapest Transport Company (BKV) to win the tender to supply the trains. Hungary’s National Bureau of Investigation has also been carrying out an investigation into the case on suspicion of bribery since 2011. That probe is expected to conclude in April.

“OLAF can confirm that serious irregularities – fraud and possible corruption - have been uncovered in all phases of the project,” the OLAF press office told bne IntelliNews. Due to rules of confidentiality, OLAF said it could not clarify whether the word “phases” refer to the timeline of the project, or to the different sections of metro line, which were also named Phases I-II-II.

“The investigation covered everything, from the Zero Milestone until the conclusion of the of the project,” the Prime Minister’s Office told bne IntelliNews.

Csepreghy has said that the OLAF report uncovered irregularities and the suspicion of corruption in connection with 57 contracts overall. “Only one contract was signed after June 2010 June [when Fidesz came to power], all the others before that,” the Prime Minister’s Office told bne IntelliNews. Further information cannot be provided due the fact that the OLAF report is not public, the office added.

Opposition parties have repeatedly called for the release of the full report, as they suspect the government is only presenting those pieces of information that are potentially uncomfortable for the opposition, and is hiding any that would raise questions against Fidesz.

“The OLAF report, on which Lazar’s people base their accusations, should be released. I don’t think it is by chance that they are handling it secretively,” Gabor Demszky, mayor of Budapest between 1990 and 2010, commented in a Facebook post. Small opposition party DK suggested that it might be in the interest of the government not to publish the report and to “maintain uncertainty” at least until the 2018 general election.

Broad leeway

It remains questionable whether the government is willing to release the report, or under what conditions if so.  “The government is fully committed to publish the OLAF report, as this issue concerns the entire Hungarian population. Legal advisors of the Prime Minister’s Office are currently looking into the possibilities we have to publish the report” the PM’s Office said on January 19.

On the same day, however, Janos Lazar suggested the government is unlikely to publish. “It was not the government who carried out the investigation, it was only informed about it. I think that OLAF – in line with EU regulations – will publish the documents,” the head of the PM's Office told MTI.

That suggestion, however, seems to be unfounded. “OLAF's final reports are subject to strict rules of confidentiality and are therefore not made public by OLAF,” the OLAF press office said, adding that it is up to competent national authorities “to follow-up on any OLAF recommendations in accordance to their national laws”.

The government seems to have a “rather broad leeway to consider the disclosure of information it receives from OLAF”, Transparency International Hungary said.

For his part, Lazar announced that he has filed a complaint against unknown parties. At the same time, he claimed “the main perpetrators are Gabor Demszky, Janos Atkari and Csaba Horvath [the former Budapest mayor and two deputies]. It will be the task of the justice system to make a decision”.