- The Ministry of Foreign Affairs’ 288 million forint non-repayable grant has ended up in one of the largest ‘invoice factories’ of recent years.
- Subsequently, majority state-owned Garantiqua Credit Guarantee Plc. also decided on a 135 million forint state guarantee in favour of the invoicing company, Top Hygiene Ltd.
- Three months after the decision, the Tax and Customs Administration (NAV) ordered an execution at the supported company due to tax arrears exceeding 90 million forints.
- Citing bank secrecy, Garantiqa Plc. refuses to disclose whether taxpayers will have to cover the 135 million forint bill as a result of their guarantee.
- The liquidation of the invoicing company is in progress, the company’s run-down Kunbaja property is up for auction for the second time, attracting no buyers even at the price of 1.8 million forints.
After reporting of the Ministry of Foreign Affairs’ 288 million forint non-refundable grant ending up with one of the largest invoice factories of recent years (you can also read the beginning of the story in English), we have learned that this may not have been the only large instance of state support the since-busted criminal group pocketed. (The term invoice factory refers to fraudulent companies that issue fictitious invoices for services not actually provided.) The mentioned member of the invoice factory, Top Hygiene Ltd., fell into execution and liquidation shortly after receiving over a quarter of a billion forints from the Ministry of Foreign Affairs. However, in the European Union’s records of approved state aids, it appears that – in addition to the support from the Ministry of Foreign Affairs – Garantiqa Credit Guarantee Plc., 80 per cent of which is owned by the Hungarian state, provided a 135 million forint state guarantee to the company.
The mentioned form of support was created by Garantiqa Credit Guarantee Plc. and the also state-owned Hungarian Development Bank to counteract the adverse effects of the coronavirus pandemic. On the website of the former company, it is stated that the on-demand guarantee allows viable small and medium-sized enterprises to access funding even
if they do not have sufficient collateral to offer, have a short operating history, or are in their initial growth phase. In other words – as they write – it is aimed at companies who may be considered too risky to lend to.
In this case, the subsequent enforcement and liquidation proceedings confirmed that lending was indeed risky. However, it is not clear whether the disbursement of the loan has actually taken place, as Garantiqa Credit Guarantee Plc. refuses to disclose this information. Therefore, it is also uncertain whether it will be taxpayers who have to stand in to cover the 135 million forint guarantee due to the decision of the majority state-owned company.
What happens in case of insolvency?
As per the on-demand guarantee, Garantiqa commits to the obligation that if the debtor fails to meet their payment obligations to the financial institution, Garantiqa will pay on behalf of the debtor, up to the guaranteed amount.
In response to our public interest inquiry regarding the loan and the guarantee, Garantiqa Credit Guarantee Plc. stated the following:
The facts, information, solutions, or data available to Garantiqa about individual clients, which relate to the client’s personal information, data, financial situation, business activities, financial management, ownership, business relationships, as well as contracts with financial institutions, constitute banking secrets, and the conditions for their disclosure are not met in the context of this inquiry.
However, according to a wiretapping transcript obtained by 24.hu, a phone call between Top Hygiene’s CEO and another individual suggests that the loan transaction may have been successful. It is therefore not excluded that Garantiqa Credit Guarantee Plc. did provide the guarantee for the loan, as the discussion had taken place just days before the supporting decision was made. Besides the loan itself – which, in the conversation, amounted up to 150 million, not 135 – the details of dividing the amount between those involved was also discussed. Regarding the use of the money, one of the participants in the wiretapped phone conversation said:
I guess everyone will either spend or invest it, and that’s that, end of story.
During the conversation, it is also mentioned that the money would have to be “shovelled out of the company” quickly, due to concerns that a debt of 85 million HUF would “hit”. This is noteworthy considering that three months after the conversation – as mentioned previously –the Tax and Customs Administration (NAV) ordered an execution at the company due to tax arrears amounting to 90 million forints. If the 85-million sum mentioned in the conversation was the tax debt owed to the tax authority, it can be suspected that the participants were aware from the very beginning that they would never repay the loan.
Therefore it is a crucial question whether Garantiqa Credit Guarantee Plc. could have had knowledge of the tax arrears. According to the company’s business regulations, it is considered an exclusionary circumstance if the applicant company has any unrescheduled tax, customs, or social security liabilities more than 60 days overdue. Additionally, the timespan during which Top Hygiene Ltd. amassed the 90-million tax arrears is also a question.
However, it is certain that Garantiqa Credit Guarantee Plc. could have noticed that there had been a significant downsizing going on at beneficiary Top Hygiene Ltd., at least on paper. As we reported, the company had employed 174 people in November 2020, but by January 2021, only 10 people were listed as employees. Furthermore, the Hungarian Tax and Customs Administration (NAV) confirmed in response to our question that
The sharp decrease in employment at Top Hygiene Ltd. could be known by February 2021, but at the very latest, March. However, Garantiqa Credit Guarantee Plc.’s support decision was made on April 23, 2021.
The downsizing issue was also problematic in the case of the Ministry of Foreign Affairs’ 288 million forint grant. The company’s mass layoffs had violated the application terms already by the moment of evaluation, as applicants were required to maintain the average employment level from the year before the application until the completion of the investment.
In the case of the support provided by the ministry led by Péter Szijjártó, it was the data request of independent MP Ákos Hadházy which revealed that Top Hygiene Ltd. had requested the 288 million forints for real estate acquisition and development. However, it appears that the investment would ultimately not take place; neither is it known where the money has ended up. The company is currently undergoing liquidation.
This is the second attempt to sell the property, as no one applied during the first auction.
The criminal embargo regarding Top Hygiene Ltd. was the culmination of an investigation that has been going on since 2019. The embargo was imposed by the National Tax and Customs Administration after the company was found to be a part of one of the largest invoice factories in recent years, authorities cracked down on which in the summer of 2021 across eighty locations. According to the accusations, this network of more than thirty companies had fraudulently concealed 19 billion forints in value-added tax (VAT) by issuing fictitious invoices for cleaning and IT services. In this extensive operation, NAV seized bank accounts, real estate, high-value vehicles, shares, and cash worth a total of 3.2 billion forints to compensate for the damages to the state budget. The former CEO of Top Hygiene Ltd. was questioned as a suspect in the investigation, but Tibor K. remains at liberty to defend himself. When attempting to contact him, our calls went unanswered. Occasionally, an automated voice message would indicate the number’s unavailability in both English and a Slavic language, suggesting that Tibor K. may have been abroad at the time of our calls.
The investigation into the invoice factory case involved several prominent companies, including T-Systems Hungary Plc., 4iG Inc., the government-connected corporation that had acquired Vodafone Hungary, as well as Antenna Hungária Plc., and Sys IT Services Ltd., the latter famously known for its role as the IT service provider for Budapest Public Transport Company (BKV). Many of the suspects held in custody were associated with Sys IT Services Ltd. That’s where ex-convict Zsolt Fuzik, whose name has since then became synonymous with the invoice factory case, came into the picture. Earlier, Fuzik had been the IT-lead at Axel Springer and BKV, while at the time of the alleged crimes he was working the same position at Hungarian supermarket chain CBA.
The case is also abundant in political implications. It was reported by 444.hu that the investigation reached as far as the circles of Minister of Interior János Pintér, as just a day before the authorities cracked down on the members of the invoice factory, a company owned by Pintér’s confidante, László Tasnádi, had acquired the firm operating BKV’s IT systems. However, investigators mainly focused on left-wing figures, especially those involved in the 2022 parliamentary election campaign. This was due to that Fuzik, as part of a plea bargain, implicated several politicians from the Hungarian Socialist Party (MSZP), claiming that he had bribed them in various deals. Based on his testimony, MSZP mayor of Zugló (Budapest’s District XIV), Csaba Horváth, and former MSZP MP from Zugló, Csaba Tóth, were both accused of accepting bribes. According to the charges, the bribe accepted by Csaba Tóth amounted up to 280 million HUF. The politicians were questioned in connection with suspected corruption related to Zugló’s paid parking system, which, while was independent of the case of the invoice factory, had both personal and corporate overlaps with it.
The father of Dániel Jellinek, one of Hungary’s richest people, was also accused in connection with the invoice factory case
