- Kristóf Szalay-Bobrovniczky, the fifth Orbán-government’s Minister of Defence, has made a name for himself in recent years by securing several mega-deals.
- Right after leaving the ambassador’s seat in London, he acquired a stake in the capital’s billion-forint casino business, replacing the late Andy Vajna.
- The next step was industrial vehicle repair company Dunakeszi Járműjavító, which soon earned a HUF 32 billion order from MÁV (Hungarian State Railways). Shortly thereafter Szalay-Bobrovniczky, along with his Russian business partner, embarked on a billion-euro deal to manufacture 1,300 railway cars for the Egyptian railway.
- With the help of a HUF 53 billion state loan he acquired a majority stake in the largest Czech aircraft factory, a major military industry player.
- Having been appointed minister in May 2022, he quit his business stakes one after another: his share in the casino business transferred to Árpád Habony, known as the informal advisor to Prime Minister Viktor Orbán, while the vehicle repair plant and the aircraft factory ended up in the hands of MOL-leader Zsolt Hernádi.
- However, he retained his asset management company, London Capital Plc., which, according to company documents, accumulated over HUF 19 billion in profits by the end of last year. Kristóf Szalay-Bobrovniczky founded London Capital Plc. in late November 2019, later joining István Garancsi’s Garinvest Projekt Plc. With this move, he became a 40 per cent owner of Las Vegas Casino Plc., the final destination of the profits accumulated by the late Andy Vajna’s five Budapest casinos.
Back before Vajna’s death, we reported that the gambling dens brought in a solid annual profit of HUF 12 billion in the form of cash to be taken out as dividends. Due to the Covid pandemic in 2020-2021, profit levels fell somewhat; but as soon as 2022, the owners would bag a dividend of HUF 20 billion. In other words, as soon as Szalay-Bobrovniczky returned from the London embassy, he immediately acquired a stake in a real jackpot machine.
In 2020, London Capital yielded Szalay-Bobrovniczky HUF 24 million, followed by a staggering 1.625 billion dividend just next year. As it turned out, he could withdraw this amount from the asset management company already as Minister of Defence.
These two years, however, proved to be nothing but a warm-up; by the end of 2022, London Capital Plc. reported a financial income of HUF 20.5 billion, with an after-tax profit of 19.19 billion.
Based on documents submitted to the registry court, the Minister of Defence did not immediately withdraw his billions in the form of dividends, but transferred them to retained earnings – this decision was made in a founding resolution on May 26, 2023.
According to the textual supplement attached to the financial statements regarding the HUF 20.5 billion financial income, it is mostly derived (up to HUF 20.287 billion) from shares-related revenues and exchange rate gains, with the rest being attributed to collection of interest and other financial income. Two significant items make up the over HUF 19 billion profit in the balance sheet closing on last year’s very last day:
- HUF 8.1 billion that is listed under the “other receivables” with the note specifying that this is where the company lists the “amount of loans granted, as well as the prescribed purchase price portion of shares” here,
- and a total of 11.1 billion on the bank account.
London Capital’s 2022 report does not specify the exact sources of the suddenly inflated revenues, or the company whose shares were sold at such profits. There is no mention of a subsidiary; neither do appear the names of other related endeavours, such as the casino company shared with Garancsi, Garinvest Projekt Plc. What little we do know, however, is that Szalay-Bobrovniczky divested his 40% stake in the casinos and by the end of 2022, the ownership structure of Garinvest Projekt Plc. had been rearranged: Garancsi’s share increased to 67%, while the minority stake went to Árpád Habony through a firm named ENTER-TNMNT Plc. However, the purchase price remains undisclosed, so the amount of money that had to end up in the Minister of Defence’s asset management company remains unknown.
Garinvest Projekt Plc., however, keeps records of the casino share: at the time of acquisition, Las Vegas Plc. was listed in the books at an acquisition cost of HUF 19.5 billion. Forty per cent of this is HUF 7.8 billion – that is the value that could have made it into London Capital at the very beginning. Although this exact figure was not present in the books of Szalay-Bobrovniczky’s asset management company, it is not far off from the mentioned 8.1 billion which, according to the reports, comes from the sale of shares and exchange rate gains.
We asked the Minister of Defence how much he sold the casino shares for, and where the HUF 11.1 billion on London Capital’s bank account came from. We also inquired whether it is only income from the casinos that was included in the gigantic financial revenues, or if there are other sources – so far, Szalay-Bobrovniczky has not responded. One thing is certain, though:
the Budapest casinos are unrelentingly bringing in money. In 2022, profits reached HUF 11.5 billion, and, utilising available retained earnings, a total dividend pay-out of HUF 20.4 billion was decided upon.
In theory, London Capital could have received a share of this, at least based on previous years’ practice, where Las Vegas Casino Plc. paid dividends during the year as well (as opposed to only at the end of the year), and London Capital only quit the casino business at the end of 2022. However, the asset management company’s submitted balance sheet does not record any income under “dividend received.”
Regardless of the origin of either the 20-billion financial revenue or the 19-billion profits, they would be enough to secure Kristóf Szalay-Bobrovniczky a spot among the hundred wealthiest Hungarians. The most recent entry threshold for the list was HUF 14.5 billion – the amount which got book industry mogul Tamás Kolosi in at the very end of the list. Szalay-Bobrovniczky would have had a place on the list even with his known wealth; however, the editing principles followed since 2002 exclude ranking the assets of politicians or individuals closely related to them, disqualifying him from the official list – responded to our query Péter Szakonyi, editor of the publication.
Yet another innovation to conceal wealth
Summing up, Szalay-Bobrovniczky has accumulated more than HUF 19 billion in profits during a mere three years since the establishment of London Capital on November 25, 2019. The question remains, however: how much of the billions’ movements will we be able to perceive? As it turns out, the Minister of Defence’s asset declaration – in addition to the companies in his ownership – also lists a firm by the name SBA Invest Ltd., in which Szalay-Bobrovniczky is not an owner but a settlor and beneficiary.
The company, appearing to be a trust fund management company – previously reported on by Népszava – is registered at the same address as London Capital. In case the Minister of Defence places his assets in SBA Invest, there won’t be much left to see, as the essence of trust management is that neither the identity of the settlors, nor the results of management are made public.
Asset declarations, in any case, do not provide a complete and accurate picture of ministers’ incomes and asset movements, let alone the economic events behind them. The latest asset declaration of the Minister of Defence is dated to January 31, 2023, reflecting the situation as of December 31, 2022, according to regulations. In other words, if dividends were decided upon in one of his companies and thereafter transferred to the minister in January 2023, it probably won’t be visible in the declaration until the following year, as it will legally suffice to declare them in 2024. In any case, asset declarations must list income-generating activities as well as company stakes. However, only the approximate range of honorariums and related dividend pay-outs must be filled in, as exact amounts are required only regarding personal assets – savings, bank receivables, cash, and high-value movables.
Changes occurring mid-year constitute a grey zone: the balance of incoming and outgoing money is left unseen; the asset declaration reflects a static state at the time of filing – it provides the observer with a balance, but does not clarify the process, the chain of economic events leading to that balance. In the case of company stakes, we also do not see the specific economic events, and the asset declaration is not required to specify the amount of investment retained in a given shareholding. Therefore, Kristóf Szalay-Bobrovniczky does not have to publicly account for how much profit he has accumulated in London Capital Plc.
The trick of the asset declaration is that only taxable incomes specified by Hungary’s personal income tax (SZJA) law must be included; those for which such tax obligations do not apply need not be disclosed.
On one hand, dividends received are subject to personal income tax, meaning that if someone withdraws them from their company, they must declare it, explained Miklós Ligeti, the legal director of Transparency International, to our newspaper. On the other, as long as the money is withheld as retained earnings, there is no need to account for it; neither is there an obligation to disclose sums loaned to an affiliated company, for example: in that case, the money becomes a claim accounting-wise.
An even newer innovation for hiding wealth is if a representative or minister entrusts their assets to a business owned by someone else (in a trust management scheme) instead of a company under their own name. In this case, the individual is only listed as a settlor and beneficiary, and it is completely unknown how much wealth they entrusted to the company, what said company did with their money according to their instructions, how much profit the management generated, and where these profits were forwarded.
As for the immunity committee and the court, they only deal with cases where there is proven hidden wealth or income; they do not perform audit procedures nor scrutinize one’s actual financial situation based on circumstantial evidence. What they examine is whether the individual has complied with the legal requirements and submitted the asset declaration by the prescribed deadline, but detailed disclosure cannot be demanded, added Ligeti.
