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In May 2014, an urgent request from a Hungarian banker\u2019s aide triggered hurried work in offices thousands of miles from each other.<\/p>\n
The request concerned a private yacht. A new offshore company had to be incorporated to act as the employer of the crew on the banker\u2019s boat. It was urgent because the yacht had to leave the shores of Malta that evening and the company had had to be set up before that.<\/p>\n
First, a Budapest-based lawyer representing the businessman approached the employee of a consultancy firm based on Jersey, an island between England and France. This employee turned to the local branch of an international law firm for assistance. The law clerk decided, however, that the request cannot be processed quickly enough on their level so they turned to their central office in Panama. The clerk gave her colleague in Panama the contact information of the Hungarian lawyer and suggested that she should deal with him directly.<\/p>\n
The Hungarian businessman who needed the offshore company was S\u00e1ndor Cs\u00e1nyi, Hungary\u2019s wealthiest person, the head of Hungary\u2019s biggest bank, OTP, and chairman of the Hungarian Football Association. The offshore company, called Durion Services and incorporated on the British-Virgin Islands (BVI) with the purpose of “providing contracts to crew members of a yacht,\u201d had been registered under the name of Erika Cs\u00e1nyi, the banker\u2019s wife. According to an incorporation document, the source of funding for the company is “from Dr Sandor Csanyi’s career in banking.\u201d<\/p>\n
Cs\u00e1nyi\u2019s link to the BVI company has been revealed as part of the global investigative reporting project known as the Panama Papers. Durion Services was incorporated by Mossack Fonseca, the Panama law firm whose internal documents \u2013 11.5 million files containing records of nearly 215 thousand companies \u2013 were leaked. The documents were obtained by the journalists of German newspaper S\u00fcddeutsche Zeitung<\/a> who shared them with the International Consortium of Investigative Journalists<\/a>. The consortium organized a global investigation with the participation of more than 370 journalists from 76 countries. From Hungary, only Direkt36 took part in the project.<\/p>\n So far, the Hungarian part of the global investigation has revealed offshore connections of two political players \u2013 Zsolt Horv\u00e1th from governing Fidesz<\/a> and L\u00e1szl\u00f3 Boldvai from the opposition socialist party<\/a> \u2013 and the former CEO of the state-owned Hungarian Development Bank<\/a>. The documents, however, contain more than one hundred individuals and companies with links to Hungary, including some of Hungary\u2019s best-known businessmen.<\/p>\n Besides Cs\u00e1nyi, another influential banker, Zolt\u00e1n Sp\u00e9der from FHB Bank, also appears in the leak with links to two offshore companies. Gy\u00f6rgy Gatty\u00e1n, also considered one of Hungary’s richest people , got in contact with Mossack Fonseca through a law firm as part of his plan to immigrate to the United States. Tam\u00e1s Szemerey, a cousin of Hungarian central bank governor Gy\u00f6rgy Matolcsy, also had shares in an offshore company. Firms linked to G\u00e1bor Kov\u00e1cs, a well-known businessman and art collector, also appear in the documents.<\/p>\n As a result of the Panama Papers, politicians were forced to resign, world leaders came under pressure, and financial wrongdoings were exposed. This does not mean, however, that simply owning or using offshore companies is illegal or immoral. For some international business transactions, it is even a logical choice.<\/p>\n Nothing suggests that the businessmen mentioned in this article used offshore companies or services for improper purposes.<\/p>\n However, thanks to the secrecy of the offshore world, their offshore activities have not been known to the public while details of their other business interests \u2013 for example, that of their Hungarian companies \u2013 are accessible for everybody. Their involvement in the Panama Papers also shows that the use of offshore companies is prevalent in the circles of the Hungarian business elite even as governments around the world \u2013 including Hungary \u2013 make serious efforts to make the offshore world more transparent.<\/p>\n According to the leaked documents, Cs\u00e1nyi needed the offshore company for the boat\u2019s crew because of “legal and taxation\u201d reasons. In a written response to our questions, the banker said that it is general international practice that the ownership and the management of boats are separated so that “the management related problems emerging do not endanger the boat\u2019s ownership.\u201d<\/p>\n Cs\u00e1nyi added that it is also common to use offshore companies for running a boat since the crew members might come from outside the European Union and the boats also ship on waters outside the EU\u2019s territory.<\/p>\n The leaked documents use the term “yacht\u201d for the boat but Cs\u00e1nyi consistently referred to it as a “catamaran sailboat.\u201d He also stressed that he was not in direct contact with Mossack Fonseca. He took care of the whole deal through a Hungarian lawyer and Hawksford International, a Jersey consultancy company, he said.<\/p>\n Cs\u00e1nyi owns the boat through a company registered in Malta, a popular country among yacht owners. Several websites advertise the tax breaks Maltese boat owners enjoy. The banker, however, offered another explanation for choosing Malta.<\/p>\n He said that he was looking for a country that requires high standards for ships registered under its flag. “We chose the Maltese company and the Maltese registration to show internationally that the boat fits the strictest requirements,\u201d he said. He added that the boat is rented out for most of the year and “in the smaller part of the season my family and I use it for recreational purposes.\u201d<\/p>\n Durion Services is not in operation any more. According to Cs\u00e1nyi, last April they hired a professional boat management company because it turned out that “managing a boat requires much more legal, technical and administrative knowledge than we had anticipated.\u201d Durion Services was dissolved and struck from the register, he said.<\/p>\n Cs\u00e1nyi gave detailed answers to almost all the questions but gave a vague response to why it was so urgent for the boat to leave Malta on the evening of May 21, 2014. “That time is considered high season from a nautical point of view and the boat had to get somewhere on time,\u201d wrote Cs\u00e1nyi, adding that in the end “the voyage had no technical, legal or financial obstacle.\u201d<\/p>\n The offshore links of Zolt\u00e1n Sp\u00e9der, another influential Hungarian banker, do not appear to have such light Mediterranean elements. Sp\u00e9der had risen to the elite circles of the banking world as Cs\u00e1nyi’s deputy at OTP Bank but now, as the chairman and co-owner of FHB Bank, a company with close ties to the government, he is considered a rival of him.<\/p>\n One of the offshore companies linked to Sp\u00e9der played an important role in the history of a publishing company called CEMP, which runs Hungary\u2019s biggest news site, Index.hu, now owned by the banker.<\/p>\n In 2008, the majority of the company\u2019s shares were purchased by a Seychelles firm. Sp\u00e9der was already a board member and minority owner of CEMP at the time.<\/p>\n The Seychelles company, called Whitestone International, acted with the usual secrecy of offshore companies. CEMP\u2019s company records do not reveal the owners of Whitestone and the publishing company did not disclose it either.<\/p>\n The Panama Papers reveal, however, that Sp\u00e9der had been in contact with Whitestone even before the company got hold of CEMP\u2019s shares. According to a document created in September 2007, Sp\u00e9der received a general Power of Attorney from Whitestone, which granted him wide authority to act on behalf of the company, including signing contracts, execute money transfers, and opening bank accounts.<\/p>\n “This instrument is to be construed and interpreted as a general power of attorney with no limitations on the power of authority of the attorney as long as such acts are lawful and in the interest of the Company,\u201d says the document, which did not indicate when the power of attorney will expire.<\/p>\n According to lawyers and consultants involved in the offshore industry, this kind of documents are often given to the real owners of the offshore companies. “In general, it\u2019s the beneficial owner who gets the Power of Attorney,\u201d said a lawyer who spoke on the condition of anonymity because of the sensitivity of the issue. He added that of course without documents it is hard to prove if it is in fact the beneficial owner who is granted the authority to represent the company.<\/p>\n Sp\u00e9der claimed, through a written statement provided by FHB that he has never been the owner of Whitestone. He did not answer the questions on the company\u2019s ownership and on how he got in contact with the firm. He only said that no transaction took place with the use of the Power of Attorney he had. He added that he did not know anything about the company\u2019s activities.<\/p>\n Today, Sp\u00e9der is the majority shareholder of CEMP. He bought the shares directly from Whitestone and through other companies. Sp\u00e9der declined to answer questions about the details of these deals. “The transactions by CEMP and its owners took place between privately owned companies,\u201d said Sp\u00e9der. He added that all parties are bound by rules of business confidentiality.<\/p>\n Sp\u00e9der had similar link to another offshore company. According to the leaked documents, he was given a Power of Attorney for a Novum Asset Management, a company registered on the British Virgin Islands. The files do not reveal its activities or its owners. The company had a bearer share, meaning that it is always owned by those who hold the share.<\/p>\n Sp\u00e9der said that he did not own the company and claimed that no transaction took place with the use of his Power of Attorney. He did not answer any other questions concerning the company.<\/p>\n Gy\u00f6rgy Gatty\u00e1n, a billionaire who built his business empire on running porn sites, got in contact with Mossack Fonseca through another law firm in late 2013. Then he was already living in Los Angeles as he disclosed this in an interview that year with Hungarian daily N\u00e9pszabads\u00e1g. The Panama Papers reveal that the same year he also took steps to immigrate to the United States.<\/p>\n As part of this process he initiated the creation of a trust, according to the leaked documents. Tam\u00e1s Nemes, the communications director of Gatty\u00e1n\u2019s company, Docler Holding, said that Gatty\u00e1n\u2019s goal with this trust was “to take care of his family and his loved ones in the present and in the future when he will no longer be around.\u201d<\/p>\n The leaked documents refer to Gatty\u00e1n\u2019s trust as an “offshore trust\u201d but Nemes disputes whether this is the right term. “The trust\u2019s activity takes place in the United States, through a local bank and according to the pertinent tax laws. Therefore, we think that the term “offshore trust\u201d does not make sense,\u201d he said. He added that even though the trust is registered in Nevada, Gatty\u00e1n pays his taxes in California, where the tax burden is ranked among the highest in the United States.<\/p>\n Gatty\u00e1n hired an international law firm to set up the trust and, according to Nemes, he had no idea that they would subcontract Mossack Fonseca. The Panama law firm conducted a KYC procedure, which stands for Know Your Customer. Gatty\u00e1n\u2019s lawyers first sent a Wikipedia post about him and some details about his companies. Later they provided much more in-depth details, including business reports of his companies and even his Hungarian tax return.<\/p>\n These documents also show that at the time of the procedure Gatty\u00e1n had a company that owned his 24 million-dollar home in Los Angeles. Nemes did not confirm the value but said that Gatty\u00e1n still owns the company and the property as well. He also said that Gatty\u00e1n\u2019s immigration process has not finished yet. The billionaire lives in the US as a resident, using a visa, Nemes added.<\/p>\n In 2010, Viktor Orb\u00e1n, referring to the offshore interests of the Hungarian Central Bank\u2019s governor at the time, said that the bank cannot be the “quarters of offshore knights.\u201d<\/p>\n Three years later he appointed Gy\u00f6rgy Matolcsy as the new governor who is not known to have any personal offshore connections. After the Panama Papers scandal broke out, the central bank even issued a statement saying that “Gy\u00f6rgy Matolcsy and members of his family did not and do not have any offshore interests, companies or investments.\u201d<\/p>\n It is not clear what exactly Matolcsy meant by family members but, according to the leaked documents, one of his cousins, Tam\u00e1s Szemerey, a well-known businessman whose companies also benefited from the controversial spending of the central bank\u2019s foundations, had an offshore company.<\/p>\n In May 2009, Szemerey became the director and shareholder of Sunjoy Development, a company incorporated on the British Virgin Islands. Szemerey hired a Hong Kong consultancy firm, which handled the incorporation procedure through Mossack Fonseca, records show.<\/p>\n The documents do not reveal the activities of Sunjoy and Szemerey claims that in fact it did not do any meaningful work during his ownership. In a written statement, he said he set up Sunjoy Development because he needed a foreign company for a technological innovation project outside Europe. A year later he quit the company because, according to his statement, he realized that his existing Hungarian businesses do not allow him to start a new venture overseas.<\/p>\n Szemerey said that during his ownership, Sunjoy Development did not even have a bank account. He also said that he did not tell about it to his cousin, Gy\u00f6rgy Matolcsy, who in the meantime became a member of the government after Orb\u00e1n\u2019s election victory in 2010. “I do not tell my cousins (none of them, including Gy\u00f6rgy Matolcsy) about my business activities,\u201d he wrote.<\/p>\n G\u00e1bor Kov\u00e1cs, a former banker whose art foundation receives substantial donations from the government, is also implicated in the Panama Papers through some of his companies. Four of his firms – Bank\u00e1r Zrt., Kogart Park Kft., Kogart H\u00e1z Kft. and P-Ag\u00e1rd Kft. \u2013 became shareholders of Trewfield Corporation, a Seychelless company in December 2012.<\/p>\n The documents do not contain any information about Trewfield\u2019s activities. Kov\u00e1cs, through one of his colleagues, said that he does not want to talk about what the company is doing. He did not answer other questions about the offshore company either.<\/p>\n Offshore interests like these have been almost impossible to discover not only for the public but also for authorities. This appears to change as a result of some serious international efforts to make the offshore world more transparent. One of the most important elements of this is a system designed by the OECD, a group of the world\u2019s most developed countries. In this system, countries will share banking information with each other, including the beneficiary owners of offshore companies that have bank accounts.<\/p>\n Hungary was among the first countries that joined the treaty that will take effect in 2017. This would allow the Hungarian tax authorities to get information on Hungarian taxpayers\u2019 currently secret bank accounts around the world.<\/p>\n In the conference room of Laveco, a Budapest-based offshore provider company, a computer screen also shows slides explaining the restrictions affecting the offshore industry.<\/p>\n As the partner of Mossack Fonseca, the company\u2019s name is often mentioned in the Panama Papers. L\u00e1szl\u00f3 V\u00e1radi, Laveco\u2019s director and majority owner, said that when the story broke they expected that their phone lines “would burn with the calls of customers\u201d but in the end only 4-5 of the more than one hundred clients called.<\/p>\n Once the information exchange starts, a similar leak would not stir such a storm because the authorities will have access to the information, said V\u00e1radi. He added that the restrictions will not be able to prevent people from conducting hidden businesses. “There will always be front men. Nobody can stop someone from putting his relative, assistant or girlfriend as the owner of a company,\u201d said V\u00e1radi, adding that “the authorities have no way to crack down on this.\u201d<\/p>\n <\/p>\n For Hungarian company information we used the services of Opten<\/a> and Ceginfo<\/a>.<\/p>\nSp\u00e9der, Gatty\u00e1n, Szemerey<\/h3>\n
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The Maltese boat<\/h3>\n
Another banker<\/h3>\n
Getting to know Mr Gatty\u00e1n<\/h3>\n
The cousin<\/h3>\n
The art collector<\/h3>\n
End of offshore?<\/h3>\n
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