Let\u2019s buy bank branches!<\/strong><\/h2>\nThe European Union launched the Jeremie venture capital programme in Hungary in 2009. A subsidy totalling 130 billion forints (422 million euros) is allocated to 28 fund managements companies operated by private investors who had been selected via a public tender. While 70% of the investment given to start-ups comes from the EU, the remaining 30% has to be provided by the private investor. The fund managers must repay the subsidies within 10 years, but not to the EU, but to the Hungarian state, which can re-use the amount for similar purposes. If the fund management company exits the start-up with a profit, most of the gain goes to the private investor. In case of significant loss, however, it has to share at least part of that, too.<\/p>\n
Hern\u00e1di was selected in 2013, and his fund, Gran Private Equity received 3 billion (9.7 million euros) worth of EU subsidy to support start-ups. Gran derives from the German name of Esztergom, a city at the Slovakian border, an hour drive from Budapest. Hern\u00e1di is connected to the city in many ways: he was raised in Esztergom, he owns a house there and he is even an honorary citizen of the city. His fund management company invested in several projects based in Esztergom, including those real estate businesses, which were criticized by the MFB.<\/p>\n
These property projects – worth a total of 840 million forints (2.73 million euros) – have been conducted by two companies. One of them was founded by Gy\u00f6rgy Bacsa, who is the son of Hern\u00e1di\u2019s cousin, according to multiple sources of Direkt36 (Hern\u00e1di did not want to comment on this information). Bacsa also has business ties with Hern\u00e1di: he is the business development director at Mol, and a board member of the Hungarian-Russian gas trader, MET Holding AG co-owned by Mol.<\/p>\n
On paper, there was no conflict of interest, as Bacsa is not a direct relative of Hern\u00e1di according to the Hungarian law.<\/p>\n
The other company that received support is owned by Viktor Sasv\u00e1ri, a council member in Esztergom from the governing Fidesz party. Bacsa and Sasv\u00e1ri have a close relationship; they were classmates in primary and in secondary school, and they also co-own a real estate company. Sasv\u00e1ri leads the financial committee of the Esztergom municipality, and Bacsa is also an external member of the body. Sasv\u00e1ri told Direkt36 that he has known Hern\u00e1di for a long time.<\/p>\n
According to the website of Hern\u00e1di\u2019s fund, Gran \u201dprimarily seeks to invest in research projects of universities and innovation labs, in businesses that lack capital but have great growth potential, and in high-risk, innovative projects\u201d. It also supported, however, Bacsa\u2019s company, HEBBO, which \u2013 even according to a decision support document written by the company itself \u2013 is not innovative, as it provides stable profit without significant innovation or risk.<\/p>\n
HEBBO\u2019s concept was simple. It buys four properties on rural towns from a business group, that had been renting out the properties to Hungarian bank MKB as the location of four of its branches. As the bank\u2019s previously signed long-term rental agreements remain valid until 2025-2028, HEBBO, as the new owner of the properties, only needs to collect the monthly rent.<\/p>\n
HEBBO planned to buy the four properties for 1.5 billion forints (4.8 million euros), an internal document showed. The final purchase price was not revealed. The document shows that in addition to a 547 million forint (1.8 million euro) investment received from Hern\u00e1di\u2019s asset management company, HEBBO covered the purchase price from its own funds and from a 2 million euro loan from Duna Takarek, a bank co-owned by Istv\u00e1n Garancsi.<\/p>\n
The company will receive 100 million forints (322,800 euros) of rent annually from MKB, according to HEBBO\u2019s decision support documents. After repaying the monthly instalments of the bank loan and covering operating costs, the company would have an annual profit of 18-20 million forints (58-64 thousand euros). The document shows that HEBBO will not have to do much for this, as MKB has to take care of the maintenance of the properties and cover all operating expenses. This solution \u201cis quite different from the \u2019spirit\u2019 of venture capital,\u201d the anxious MFB official wrote in the e-mail in November 2015.<\/p>\n
Purchases in central Esztergom <\/strong><\/h2>\nThe venue of Viktor Sasv\u00e1ri\u2019s property project, who is a Fidesz member of the local government, was also Esztergom. Hern\u00e1di’s fund gave the politician\u2019s company called Borosty\u00e1n Udvar Ltd. 293 million forints in two instalments. There is not much innovative about its concept either, as the company received money to purchase properties, and its income is expected come from renting fees.<\/p>\n
In 2015, Sasv\u00e1ri\u2019s company purchased a property in the same street of central Esztergom where HEBBO did, right next to one of the earlier mentioned MKB branches. Sasv\u00e1ri bought and renovated a 523 m2 multi-level building. It was closed at the time of our visit to Esztergom, but Sasv\u00e1ri hopes to soon rent it “primarily for touristic and business purposes”.<\/p>\n
Last year, the politician\u2019s company used the money received from Gran to purchase further local governmental properties, one of them located on the central square of Esztergom. His company was the sole bidder at the public tender for the properties, allowing the company to buy five properties for 34 million forints (110 thousand euros), including four apartments sized between 40 and 90 m2 and one ruined retail premise of 146 m2.<\/p>\n
Sasv\u00e1ri explained that the reason for the seemingly low price was the bad condition of the buildings, arguing that the cost of reconstruction of the retail premise would exceed 150 million forints. He also stressed that he himself did not participate in the related decision-making process of the local governmental body. This was also confirmed by the Esztergom local government.<\/p>\n
The Prime Minister\u2019s friend <\/strong><\/h2>\nHern\u00e1di\u2019s several Jeremie-related activities are connected to Istv\u00e1n Garancsi. The relation of the two businessmen has a long track record \u2013 they worked together in a bank group in the 90’s and they both participated in a profitable privatisation deal at the beginning of 2000s. Moreover, they are both in close relation with Prime Minister Viktor Orb\u00e1n \u2013 the three of them were seen together at football matches and went on hiking tours together, for example on a three-day hiking in the Austrian mountains in 2009, as Garancsi once told weekly magazine Figyel\u0151.<\/p>\n
Hern\u00e1di and Garancsi have also cooperated in the Jeremie-programme. We found five persons who fulfilled or are fulfilling positions in both Hern\u00e1di’s and Garancsi’s fund called Garangold, which also received 3 billion forints from the EU. Moreover, the 50-page-long documents with internal rules of Gran and Garangold regarding the functioning and investment policies are almost word-by-word identical.<\/p>\n
Another link between the two businessmen is Mikl\u00f3s K\u00f3bor, citizen of Esztergom who was the CEO of Hern\u00e1di’s fund. Later, one of his companies participated in the preparation of investments in both funds. Since December 2016, the cooperation between the two funds has become even closer. The mandate of all members of the management and supervisory committee was terminated in Garancsi’s fund except his own, and in the past few months Hern\u00e1di’s fund started to represent and manage several investments of Garangold, according to company data.<\/p>\n
K\u00f3bor declined to comment and the Hungarian Development Bank did not answer whether they noticed the connections between the two funds and whether their relation raised any concerns.<\/p>\n
As a further link, in 2014 Hern\u00e1di’s fund invested in a factory co-owned by Garancsi. A company called TRP \u2013 Terenye Ltd. built a factory in N\u00f3gr\u00e1d county producing fuel materials from biological waste. One of the owners of the investor company is Market Ltd., which is linked to Garancsi. Gran provided the almost 2-billion value investment with 400 million forints (200 million as capital injection and 200 million as a loan).<\/p>\n
We asked Gran why they supported the business interests of one of Hern\u00e1di\u2019s long-time business partners but the representative of the company said he “did not understand the question.” We tried to contact Garancsi through various channels but one of his employees told us that the businessman was abroad and could not be reached.<\/p>\n
The EU suspended the payments<\/strong><\/h2>\nThe problems concerning the Hungarian operation of Jeremie funds also caught the attention of the European Commission. The auditors of the Commission investigated the investments of three funds in October 2014. Besides the investigation of Hern\u00e1di’s fund they also checked the Morando fund of Andr\u00e1s Tombor, the former foreign and security policy adviser of the Prime Minister (its anomalies were revealed by Forbes Hungary last September).<\/p>\n
Part of the concerns was that the supported companies are operating in the Central Hungary region (consisting of the capital and Pest county), and this is against the rules. The aim of the EU was to provide funding to start ups in less developed regions even if it might be more difficult to find such companies in these areas.<\/p>\n
Even though the seat of some companies was located in the countryside, they were active in the region of Central Hungary, the auditors found out. Such problems were also revealed in the case of two companies supported by Hern\u00e1di’s fund. According to Gran, they acted in line with the rules with regards to both companies. After we sent them those parts of the Commission\u2019s report that detail the anomalies connected to the companies supported by Gran, they responded that \u201cwe do not know the report, thus we will not comment on it.\u201d<\/p>\n
In April 2015, the head of the Regional Policy Directorate-General of the European Commission sent a letter to the Hungarian Ambassador to the EU regarding the irregularities in the Jeremie programme. “Based on the number of cases revealed during their investigation, the auditors of the European Commission concluded the irregularities are systematic,” Walter Deffaa wrote according to the letter obtained by Forbes. In his opinion, “serious deficiencies can be experienced” in the work of Hungarian authorities that did not find the irregularities during their investigations. He called on them to address these problems and also signalled the interruption of payments.<\/p>\n
The European Commission declined to comment but another leaked document showed that the interruption was in force until July 2015. The Commission appears to have lifted the suspension of payments due to stricter measures introduced by the National Economy Ministry in charge of the implementation of the programme. On the Commission\u2019s recommendation, a 10% financial correction \u2013 in other words a fine \u2013 in the amount of 4.3 billion forints (13.9 million euros) was imposed. This, however, did not mean that the money had to be paid back to Brussels because the 4.3 billion forints could be invested in another part of the Jeremie programme, the ministry said.<\/p>\n
No fine had to be paid by the funds, which were found problematic during the EU investigation, including Hern\u00e1di’s fund. The objections of the EU did not prevent the continuation of controversial practices. For example, several months after the sanctions of Brussels, Gran took a decision about the projects in Esztergom, which \u2013 according to the employee of the Hungarian Development Bank \u2013 were in line with the rules but not with the spirit and aim of the Jeremie programme. The Hungarian Development Bank did not respond to our question whether they took any steps with regards to these cases and the Ministry of National Economy supervising the Jeremie programme only said that it had informed all funds concerning the warnings of Brussels. In its reply to Direkt36 it also added that “the regular and contractual use of EU financial support” is the responsibility of the funds.<\/p>\n
For the Hungarian company data we used the services of Opten<\/a> and C\u00e9ginfo<\/a>.<\/em><\/p>\nIn cooperation with ![\"Forbes_logo_blue\"](\"https:\/\/www.direkt36.hu\/wp-content\/uploads\/2016\/05\/Forbes_logo_blue_mo_kicsi.jpg\")
<\/a><\/em><\/p>","protected":false},"excerpt":{"rendered":"
The venue of Viktor Sasv\u00e1ri\u2019s property project, who is a Fidesz member of the local government, was also Esztergom. Hern\u00e1di’s fund gave the politician\u2019s company called Borosty\u00e1n Udvar Ltd. 293 million forints in two instalments. There is not much innovative about its concept either, as the company received money to purchase properties, and its income is expected come from renting fees.<\/p>\n
In 2015, Sasv\u00e1ri\u2019s company purchased a property in the same street of central Esztergom where HEBBO did, right next to one of the earlier mentioned MKB branches. Sasv\u00e1ri bought and renovated a 523 m2 multi-level building. It was closed at the time of our visit to Esztergom, but Sasv\u00e1ri hopes to soon rent it “primarily for touristic and business purposes”.<\/p>\n
Last year, the politician\u2019s company used the money received from Gran to purchase further local governmental properties, one of them located on the central square of Esztergom. His company was the sole bidder at the public tender for the properties, allowing the company to buy five properties for 34 million forints (110 thousand euros), including four apartments sized between 40 and 90 m2 and one ruined retail premise of 146 m2.<\/p>\n
Sasv\u00e1ri explained that the reason for the seemingly low price was the bad condition of the buildings, arguing that the cost of reconstruction of the retail premise would exceed 150 million forints. He also stressed that he himself did not participate in the related decision-making process of the local governmental body. This was also confirmed by the Esztergom local government.<\/p>\n
The Prime Minister\u2019s friend <\/strong><\/h2>\nHern\u00e1di\u2019s several Jeremie-related activities are connected to Istv\u00e1n Garancsi. The relation of the two businessmen has a long track record \u2013 they worked together in a bank group in the 90’s and they both participated in a profitable privatisation deal at the beginning of 2000s. Moreover, they are both in close relation with Prime Minister Viktor Orb\u00e1n \u2013 the three of them were seen together at football matches and went on hiking tours together, for example on a three-day hiking in the Austrian mountains in 2009, as Garancsi once told weekly magazine Figyel\u0151.<\/p>\n
Hern\u00e1di and Garancsi have also cooperated in the Jeremie-programme. We found five persons who fulfilled or are fulfilling positions in both Hern\u00e1di’s and Garancsi’s fund called Garangold, which also received 3 billion forints from the EU. Moreover, the 50-page-long documents with internal rules of Gran and Garangold regarding the functioning and investment policies are almost word-by-word identical.<\/p>\n
Another link between the two businessmen is Mikl\u00f3s K\u00f3bor, citizen of Esztergom who was the CEO of Hern\u00e1di’s fund. Later, one of his companies participated in the preparation of investments in both funds. Since December 2016, the cooperation between the two funds has become even closer. The mandate of all members of the management and supervisory committee was terminated in Garancsi’s fund except his own, and in the past few months Hern\u00e1di’s fund started to represent and manage several investments of Garangold, according to company data.<\/p>\n
K\u00f3bor declined to comment and the Hungarian Development Bank did not answer whether they noticed the connections between the two funds and whether their relation raised any concerns.<\/p>\n
As a further link, in 2014 Hern\u00e1di’s fund invested in a factory co-owned by Garancsi. A company called TRP \u2013 Terenye Ltd. built a factory in N\u00f3gr\u00e1d county producing fuel materials from biological waste. One of the owners of the investor company is Market Ltd., which is linked to Garancsi. Gran provided the almost 2-billion value investment with 400 million forints (200 million as capital injection and 200 million as a loan).<\/p>\n
We asked Gran why they supported the business interests of one of Hern\u00e1di\u2019s long-time business partners but the representative of the company said he “did not understand the question.” We tried to contact Garancsi through various channels but one of his employees told us that the businessman was abroad and could not be reached.<\/p>\n
The EU suspended the payments<\/strong><\/h2>\nThe problems concerning the Hungarian operation of Jeremie funds also caught the attention of the European Commission. The auditors of the Commission investigated the investments of three funds in October 2014. Besides the investigation of Hern\u00e1di’s fund they also checked the Morando fund of Andr\u00e1s Tombor, the former foreign and security policy adviser of the Prime Minister (its anomalies were revealed by Forbes Hungary last September).<\/p>\n
Part of the concerns was that the supported companies are operating in the Central Hungary region (consisting of the capital and Pest county), and this is against the rules. The aim of the EU was to provide funding to start ups in less developed regions even if it might be more difficult to find such companies in these areas.<\/p>\n
Even though the seat of some companies was located in the countryside, they were active in the region of Central Hungary, the auditors found out. Such problems were also revealed in the case of two companies supported by Hern\u00e1di’s fund. According to Gran, they acted in line with the rules with regards to both companies. After we sent them those parts of the Commission\u2019s report that detail the anomalies connected to the companies supported by Gran, they responded that \u201cwe do not know the report, thus we will not comment on it.\u201d<\/p>\n
In April 2015, the head of the Regional Policy Directorate-General of the European Commission sent a letter to the Hungarian Ambassador to the EU regarding the irregularities in the Jeremie programme. “Based on the number of cases revealed during their investigation, the auditors of the European Commission concluded the irregularities are systematic,” Walter Deffaa wrote according to the letter obtained by Forbes. In his opinion, “serious deficiencies can be experienced” in the work of Hungarian authorities that did not find the irregularities during their investigations. He called on them to address these problems and also signalled the interruption of payments.<\/p>\n
The European Commission declined to comment but another leaked document showed that the interruption was in force until July 2015. The Commission appears to have lifted the suspension of payments due to stricter measures introduced by the National Economy Ministry in charge of the implementation of the programme. On the Commission\u2019s recommendation, a 10% financial correction \u2013 in other words a fine \u2013 in the amount of 4.3 billion forints (13.9 million euros) was imposed. This, however, did not mean that the money had to be paid back to Brussels because the 4.3 billion forints could be invested in another part of the Jeremie programme, the ministry said.<\/p>\n
No fine had to be paid by the funds, which were found problematic during the EU investigation, including Hern\u00e1di’s fund. The objections of the EU did not prevent the continuation of controversial practices. For example, several months after the sanctions of Brussels, Gran took a decision about the projects in Esztergom, which \u2013 according to the employee of the Hungarian Development Bank \u2013 were in line with the rules but not with the spirit and aim of the Jeremie programme. The Hungarian Development Bank did not respond to our question whether they took any steps with regards to these cases and the Ministry of National Economy supervising the Jeremie programme only said that it had informed all funds concerning the warnings of Brussels. In its reply to Direkt36 it also added that “the regular and contractual use of EU financial support” is the responsibility of the funds.<\/p>\n
For the Hungarian company data we used the services of Opten<\/a> and C\u00e9ginfo<\/a>.<\/em><\/p>\nIn cooperation with <\/a><\/em><\/p>","protected":false},"excerpt":{"rendered":"
The problems concerning the Hungarian operation of Jeremie funds also caught the attention of the European Commission. The auditors of the Commission investigated the investments of three funds in October 2014. Besides the investigation of Hern\u00e1di’s fund they also checked the Morando fund of Andr\u00e1s Tombor, the former foreign and security policy adviser of the Prime Minister (its anomalies were revealed by Forbes Hungary last September).<\/p>\n
Part of the concerns was that the supported companies are operating in the Central Hungary region (consisting of the capital and Pest county), and this is against the rules. The aim of the EU was to provide funding to start ups in less developed regions even if it might be more difficult to find such companies in these areas.<\/p>\n
Even though the seat of some companies was located in the countryside, they were active in the region of Central Hungary, the auditors found out. Such problems were also revealed in the case of two companies supported by Hern\u00e1di’s fund. According to Gran, they acted in line with the rules with regards to both companies. After we sent them those parts of the Commission\u2019s report that detail the anomalies connected to the companies supported by Gran, they responded that \u201cwe do not know the report, thus we will not comment on it.\u201d<\/p>\n
In April 2015, the head of the Regional Policy Directorate-General of the European Commission sent a letter to the Hungarian Ambassador to the EU regarding the irregularities in the Jeremie programme. “Based on the number of cases revealed during their investigation, the auditors of the European Commission concluded the irregularities are systematic,” Walter Deffaa wrote according to the letter obtained by Forbes. In his opinion, “serious deficiencies can be experienced” in the work of Hungarian authorities that did not find the irregularities during their investigations. He called on them to address these problems and also signalled the interruption of payments.<\/p>\n
The European Commission declined to comment but another leaked document showed that the interruption was in force until July 2015. The Commission appears to have lifted the suspension of payments due to stricter measures introduced by the National Economy Ministry in charge of the implementation of the programme. On the Commission\u2019s recommendation, a 10% financial correction \u2013 in other words a fine \u2013 in the amount of 4.3 billion forints (13.9 million euros) was imposed. This, however, did not mean that the money had to be paid back to Brussels because the 4.3 billion forints could be invested in another part of the Jeremie programme, the ministry said.<\/p>\n
No fine had to be paid by the funds, which were found problematic during the EU investigation, including Hern\u00e1di’s fund. The objections of the EU did not prevent the continuation of controversial practices. For example, several months after the sanctions of Brussels, Gran took a decision about the projects in Esztergom, which \u2013 according to the employee of the Hungarian Development Bank \u2013 were in line with the rules but not with the spirit and aim of the Jeremie programme. The Hungarian Development Bank did not respond to our question whether they took any steps with regards to these cases and the Ministry of National Economy supervising the Jeremie programme only said that it had informed all funds concerning the warnings of Brussels. In its reply to Direkt36 it also added that “the regular and contractual use of EU financial support” is the responsibility of the funds.<\/p>\n
For the Hungarian company data we used the services of Opten<\/a> and C\u00e9ginfo<\/a>.<\/em><\/p>\n In cooperation with <\/a><\/em><\/p>","protected":false},"excerpt":{"rendered":"