Corruption Continues

Organized crime and corruption still dominate life in Hungary, undiminished since the turf battles of the 1990s and early 2000s. Instead, groups and individuals have consolidated their strength, through connections to Hungarian leaders in government and business, to such an extent that many experts question the ability of the justice system to make any difference.

"If there are 300 murders, you call the police," said Geza Finszter, a senior researcher at the National Institute of Criminology in Budapest. "If there are 30,000 murders, you look for another solution. Real justice is only possible in a fundamentally honest society. Only then it is possible to shift away from current practices and thus make crime unprofitable."

Hungary, by most standards, is not such a society. According to Transparency International’s 2008 report on corruption in businesses, top managers from one third of Hungary’s major companies say they regularly bribe politicians, and two-thirds of those businesses have recently become targets of economic crime, according to the annual assessment of corrupt activities in 90 countries.

Meanwhile, except for multinational companies and the public sector, almost no one pays the expected taxes, and skirting regulations is the historical norm. There seems to be little concerted effort to tackle the problem, Finszter said. The justice system is uninterested in a comprehensive review, let alone in reform. And all those involved avoid scrutiny.

"We tried to get a list of cases that were discontinued, and the reasons for dropping them," Finszter added. "We found nothing but closed doors."

Hungary has remained corrupt throughout its structural transition, say Finszter and others.  This is a long-term issue that needs a deep and serious rethinking process in society. According to the Transparency International Report, business people think the situation has even worsened in recent years. Corruption is the standard, not the exception, for most businesses. It defines success: three-quarters of those who claimed to be actively engaged in corruption are top-level managers. An overview of high-profile cases in the last decades supports this assessment and lists names from senior ranks of government and business, although such links remain unproven and those involved have gone unpunished.

Part of the problem is that the justice system lacks the sophistication of the criminal networks, which are armed with specific technical knowledge and, as opposed to investigators, have money, education, motivation, and a proper legal background. So, sector by sector, the justice system fails to protect the government’s financial interests and, in turn, the welfare of the citizens.

In addition, the police, especially criminal investigators, are widely vulnerable to corruption. Sources say that few cops are clean, although the level of dishonesty can vary according to rank.

For ordinary police officers, "it is understandable to a degree," said one lower-ranked judge who wished to remain anonymous. "They are out on the street, they are badly paid, and they are outsmarted. They get approached, are offered some money, and so they fall for it." One former police official called the rank and file police "an army of bandits," among whom loyalty matters more than professionalism, and getting ahead depends on total obedience. Few investigators ever leave, he said, making it all but impossible to track down criminals.

But corruption of top-level cops is, by far, the larger problem. In the national police force, and especially in the organized crime section, investigators are often bound by their superiors’ permission to proceed with sensitive operations. If superiors are tied into the political system, there is a tendency to shut down investigations that may pose a threat.

"When high level political and economic interests intersect," says Transparency International, "investigators are exposed to political pressure, making uncovering crimes exceedingly difficult."

"We got a tip from an informant who did a lot of business with a government official," one investigator complained, omitting details to avoid being traced. "We investigated the case but we got shut down very, very quickly."

Even Hungarian secret services have been widely suspected of improper ties to private business and government departments. Although little hard proof has surfaced in the last two decades, the secret services recently became the focus of a very public scandal.

Ibolya David, the chairwoman of a junior opposition party released to the media a tape of a conversation between an employee of a private security service company and Sandor Csanyi, the CEO of OTP Bank, Hungary’s largest bank. The tape outlined a political plot to remove David from office. Csanyi has refused to comment in the weeks since the case broke. The resulting scandal has drawn attention to the abuse of security services, as well as the connections among currently serving government secret service agents and their retired colleagues, who often take positions in private companies while remaining privy to sensitive information, according to media reports.

Given such obstacles, investigations move very slowly. Complicating quick prosecution is the nature of organized crime cases, especially white-collar, potentially "hot," or politically connected ones.  So, because of such  obstacles and because of caution in pointing a finger at someone in a power position, cases can take a long time to even get a prosecutor’s attention. Five, even ten years is not unusual.

Such delays work to the criminals’ advantage.  Investigation periods often exceed statutory limitations, which perpetrators may spend behind bars. This time is deducted from final sentences, thus creating remarkably light incarceration periods. And, after multiple rounds of appeals, many big-name criminals get away without spending a single minute in jail.

 

Prosecutors politically influenced

The political inclinations of prosecutors are something of an open secret. A former Prosecutor General, Peter Polt, had a reputation for systematically naming right-wing prosecutors as his lieutenants. That infused the prosecutorial ranks with political bias that judges and attorneys complain is now "irreversible." In that environment, although prosecutors may not take bribes for favorable treatment in certain cases, they are still considered controlled by their politics – or politicians. In the triangle between the criminal world, government and the justice system, government and politics have undue influence.

Cases that survive the prosecutor obstacle are remarkably successful, but they often have been watered down or stopped before they get there.  Those that make it through this phase have a success rate of 95 percent or higher.

"Court cases are laughable," said one judge, who also requested anonymity. "We only get cases once the investigators and the prosecutors are one hundred percent sure that the case will fly. Testimonies are the same as those recorded during interrogations. Judges, to be honest, can get a little lazy, too."

He said that the judges who are tough on most criminals tend to favor those accused of white-collar crime or who have an education and habitually give them light sentences. "Tax evasion, for instance, could be a 5-year sentence," he said, "but most huge tax avoiders get a year or two, and are put on probation."

The most spectacular failures of the justice system have come in some complicated, high profile cases, for which defendants got very light sentences. Gabor Princz, a former bank chief who embezzled the equivalent of about $200 million in the 1990s, was not sentenced to jail but was fined about $20,000 – and that might be reversed if his appeal filed at the Supreme Court is successful.

Judges sometimes claim that such a low sentence was not the fault of the judge. The prosecutors sometimes decide to probe the bank’s misguided business strategy, rather than a string of specific transactions that would have carried jail sentences. This lenient treatment has been traced to Princz’s political connections.

Judges, however, remain legally bound to the prosecution’s case and cannot transgress these parameters even if they see an opportunity.

"Investigators decide to go with one case and not another in a way that looks very random," said one retired judge, who also requested anonymity. "Often, we will see very interesting angles in their files that nobody followed through with. Well-known names (of political figures) pop up in the investigation files, and then disappear again. Some cases are related to others, but because separate police units work on them, they are never merged. Many cases, even when they are investigated for years, have so many holes in them that they cannot hold up in front of a court."

All in all, court cases do not seem to prove the government assertion that organized crime has been "reduced to a fraction of 1990s’ activity." That there are fewer spectacular crimes, such as street executions or blown-up cars as was seen a decade ago, does not mean that the underworld has withered. Rather, it has solidified its position and continues to thrive. Money laundering cases, which one former police chief said was vital to uncovering organized crime activity, would reveal many links if prosecuted. Yet in the past 10 years, fewer than 10 cases of money laundering that have made it to the courts.

At a recent conference focused on money laundering issues, Chief Prosecutor Tamás Kovács agreed that this matter was the key to other investigations – but was going nowhere.

"We have to face the facts," Kovács said. "Latency is huge." And this despite a list in the Chief Prosecutor’s office of 80 to 120 organized crime networks, said a source familiar with the government’s efforts to combat organized crime.

While it is very hard to prove, observers describe multinational gangs taking part in ordinary street crime, prostitution, human and drugs trafficking. Some of the groups listed are small, with perhaps a dozen members. Others are well funded and may have hundreds of members.

But it’s not their size so much as their connections and sophistication that make some of these networks so powerful, insiders say. The relations between organized crime and the highest levels of Hungarian society are so intricate that many experts have begun to believe it is no longer a problem for the justice system to solve.

With a low number of cases, a low frequency of high-profile convictions, and the large number of organized crime groups that reportedly operate in the country, Hungary has a long way to go to straighten out its justice system and smoke out its organized crime groups.

 

Eva Vayda and Marton Dunai are on the staff of The Organized Crime and Corruption Reporting Project (OCCRP) a joint program of the Center for Investigative Reporting in Sarajevo, Romanian Center for Investigative Journalism, Bulgarian Investigative Journalism Center, Media Focus, the Caucasus Media Investigation Center, Novaya Gazeta and a network of investigative journalists in Montenegro, Albania, Moldova, Ukraine, Macedonia and Georgia.

www.reportingproject.net