How to waste public funds

Energy consumption was not reduced by EU-funded LED lights installed by company of PM Orban’s son-in-law

The town of Vác received 421.9 million Hungarian forints (€1.31 million at today’s exchange rate) from the European Union for street light modernization in 2012. The job was done by Elios Zrt., a company formerly co-owned and managed by PM Orban’s son-in-law, István Tiborcz. The town council expected that energy consumption and the cost of the street lighting maintenance will decrease significantly. However, recently published documents prove that this did not happen.

László Ferjancsics of the group called Local Patriots for Vác filed a freedom of information request with the municipality and asked how much savings the town had been expecting and what the results were.

These LED street light modernization programs are highly controversial: European Anti-Fraud Office (OLAF) for two years investigated dozens of such contracts won by Elios and found serious irregularities and possible conflict of interest. The project in Vác was one of those where OLAF found irregularities.

The story started on December 12, 2012, when it was announced that Hungarian towns can apply for EU funds that they can use to modernize their street lighting. The town of Vác, among others, applied for such funds and in October 2012 a decision was made that the town would receive 421.9 million Hungarian forints for this goal from EU funds. This was 85 percent of the total costs of street light modernization for the town. The remaining 87.6 million HUF came from the town’s budget.

The only applicant for the job of the street light modernization in Vác was Elios Zrt, which signed the contract on February 25, 2015. At that time, István Tiborcz was a co-owner of the company.

This is what corruption looks like: drone videos of 23 towns with Elios lamps

One of the biggest political scandals of the past few months was the so-called Elios scandal in Hungary. OLAF, the European anti-corruption agency sent the result of two years of its work to Hungarian authorities in the winter, recommending legal action over “serious irregularities” and “conflict of interest” connected to Elios Zrt.

A study about the effects of the new lights was done in March 2012 – even before the call for applications for EU funds was published. Another controversial part of the story is that the study was done by Sistrade Kft and signed by its owner, Endre Hamar.

Hamar was a co-owner of Elios Zrt. with István Tiborcz between November 2013 and April 2014.

The document created by Sistrade predicted that the new lights will reduce electricity consumption of the street light system by 37 percent and reduce total maintenance and energy costs by 41 percent.

The document by Sistrade predicting savings after the installation of LED lights

Thus László Ferjanincs asked the town how much the municipality was spending on street lighting in the two years before the new LED lights were installed and in the two years after. (He did not ask for data from the year when the lights were installed.)

The documents he received prove that the town saved no money on maintenance and energy consumption did not decrease, either.

Spreadsheet provided by the municipality of Vác

The spreadsheet above shows that energy costs (row 1) actually decreased after the new lights were installed, but Ferjancsics pointed out that the document also shows that the price of electricity decreased in the years examined (row 2). The spreadsheet also shows that energy consumption did not decrease (row 4).  Thus, the only cause for any savings was a drop in electricity prices. Maintenance costs have not decreased, either (row 3).

Last spring Atlatszo published OLAF’S letter sent to the town of Vác detailing its findings about the EU-funded project. The document was also requested and then provided to Atlatszo by Ferjancsics.

LED lamps by Orban’s son-in-law: This is how EU funds were stolen in the town of Vác

News broke in January that the European Anti-Fraud Office (OLAF) had finished a two-year investigation into EU-funded street light modernization programs in Hungary. OLAF found that there were serious irregularities and possible conflicts of interest concerning 35 such contracts.

Written by Katalin Erdélyi

English version by Márk Tremmel and Anita Kőműves. You can read the original, Hungarian language version of this story here.

Cover photo: Mayor of Vác, Attila Fördős signs the contract with Elios CEO Gábor Sájer in February 2015. Photo credit: Vácért Lokálpatrióta Egyesület