OLAF cases in Hungary: first defendant in fake ‘dog fitness’ case given suspended prison term
The man who embezzled EU funds totaling HUF 45 million (€140,000 at today’s exchange rate) received a suspended prison sentence, while his three accomplices in the fraud received fines ranging between HUF 150,000 (€470) and HUF 1.5 million (€4700). The man and his helpers promised to create a hydrotherapy treadmill in 2018 to aid the rehabilitation and welfare of dogs. The European Anti-Fraud Agency (OLAF) notified Hungarian prosecutors in 2013 about the case.
On December 23., 2013 OLAF notified Hungarian authorities about suspicious activities surrounding an EU grant to develop an animal welfare program. Investigations followed, which prompted the Budapest High Prosecution Office to press charges in the case on December 23, 2015.
A 49-year old man, the first defendant in the trial, submitted an EU tender application in October 2008 to develop a hydrotherapy treadmill to aid the rehabilitation and welfare of dogs.
The application bid sought a 45% non-refundable compensation out of a planned expenditure of HUF 250 million. A first installment of the grant was paid to the man. However, he did not use the funds to implement the project, and according to the prosecutors, he had never intended to do so.
The designated project headquarters did not even have public utilities and were unfit for the proposed activities.
The prosecution concluded that the defendant sought to misappropriate the EU funds by means of issuing fictitious invoices and forging documents.
The scheme involved a number of accomplices. The Budapest High Prosecution Office pressed charges on grounds of attempting to carry out serious budgetary fraud carrying a possible prison sentence of two to eight years.
It was Hungarian daily Népszabadság that first reported in 2009 on the peculiarities surrounding the project planned to be implemented in Drégelypalánk in Nógrád county. According to the newspaper, the local residents were familiar with the grant of HUF 112 million from the Hungarian Development Agency, but not with the company and its owners.
The footage of HírTV about the headquarters of the company
In 2009 Népszabadság was not able to reach Gyrotech CEO Balázs Kis, and had no information about how the company intended to cover its required down payment for the project. The statements of the company mentioned a planned revenue of HUF 60 million until the end of their second business year and claimed to work with professionals with relevant qualifications and years of domestic and international professional experience.
Debts, liquidation and shutdown
Budapest-based Gyrotech Ltd. had been undergoing liquidation since November 6, 2012, and was removed from the company registry on November 1. The company was originally involved in the trading of IT hardware and applied to expand its business in biotechnology R&D in 2008. Between the end of September 2012 and the end of June 2013 The company was on the tax agency’s list of legal entities with tax arrears exceeding HUF 100 million, 180 days overdue.
In September 2011 the registry court concluded that the company could not be found in its official headquarters or premises, and the representatives of the company were in unknown locations.
Therefore, the court initiated the cancellation of the company from the registry, which was then ceased by the new order for liquidation. During the liquidation, the two real estate properties of the company – mortgaged for millions of forints – were put up for bidding at a price of HUF 4.3 million.
Suspended prison sentence for embezzling HUF 45 million
Átlátszó learned that the appeals court in October 2018 found all of the defendants guilty of budgetary fraud and forging private documents.
One of the defendants was sentenced to 1 year and 10 months of imprisonment suspended for 3 years of probation, while three others received fines ranging between HUF 150 thousand and HUF 1.5 million.
A mild sentence
A sentence in a very similar case a decade ago ordered years of imprisonment based on OLAF signals. In that case, the chief of a company submitted EU tender bids between 2005 and 2010 for purchasing new machinery for producing paper bags without the intention of procuring the machines.
The convicted person forged and used documents defrauding HUF 630 million from the EU budget and HUF 140 million from the Hungarian state budget. Last November a Hungarian court raised the term of imprisonment of the first accused to 6 years and issued a fine of HUF 5 million and gave a penalty of suspended imprisonment to the other three defendants.
Despite OLAF’s accusations that Elios Plc., the former company of the son-in-law of the prime minister, committed serious fraud in dozens of EU-funded projects after 2010, the Hungarian investigators closed these cases last year without in-depth investigation, which may cost Hungarian taxpayers billions of forints as the EU is expected to require the Hungarian state to repay €43 million from the funds granted.
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.
Written by Brigitta Csikász
English version by Péter László. You can read the original, Hungarian language story here.