How to waste public funds

The Integrity Authority filed a criminal complaint about the EU-funded canopy walkways

Last March, Atlatszo reported on the canopy walkway in Nyírmártonfalva, whose contractor, the local Fidesz mayor, cut down the trees around it during construction. The case caused a sensation in Hungary and abroad, as the mayor won 60 million HUF in EU funding for the construction. Following our story, Transparency International Hungary turned to the Integrity Authority, which now said that it had found serious irregularities in the investigation and had filed a criminal complaint for the crimes of budget fraud, restrictive agreement, and use of forged private documents, and also initiated an investigation at the Hungarian Competition Authority (GVH).

Mihály Filemon, the Fidesz mayor of Nyírmártonfalva, and the builder of the local canopy walkway previously said in his defence that “It was not a condition of the project that there should be a forest around the canopy trail”. He also blamed Brussels by saying he had applied for the project years ago, but no money came in, “and we had to find something to finance the project, so because the forest was ripe for cutting, we cut it down and put the money into this project”.

We reported about the canopy walkway in Nyírmártonfalva, about 30 kilometres east of Debrecen at the end of March 2023. The facility was originally designed – as the name suggests – to be at the level of the tree canopy, but during the construction, the forest around it was cut down.

The treeless canopy walkway quickly became a symbol of the waste of EU funds in Hungary. Mayor Mihály Filemon, who won HUF 60 million of EU money for the construction, demanded an apology and threatened Átlátszó with a lawsuit (which we have won), while independent MP Ákos Hadházy and MEP Anna Donáth reported the matter to the European Anti-Fraud Office (OLAF). Transparency International Hungary (TI) has taken the case to the newly created anti-corruption agency, the Integrity Authority (IA), which is supposed to watch over the use of EU funds in Hungary.

The case of Nyírmártonfalva is not unique as multiple similar projects in the area were built under an EU-funded programme.

Budget fraud suspected by the authorities

The Integrity Authority has now published its summary report on the case. The detailed document shows that a systemic investigation was carried out into the project in question.

The total funding available for the programme was 1.61 billion forints, and the investigation examined the whole process. According to the report, serious irregularities were found at all key stages, which were found to be in breach of EU rules on the use of EU funds. For this reason

the Integrity Authority files a complaint against an unknown perpetrator for the offences of budget fraud and restrictive agreement in public procurement and concession procedures,

and the offence of using a forged private document and also initiates a procedure at the Hungarian Competition Authority (GVH) plus requests the managing authority to carry out irregularity procedures.

Summary of the findings of the anti-corruption authority:

  • There is a suspicion of collusion among a large group of beneficiaries: most of the applicants, limited to two counties (Hajdú-Bihar and Szabolcs-Szatmár-Bereg), submitted grant applications with identical content, identical project specifications, technical content, designers and contractors, with practically the same overall budget and with similar significant overpricing of projects.
  • Even the call for proposals was irregular and the process lacked control mechanisms. The call for tenders, after several modifications, was published in a way that favoured only a narrow group of bidders.
  • In practice, there were no factually assessable indicators against which to compare the need or justification for applications.
  • The principle of equal treatment may also have been compromised, as applicants were faced with unequal conditions.
  • The Integrity Authority’s investigation also revealed that the winners of the grant may have restricted competition in the award of public contracts for the selection of the contractor.

Toilet for HUF 1 million

The authority found it noteworthy that, unlike the canopy walkways, “the prices of some public welfare facilities (toilets, fire pits, gazebos) with the same technical parameters show significant differences in the bids – up to 30-60%”.

The report also includes a large number of photographs of the projects completed and examined, and the photographs taken by them “also show the quality and value for money of the works”.

Perhaps the best illustration of the situation is the toilets with a toilet seat, which cost HUF 475 000 each for Mihály Filemon, HUF 372 000 for László Tasó, and HUF 1 222 000 for Sándor Tasi.

Ih Jelentes Budik

However, not all projects were irregular, as the chairman of the Integrity Authority also reported good examples.

Translated by Zita Szopkó. The original, more detailed Hungarian version of this story was written by Katalin Erdélyi and can be found here.