Millions in fines imposed following our story on bid rigging by Fidesz MEP in Nyírkarász

“It’s no use 24.hu fussing, they can’t do anything. Neither the police, nor Hadházy, nor you” – József Szalmási, the former Fidesz mayor of Nyírkarász, said in connection with a suspected corruption case. He said this after earlier testifying that Sándor Kovács, a Fidesz MEP from Szabolcs county, had essentially blackmailed him to ensure that his favoured company won the tender. Although the police closed the investigation for lack of criminal offence, we appealed to the Public Procurement Authority. The Public Procurement Arbitration Board has now found 11 cases of infringement, including in Nyírkarász, and has imposed fines.

„Either GÉ-65 Mérnökiroda Ltd. and Bereg Konstruktor Ltd. are infinitely professional, or something else is behind the fact that the companies won a dozen public money contracts by guessing the amount available to the investors exactly or with a few forints difference,” we wrote in early May.

We started to deal with the tenders concerned after Ákos Hadházy, an independent Member of Parliament, announced that the Borsod-Abaúj-Zemplén County Police Headquarters had closed the investigation launched in 2021 following the article and denunciation by 24.hu.

The background to the case: the companies of Csaba Galambosi, a friend (and business partner of his wife) of Sándor Kovács, a Fidesz MEP from Szabolcs county, have won a billion forints worth of public procurement in the region in just a few years.

The tenders were restricted and were conducted without meaningful competition. 

József Szalmási, the mayor of Nyírkarász, told the police about one of the public procurement procedures that Kovács essentially blackmailed him into letting the company he had chosen, Galambosi GÉ-65 Mérnökiroda Ltd., to build the village’s farmers’ market. Otherwise the village would not get the necessary EU funding. The public procurement was finally completed and GÉ-65 Ltd. won the contract.

After Ákos Hadházy’s complaint, the police launched a „criminal investigation against an unknown perpetrator suspected of having committed a criminal offence in a public procurement and concession procedure for a restrictive agreement”, but they closed it for lack of concrete evidence.

When 24.hu contacted the mayor of Nyírkarász again about the decision, József Szalmási said that he has a good relationship with Sándor Kovács and that he might have been „drunk” when he spoke about the project at the police station. He added, „it’s no use 24.hu fussing, they can’t do anything. Neither the police, nor Hadházy, nor you”.

We, however, saw it differently, and with the public procurement expert of Átlátszó, we took a closer look at the tenders won by Csaba Galambosi’s two companies after 2018.

No suspicions for the tenderers

Examining the public procurement procedures one by one, we found, among other things, that in one case Bereg Konstruktor Ltd. submitted a bid for HUF exactly the same amount as the available amount of HUF 107 905 693. In a further 9 cases, the difference between the financial coverage and the winning price offered was only a few thousand forints – even for investments exceeding 100 million forints.

This is particularly important because, with the exception of one tender, the tenderer never provided an estimated value, according to the documents uploaded on Electronic Public Procurement System (EKR). This means that bidding companies could only be informed – officially – of the value estimated by the contracting authority after the end of the procurement procedure.

This means that the two firms were either that lucky/genius or they must have been aware of the estimated price.

The suspicions should have been reported to the Hungarian Competition Authority by the tenderers, but, according to our information, this has never been done.

Fines of HUF 8.8 million

At the same time as our article was published, we therefore filed a public interest report with the Public Procurement Authority. As a result of the Authority’s investigation, 11 of the 14 public procurement procedures identified in the notification were referred to the Public Procurement Arbitration Board for review, involving nine contracting authorities. The Arbitration Board conducted the procedures and found an infringement in all cases.

According to the reasoning, the fact that the winning bid was almost identical to the amount of the estimated value should in itself have been considered as a circumstance that could have given rise to the possibility of preventing, restricting or distorting competition. Therefore, contracting authorities should have reported suspicious cases to the Hungarian Competition Authority. However, as they failed to do so, the Arbitration Board imposed a total fine of HUF 8 850 000.

The main defence put forward by the parties concerned during the investigation was that they did not consider that the bid, which was almost identical to the estimate, was suspicious, as the bidders were able to make accurate calculations in the light of their previous work or the amount of EU funding available.

The police have not opened a new investigation

Following the publication of our story in the spring, MEP Ágnes Vadai (DK) submitted a written question to Péter Polt. Vadai wanted to know whether Polt considers the procedures presented suspicious.

The attorney general assessed the question as a „denunciation in terms of content” and forwarded it to the National Investigation Office of the Police Service. However, they rejected the complaint for lack of criminality.

Written and translated by Eszter Katus. The Hungarian version of this story can be found here.