Corporation games the system to get financing for its new plant

A company in the business of selling second-hand clothing secured upwards of €1 million in job-creating funds by circumventing safeguards in the tender system. It used the money to establish a new facility for its profitable business. The circumstances of the investments show that there was strong political support.

The Háda-empire, owned by József Háda and his family, recently inaugurated a new sorting facility for HUF 338 million (€1.1 million). The company specializing in the sale of second-hand clothes collected in the UK, attracted no smaller names to cut the ribbons then Development Minister Miklós Seszták and state secretary in charge of labor affairs Sándor Czomba.

The history of the project shows that the company has had plenty of “goodwill” from the authorities, given how it breached the rules of the grant procedure as well as how it acquired the plot of land which would later accommodate the plant.

Háda was looking to apply for funding from the European Union job-creating tenders designed for small and middle enterprise, but as a company with annual revenues of HUF 9 billion (€29.3 million) in 2013, and with a headcount of over 700, it was too big to be eligible. As a way around this, Háda bought one of its retail partners, Maxx Pont Kft, a company that ended 2013 with revenues of HUF 39 million (€127,000). It was this company that would formally apply and be selected for the grant even though its business records in no way justified the proposed plan to launch a huge €1-million project.

Háda should have been disqualified because of its ownership of the applicant SME, but the sides involved solved the matter by rearranging their ownership stakes, so everything seemed in order on the records.

It was all too clear that no-one cared much about observing the rules, or even being seen to observe the rules. The statement released on kormany.hu, the government’s official website, celebrated the “Háda group’s” new investment as the sorting facility was completed, without any regard to the fact that the company had no business whatsoever spending centrally approved funds.

The lucky applicant also managed to secure quite a deal when purchasing the plot that which now accommodates the new facility. The municipality of Kisvárda, the host township in the northeastern reach of Hungary, with a population little short of 17,000, was in talks with Háda as early as 2011 about the sale of the land in question. It was already questionable when the mayor Tibor Leleszi signed a preliminary contract with Háda without consulting the town hall for the 1,913 square meter plot. At the time, the land was valued at little below HUF 49 million (€160,000), and, as such, the procedure was already in violation of the town’s rules requiring an open tender for the sale of assets worth more than HUF 10 million (€33,000).

Although the 2011 deal fell through, property prices – or appraisers’ attitudes – changed a lot in the area, prompting Háda to have another go in 2013. This time through what was clearly a staged procedure, he acquired the plot for a total of HUF 13 million (€42,000).

Also of concern is the strategising that was apparent from Hada’s remarks about the new facility. It reported that the new site was a more efficient replacement of its previous facility in nearby Tiszakanyár, a tiny township, where the 250 people employed locally would be made redundant.

In conclusion, all the facts point to Háda exploiting the system with the express support of top government officials, as a way to upgrade his costly operations with a better facility, financed from grants, with concomitant loss of jobs. Of course, Atlatszo.hu would be happy to believe that Háda’s chicanery was actually successful in deceiving the administration. As such, we expect the launch of formal inquiries into the matter.

The original article in Hungarian was published on 26th January 2015.

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