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. The contracts in question were all won by Elios Zrt., a company formerly co-owned and led by prime minister Viktor Orban’s son-in-law, István Tiborcz. They were signed between 2011 and 2015 and are worth a total of €40 million.

It was revealed in January 2018 that OLAF sent detailed letters to all 28 Hungarian municipalities that had contracted with Elios to modernize their lights using EU funds. In February 2018 Atlatszo.hu filed freedom of information requests with all municipalities requesting copies of the letters sent by OLAF.

Eight towns complied with our request and we presented their stories in a series of articles. Nine towns did not get back to us, including Vác. We did not press them further but locals did. László Ferjancsics of the Local Patriots for Vác (Vácért Lokálpatrióta Egyesület) filed a freedom of information request and he sued when his request was denied.

The court ruled that the municipality had to share the OLAF document with him and he shared it with Atlatszo.

The document makes it clear how the public tender for the modernization oof streetlights in Vác was rigged. Here are the main points:

1. Criteria changed at the last minute

The tender was announced on December 12, 2010, and the first day to file for applications was February 11, 2013. This was a Monday, and on the Friday before (8 February, 2013) the government agency responsible for distributing EU funds decided to change the criteria.

According to the new criteria, applicants were allowed to estimate that the new LED lamps would operate for 100,000 hours instead of 50,000 hours.

2. Three offers, written by the same person

Applicants for the EU funds had to estimate how much the project would cost and they had to present three offers.

Vác used offers from three companies: SMHV Kft. (previously called Simó Kft.), KVIKSZ Kft., and Polar-Studió Kft.

All three offers were written by the same person, and, curiously, the two weaker offers were exactly 5 and 7 percent more expensive than the best offer. This number refers not only to the final totals but all of the details, for example the individual lamps and types were 5 and 7 percent more expensive, respectively.

3. Inconsistencies regarding the life cycle of the LED lamps

Companies provided an estimate of 100,000 hours for the life cycle of the lamps even though they were unable to provide any expert opinions or documentation proving such functionality.

According to provider Tungsram-Shréder’s preliminary technical documentation, the guaranteed life cycle of the lamps was 60,000-80,000 hours.

However, by estimating that the lamps would be able to operate for 100,000 hours, the modernization project of Vác became eligible for EU funding.

4. Personal connections

The accuracy of the cost-benefit analysis was verified by INS Kft. This was the same company that carried out the end-of-the-project audit as well.

The offer for the end-of-the-project audit by INS Kft was written by Ivette Mancz, the director for public lighting for Elios, the winner of the tender. The other author was András Puskás, the CEO of Sistrade Kft, a company owned by Endre Hamar, a friend of István Tiborcz.

Ivette Mancz also co-authored the application on behalf of the town of Vác for the EU funds.

The tender itself was prepared by a company called Tender Network Zrt. This company was advising both the town of Hódmezővásárhely and Elios itself during Elios’s first public light reconstruction project.

5. Elios was the sole bidder

Vác applied for EU funding for its LED lamp project on February 12th, 2013. The decision was made in October that the town would receive 421,9 million Hungarian forints of EU funds for the project. This was 85 percent of the budget; Vác was putting in 15%, a sum of  87.6 million forints.

In October 2014 the public tender for the project was announced and Elios was the only bidder. It proposed to complete the project for 421.1 million Hungarian forints. The contract was signed in February 2015.

At the time István Tiborcz, PM Orban’s son-in-law, was a co-owner of Elios.

According to an announcement by the ministry of the interior Sándor Pintér in July, Hungarian authorities are still investigating the Elios case.

Written by Katalin Erdélyi

English version by Anita Kőműves, editing by Clare Humphreys

You can read the original, Hungarian language 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