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Budapest Suspends Metro 4 Payments As Construction Project Turns Out To Be “Textbook Example Of Fraud”

Tamás Székely 2017.02.13.

Budapest will suspend payment for contested Metro 4 contracts closed before 2010, daily Magyar Nemzet cited Mayor István Tarlós as saying on Monday. Tarlós reportedly said he had immediately commissioned a report on paid and unpaid contracts and is ready to suspend payment immediately for those closed under “suspicious” circumstances.

Tarlós’ remarks came after government office chief János Lázár’s told public Kossuth radio that the report by the European Union’s anti-fraud office OLAF identifying corruption surrounding Hungary’s metro 4 construction project shows that the handling of the project was a “textbook example of fraud”. The total cost of the project was 406 billion forints, 380 billion of which has already been paid, with a further 20 billion payable this year, Lázár said. The latter will be suspended pending outcome of the OLAF-report, and identification of those responsible, he added.

János Lázár said in the radio interview the project is still in its closing phase, as the capital is still receiving government support for it, he said. The government is due to transfer the final 20 billion forints to Budapest this year, but that transfer is being suspended, Lázár said. Given that criminal activities are suspected in connection with the project, under Hungary’s budget law, the government cannot spend taxpayer money on it until the OLAF investigation of the case is closed and it becomes clear who is legally responsible for what had happened, Lázár said.

He noted that the Prime Minister’s Office has launched an investigation to determine whether the alleged misappropriations also concerned government money contributed to the project. “It appears that they did,” Lázár said, citing the OLAF report which he said indicated that the “frauds” suspected in the case involved not just the misappropriation of EU funds but also funds transferred directly from state coffers. If the suspected irregularities are confirmed, Budapest will have to be asked to repay the misappropriated funds to the government, Lázár said. He said that “in simple terms” what had happened was that international corporations involved in the project “such as Siemens or Alstom” had “joined forces” with the municipal council leadership at the time, the various technical supervisors and designers and “robbed Brussels and the Hungarian budget”.

He said the reason why the current municipal council leadership was now in “a difficult position due to [former liberal Budapest mayor] Gábor Demszky’s activities” was because the EU was expected to demand that Hungary pay back the misappropriated funds and the Hungarian state can do so as well. He said the EU would not wait for the case to be wrapped up in the Hungarian justice system before issuing its reimbursement demands, adding that this would have serious financial bearing on the capital. He added, at the same time, that Prime Minister Viktor Orbán had instructed members of the government to provide any assistance they can to the capital in resolving the matter.

via and; cover photo: Zoltán Máthé – MTI