Hidden wealth of Hungarian government-connected circles exposed
Journalists of the investigative media outlet Direkt36 have uncovered that several official documents prove the ownership of a number of private equity funds by government-connected businessmen. The wealthy owners of these private equity funds, which hold vast fortunes, have so far managed to keep their secret.
The information obtained by investigative journalists has also been reported on the news portal Telex, which cooperates closely with Direkt36.
What is a private equity fund?
Private equity funds mean a type of investment vehicle that allows a select group of investors to grow their money while avoiding public regulations. An asset management firm manages the money on behalf of the investors, and while the information of the management firm is public, it is difficult to find out whose money is in the private equity fund. These types of funds exist in many countries, mainly for investment purposes. In Hungary, this type of investment has been increasingly utilised by a government-connected elite to secretly accumulate wealth, according to a new discovery of Direkt36.
Private equity funds invest in various sectors, such as hotels, real estate, restaurants, banks, industries and waste management.
Valuable state-owned properties and companies have also been transferred to private equity funds, ultimately enriching the wealth of unknown individuals,
they write.
Contradictory laws
There is a state database managed by the Hungarian tax authority (NAV), created in response to an EU requirement, which provides access to the beneficial ownership records of private equity funds. Direkt36 found that out of 119 private equity funds, only 37 had some kind of information on the beneficial owners. However, only 26 of them could be identified by name.
They add that it is not clear who should be considered a beneficial owner. That is because the relevant laws are contradictory, meaning that there can be different interpretations of who is the beneficial owner of a private equity fund.
The results
In the NAV system, the level of interest of the 26 persons with an ownership stake ranges from 39 to 100 percent. According to the findings of Direkt36, 17 of them are clearly close to the government, while another 5 are also
easily connected to government-related business circles.
The names of several well-known Hungarian billionaires were discovered during the search, including István Száraz, László Szíjj, Zsolt Hernádi, Gellért Jászai and Lőrinc Mészáros. These government-linked businessmen have between 78 and 100 per cent stakes in each of their private equity funds. Lőrinc Mészáros’ name appears most often in the register. The businessman
has a 100 per cent stake in nine private equity funds, and a further two belong to his corporate lawyer, József Tamás Kertész.
Mészáros is one of the richest Hungarians, currently ranked third on the latest Forbes billionaires list with an estimated wealth of HUF 436.5 billion (EUR 1.08 billion).
- Read also: Meet the richest Hungarians
The database’s end might be near
An EU directive from 2018 mandated that the identities of actual owners should be made publicly available. Based on this directive, registers of actual ownership were created throughout Europe, including in Hungary in 2021.
However, the Hungarian system may not be available for long as EU courts have ruled that it is not acceptable for anyone to know the identity of actual owners. Several EU countries have already discontinued their publicly available registers.
Read alsoHidden wealth of Hungarian government-connected circles exposed
Source: telex.hu, forbes.hu