Panama papers show a hidden business link between a former Hungarian state bank chief and an Austrian media investor

The world’s biggest offshore-leaks show a hidden connection between a former Hungarian state bank CEO, János Erős, and an influential Austrian investor, Heinrich Pecina. Their business was conducted between 2007 and 2009.

The connection was reported by Austrian weekly Falter while Direkt36 provided assistance for the Hungarian parts of the story. Falter and Direkt36 were part of the international cooperation of investigative journalists led by Süddeutsche Zeitung and ICIJ (International Consortium of Investigative Journalists) working on the Panama papers. Direkt36 had already published articles about Hungarians involved in the offshore business.

Support Direkt36, invest in democracy!

[vimeo id=”158802467″ align=”center”]

Pecina’s companies have business interests in Hungarian FHB Bank, as well as in Mediaworks Hungary Zrt., a publisher of major Hungarian newspapers and news sites.

At the end of 2007, Pecina’s private foundation, Collegia sold a company named Wintercastle to the Panama-registered Garuda Group for about 50.000 euros. According to the documents leaked from the Panamanian offshore service provider Mossack Fonseca, the owner of Garuda at that time was János Erős, the then-CEO of the state-owned Hungarian Development Bank (MFB). Erős was in this position at the bank from 2002 to 2010.

There was a significant cash flow between the offshore Garuda Group and Pecina’s companies. In July 2009, Garuda loaned 5.4 million euros to one of Pecina’s companies called VCC Financial Information Services GmbH. A few months later, the mortgage was paid back, but on request of János Erős’s company, the money was not given back to Garuda but to a certain Viennese trustee. The public prosecutor’s office in Vienna later investigated this transaction on suspicion of money laundering, but the case was closed in April 2015 without any success.

Falter recalled that Erős and Pecina had both been involved in the 2007 events, when the Austrian oil giant OMV tried to gain control over Hungarian oil company Mol. This hostile takeover attempt by OMV turned out to be unsuccessful because the Hungarian government pushed back – through the bank led by Erős – but Pecina reportedly made significant profit on the deals. Pecina and Erős – through one of his associates – both denied that their involvement in the events had anything to do with their private business with Garuda.

However, Erős told Direkt36 some details about his relationship with Pecina. He claimed to have a long acquaintance with the Austrian investor, both of them being enthusiastic hunters for almost three decades. But this is not unique, many bankers and investors share the same hobby, he added. His relationship with this circle of hunters did not change during his time leading the Hungarian Development Bank, he said.

Erős also replied to questions concerning the Garuda Group. The Panama company was involved in investment advisory and management consulting services, he said. It bought Pecina’s Wintercastle company to use it as a project company for a planned investment project. According to him, Garuda was financed through a long-term loan, which was also the source of the mortgage given to Pecina’s company. Erős claimed that Pecina paid back the money because the planned business failed in the end. He did not enclose further details about these failed business plans.

Become a supporting member of Direkt36 now!

  • András Pethő

    András is a co-founder, editor and executive director of Direkt36. Previously, he was a senior editor for leading Hungarian news site Origo before it had been transformed into the government’s propaganda outlet. He also worked for the BBC World Service in London and was a reporter at the investigative unit of The Washington Post. He has contributed to several international reporting projects, including The Panama Papers. He twice won the Soma Prize, the prestigious annual award dedicated to investigative journalism in Hungary. He was a World Press Institute fellow in 2008, a Humphrey fellow at the University of Maryland in 2012/13, and a Nieman fellow at Harvard University in 2019/20. András has taught journalism courses at Hungarian universities.