Csilla Konti did not have to worry about the authorities very long. As the wife of László Boldvai, a former socialist member of parliament, she was one of the most prominent Hungarian figures found in the leaked offshore documents known as the Panama Papers and once her offshore connections were exposed she could have anticipated to become the subject of official inquiries.
The records showed that Konti, who works as a teacher in a high school of a rural town, was the owner of a Samoan company, which had a bank account at one of the most prestigious Swiss banks. The Hungarian authorities took note of the revelations published early April and launched an investigation on 12 May with the suspicion of tax fraud.
The investigation, however, lasted only a month. On 13 June, the National Tax and Customs Authority’s crime unit notified those who initiated the inquiry that the investigation was shut down because the investigators concluded that no crime was committed.
The investigation concerning another political figure did not last much longer either. The leaked records showed that Zsolt Horváth, a former MP from the governing Fidesz party secretly became director of a Seychelles company while he was still serving in the parliament and became the owner of another Seychelles firm after his mandate ended.
The tax authority launched an investigation concerning his offshore interests on the same day when the inquiry about Konti started. The probe into Horváth’s companies was also based on the suspicion of tax fraud. According to a record signed on 1 August, this investigation was closed too, because the investigators found no signs of criminal activities.
The Panama Papers, the product of a global investigative reporting project led by German newspaper Süddeutsche Zeitung and the International Consortium of Investigative Journalists, prompted authorities in several countries to look into the companies whose ownership structure was exposed by the news organizations. The reason for the officials’ interest was that even though owning offshore companies is legal, these entities are often used for avoiding tax payments or hiding assets from the authorities.
In Hungary, the investigations were shut down quickly despite that prime minister Viktor Orbán personally ordered the country’s top law enforcement agencies to look into the cases related to Hungary. On 11 April, a week after the first stories had been published, he told the parliament that “we set up investigative groups at the police, the tax authority, and hopefully the prosecutor’s office will also be part of the cooperation. Their job will be to look into the Hungarian aspects of the offshore cases that emerged recently.”
Now, eight months later, there are no signs that any other investigation took place, apart from the ones conducted and already closed in connection with Konti and Horváth. The tax authority declined to give details about their inquiries and told Direkt36 only that they are not aware of any other investigations by other authorities. The National Police’s Press Office only said that they conduct an inquiry in connection with the Panama Papers but it is not considered an investigation. The Prosecutor’s Office said that they were not involved, and only tax authority investigated the Panama Papers cases.
Direkt36 has learned about the inquiries into Konti’s and Horváth’s offshore interests from György Szilágyi, an MP from the opposition Jobbik party, and István Tényi, a private citizen who often files criminal complaints with the authorities based on news reports. Both Szilágyi and Tényi filed complaints in the cases of Konti és Horváth and the tax authority notified them about the closure of the investigations at the same time.
László Boldvai, Konti’s husband, told Direkt36 that they do not want to make any comments. Horváth could not be reached by phone and he did not respond to a message sent to his email address.
Statute of limitations
In a May 30 speech in the parliament, András Tállai, the Economy Ministry’s state minister in charge of the tax authority, provided some details on how the tax investigators approached the Panama Papers revelations. He said that “based on the press reports, the tax authority was looking into the offshore connections of 17 private individuals and three companies.” He added though that the press reports contained information on cases that were beyond the statute of limitations, meaning that no inquiry could have been launched into them.
The statute of limitation is at least 3 or 5 years (depending on when the crime was committed) and many of the Hungary-related findings of the Panama Papers, including the ones about former MP Zsolt Horváth, were within this time period. The Economy Ministry did not respond to questions about Tállai’s reference to the statute of limitations.
The Panama Papers contained internal files of a Panamanian law firm, Mossack Fonseca. The documents, 11.5 million files, the biggest leak in the history of journalism, were obtained by the German newspaper Süddeutsche Zeitung and more than 370 journalists from 76 countries worked on it in a yearlong investigation by the International Consortium of Investigative Journalists. From Hungary, Direkt36 was the only journalism organization participating in the project.
Besides Horváth and Konti, the documents contain several dozens of Hungarian individuals with offshore interests.
Offshore companies, which are often registered in exotic countries, are used in general for two purposes. One is for minimizing the tax burden on income that a company or a person makes in other countries. Since the ownership data of these entities are in most cases very hard to access, these companies are also used for hiding assets or conducting shady businesses. It is because of these two characteristics that even though owning or using offshore companies is legal there have been major international efforts to crack down on their use.
As a result of the Panama Papers project, these efforts gained momentum. More than one-third of all nations— at least 76 so far — have announced nearly 150 inquiries, audits or investigations by police, customs, financial crime and mafia prosecutors, judges and courts, tax authorities, parliaments and corporate reviews, according to global media reports and official statements collected by ICIJ.
Legislatures from Ireland to Mongolia to Panama have rushed through laws to strengthen weaknesses pinpointed by the media partnership’s reporting. Governments have already reported recouping tens of millions of dollars in taxes on previously undeclared funds, according to an ICIJ story.
Officials in many countries are also taking direct action against citizens suspected of having used offshore entities to reduce their tax bills. Governments are investigating more than 6,500 taxpayers and companies, according to ICIJ and dozens of its media partners who assembled responses from government agencies and public statements. “In November alone, governments in Iceland, the United Kingdom, Canada, France, India and Pakistan announced probes of nearly 1,300 taxpayers for potential tax evasion,” ICIJ reported.
Some governments, however, have taken reform off the table entirely. Seven of the 10 countries in which current or former heads of state were named in Panama Papers, have remained silent or refused to open inquiries, including Saudi Arabia, Qatar and Ukraine, where the parliament rejected a proposal to create a commission of inquiry.
“Some governments have made welcome new commitments to transparency, while others have shrugged it off,” said Porter McConnell, director of the Washington D.C.-based Financial Transparency Coalition. He added: “Until basic financial transparency measures become the norm worldwide, I worry that we’ll be in a perpetual cycle of making policy via leaks.”
This story is partly based on an article written by ICIJ reporters Will Fitzgibbon and Emilia Díaz-Struck.