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Here’s how Orban’s office helped his son-in-law’s company win tenders

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Hungarian Prime Minister Orban Viktor has rarely appeared publicly in the company of his son-in-law, Istvan Tiborcz, and even these appearances were limited to family events like his daughter’s wedding or a photo shooting of palinka tasting.

Orban also avoided being personally implicated in the controversial state projects linked to Tiborcz, which are currently investigated by several EU authorities and the Hungarian police.

Yet there was a point where Tiborcz’s business activities reached Orban’s office. Documents obtained by Direkt36 show that the Prime Minister’s Office played a significant role in enabling Tiborcz’s former company to win a series of public procurements and other state contracts without real competition.

One of the many tasks of the Prime Minister’s Office (PMO) is to oversee the biggest public procurement procedures. During 2014, the Office had approved the calls for tenders later won by Elios Innovatív, then co-owned by Tiborcz. Now these street lighting projects, almost entirely financed by the European Union, are under the investigation of the Hungarian police and EU authorities. The investigations were launched partly because the tenders included specific requirements that could have been met only by Elios.

The PMO started to raise concerns about the public procurements only in 2015, after the investigations had started. The Office then changed its attitude and called for the tenders’ modification so that there would be competition. By that time, however, the Office had approved eight different tenders (worth 4.6 billion forints or 14.5 million euros of EU money in total), which were later won by Elios Innovatív. It faced competition in only one procurement.

According to Orban’s Office, the stricter approach was the result of the EU’s previous audits and of the experience gained from these procedures. In the cases of previous tenders, the PMO shifted the responsibility to the municipalities that actually conducted the procurements. But the whole idea of the supervision is to look into the tenders and in case of finding any irregularities the PMO had authority to stop the flawed projects. They, however, did not use this authority in any of the cases.

We asked the PMO if they were aware that their lenient inspection practice favoured Elios, but they didn’t give specific answers. We also asked if Viktor Orban knew that his own office was inspecting the procurement tenders his son-in-law was interested in. “The daily operation of the inspection department is not controlled by the prime minister. He did not and can not have influence on certain procurement processes or their inspection”, the PMO told Direkt36.

Direkt36 asked István Tiborcz whether he and Orban had discussed the issue of Elios Innovatív’s contracts. ”Why should I have?” he answered, when we managed to catch him for a brief comment during the Bocuse d’Or cooking competition event which was held in Budapest early May. ”We normally talk about family issues, nothing else,” he added.

The time when the Hungarian cities favoured only Elios

The whole story began years ago when Hungarian cities set out to modernise their street lighting and decided to switch to LED lamps.

This was made possible by two EU subsidy programmes launched by the Hungarian government. In the first phase, in the fall of 2013, 8.8 billion forints (27.8 million euros) were distributed among 33 municipalities. The municipalities had to launch public procurement procedures to hire contractors. These started mainly in 2014. The absolute winner was Elios Innovatív: they won the 12 biggest projects, getting 72 per cent of the total money. During this series of success, the company was half-owned by István Tiborcz, the husband of Viktor Orbán’s oldest daughter.

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Last March, Direkt36 revealed what made this spectacular success story possible. In the majority of the tenders the requirements were so specific that no company but Elios (or in other cases only a small circle of other companies) was able to meet them. For example, the cities required reference of former Hungarian public lighting work but they accepted only LED-lighting projects even though this, according to experts, was not professionally justified nor required by any law. In many cases, the cities asked for reference work of such high value that only Elios was able to provide.

We asked the municipalities involved whether they knew that their tenders were tailored for one particular company. A number of them told us that their tenders (the ones that were worth more than 300 million forints or 950 000 euros) were overseen and approved by both the Ministry of National Development and the Prime Minister’s Office. The technological supervision was the task of the former and the formal supervision was the task of the latter. This meant that the Prime Minister’s Office had to examine whether the public procurements comply with the laws.

Last April, Direkt36 asked for the PMO’s supervision reports on the public lighting tenders. The Office first rejected our request, saying these documents were part of the decision-making process and thus they are not public. We successfully sued the Office with the legal help of the Hungarian Civil Liberties Union (TASZ) and were given the documents this March.

Realizing the irregularities took a long time

The documents reveal that the PMO looked into eight public lighting tenders in 2014, which were tailored for Elios but not even once raised concerns over the controversial specific requirements. The Office never asked the cities whether they knew how many companies could meet the requirements at all and did not warn them that in case of restriction of competition the whole EU funding of the projects could be at stake.

Although the Office raised a few concerns, these were about smaller details and were not taken seriously. The PMO found that there were ”high risk” elements in connection with the rule of effective money management in case of all eight tenders. According to the monitoring reports, it is not allowed to launch a public procurement process without every ”high risk element” being changed. But in these cases, the tenders were launched even though the municipalities did not change the risky elements.

A typical example is one of the specific requirements. The cities required their contractor to have at least 20 employees (Elios had 21 at the end of 2013). Although the Prime Minister’s Office raised concerns about this condition saying it was unnecessary, the requirement was not deleted from all of the 2014 tenders. These contracts were later won by Elios, again without facing any competitors.

According to the documents, if the cities do not change the criticised elements in their tenders, the PMO has the authority to launch an extra procedure to correct the flaws. The PMO, however, never used its power in relation with the public lighting tenders. According to the PMO the cities reasoned the criticised elements and the PMO accepted the answers.

The Office changed its approach in March 2015. It is clear from the monitoring reports that they started to strictly disapprove the specific requirements apparently built-in to favour Elios Innovatív. One of the cities, Békéscsaba, was for instance asked to rewrite the minimum requirements in their tender. The requirement of former high-value LED-lighting references ”is too complex and unnecessarily restricts competition, so we need you to reconsider it,” the report says.

In 2015, the Office also asked some of the cities to estimate ”the volume of the potential contractors.” They also warned the cities that if the specific requirements of the public procurement restrict competition, and only one company comes forward, it is ”a serious audit risk and can result in corrections,” meaning that the EU can partially or fully withdraw the funding.

While in 2014 the Office merely asked for an ”explanation” concerning the controversial points, in 2015 they ordered to delete the ”unsubstantiated” and competition restricting requirements.

What changed?

When we asked the PMO what caused this change they did not give a specific answer, only a general explanation about the details of the monitoring process. They also said that the monitoring system always has to be able to adapt to the questions raised in practice and to the EU authorities’ inspections.

However, the change in the attitude of the Prime Minister’s Office also coincided with other events concerning the public lighting contracts of Elios.

The businesses of Elios gained media attention after Ráhel Orbán, Viktor Orbán’s daughter and István Tiborcz’s wife, had posted on Facebook in December 2014 a comment about how she and her husband “stand on their on feet” and live without financial help from their parents. A story by Átlátszó into Elios controversial state projects triggered a criminal investigation by the Hungarian police. OLAF, the European Anti-Fraud Office, also launched an investigation into the matter last January.

The PMO claims, however, that the procurements’ supervision became stricter as a result of a November 2014 EU audit. The European Commission then revealed a series of irregularities in a number of EU-financed projects in Hungary. From then on, “the Commission expected more thorough audits,” the Prime Minister’s Office said.
The stricter approach led to apparent changes in the street lighting tenders. While in 2014 Elios won seven tenders as a sole bidder (and another one where there was another bidder) in 2015 there were at least one competitor in each tender (8 monitored public procurements in total in 2015). Still, in most cases, Elios was the winner in 2015 as well.

For information on companies, we used the databases of Ceginfo and Opten.

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