He had a lucrative business with Orbán’s father but then they entered a dispute that courts have been sitting on for 9 years

The father and brothers of Hungarian Prime Minister Viktor Orbán are successful businessmen. Their mine in Gánt and companies associated with it produce billions of forints (millions of euros) of annual turnover. Their performance improved after 2014, but they had also been successful before Viktor Orbán became prime minister. Although members of the Orbán family are experienced businessmen, in an unusually long lawsuit their lawyer argued that years ago they had been misled by a tinker.

According to them, the tinker was József Kosztolányi, a former employee and well-paid partner of Gánt Kő Ltd., one of the businesses owned by the Orbán family. The company used Kosztolányi’s recipe to produce industrial glue using the dolomite mined in Gánt. The joint business was very lucrative. During several years Orbán’s family paid tens of millions of forints to Kosztolányi for the recipe, but most of the income from glue sales went to Gánt Kő Ltd. Kosztolányi’s profitable business, however, unexpectedly came to an end.

Kosztolányi thinks that Gánt Kő scammed him as the company started to do business without him, but still using his recipe – so to say, the company stole his idea. The Orbán family, on the other hand, argues that the Kosztolányi’s glue was not an original invention, but due to lack of expertise, the Orbán family had not realised this for years. When they did eventually realise it, their employees developed an own recipe, and since then they sell a product that has nothing to do with the one of Kosztolányi.

The damaged relationship led to a lawsuit, which has been going on since October 2008. During almost nine and a half years, the court was unable to decide which party is right. This is a very long trial according to the data from the National Office for the Judiciary: the court that examines Kosztolányi’s case has only five economic lawsuits that have been going on for over five years.

We asked both the senior and junior Győző Orbán about the case, but they did not react neither to our interview request nor to our questions sent by e-mail, so we only learnt their position from the court documents. Dávid Tibor, leader of Masterplast, a company selling construction materials and involved in the lawsuit as a third party, declined to comment on the issue.

He had a good idea about stone powder

Gánt Kő Ltd. is owned by the prime minister’s parents Győző Orbán and his wife, and by one of his brothers, Győző Orbán junior. The latter is responsible for the day-to-day management of the company. Gánt Kő has been processing and selling the dolomite mined in Gánt since 1996. The roughly ground dolomite is sold, for example, for glass production, while the residual stone powder had often gone to rubbish as the company did not know what to do with it, according to Kosztolányi. He started to purchase this fine dolomite powder from Gánt around 2002, in order to produce industrial glue from it.

Furrier by profession, Kosztolányi started to develop and produce building materials in the early 2000s. His industrial glue was considered an innovation, according to Kosztolányi: although other producers also use fine dolomite powder for the production of industrial glue, they mix it with sand, while his glue was solely based on dolomite. First, Kosztolányi frequented Gánt as a buyer of dolomite powder, but after a while the Orbán family became interested to know how he uses it. The interest turned into negotiation, then into a common business. The Orbán family built a plant at the industrial site of the company in Gánt, and here, in 2005 they started to produce industrial glue and other building materials based on Kosztolányi’s recipe.

Kosztolányi became the employee of Gánt Kő and the leader of the glue plant. He also signed a contract with the company that stipulates under what conditions Gánt Kő can use his recipe and his trademark Herkules. “I had been pondering for months how and what to write in the contract, so that I would be protected in all possible situations,” Kosztolányi told Direkt36.

According to the contract seen by Direkt36, the company of Kosztolányi, Herkules 777 LP and Gánt Kő agreed that the Orbán company can use the recipe and the trademark of the materials invented by Kosztolányi, and in exchange Kosztolányi receives 5%+VAT after the net income gained on those products, and an additional 5% as a usage fee. It was also stipulated that Gánt Kő has to keep the recipe secret and in case the agreement is terminated between the companies, Gánt Kő cannot keep producing the products. The contract also included that without Kosztolányi’s permission, Gánt Kő cannot produce materials based on Kosztolányi’s recipe but under a different name.

The business kicked in, Kosztolányi said. According to him, Gánt Kő had an annual turnover of 150-200 million forints (490000-650000 euros) from the sale of the glue, with Kosztolányi receiving a share of more than 10 million forints (33000 euros) besides his wage as an employee. Kosztolányi thinks that his extra income was the reason why a dispute emerged between him and Győző Orbán senior in early 2007. Kosztolányi says he was self-confident during the dispute, as based on the contract he expected that if he was fired, the Orbán family would also lose his product, and their glue plant would be left without work.

To end the conflict, the company terminated Kosztolányi’s employment. His company, Herkules 777 LP made a new contract with Gánt Kő, which, in practice, became Kosztolányi’s manufacturer . Kosztolányi kept receiving orders from customers, and the Orbán company manufactured the products for Herkules 777. The new contract only included that Gánt Kő acknowledges that the recipe is owned by Herkules 777, they consider it a trade secret, and based on the recipe Gánt Kő manufactures glue exclusively for Herkules.

Nine years at the court

The glue manufactured in Gánt was bought and marketed, for example, by a company named Masterplast. According to Kosztolányi, this company was the most important buyer of the glue, accounting for 90% of all sales. A dispute between the Orbán family and Kosztolányi – which later turned into lawsuit – was due to products delivered to Masterplast. In 2008, arguing that the materials were of bad quality, Masterplast did not pay some of Koszolányi’s bills, while Kosztolányi did not pay some bills of Gánt Kő. It is unclear whether these unpaid bills are directly connected.

Kosztolány sued Masterplast, and Gánt Kő sued Kosztolányi due to the unpaid bills. Masterplast stated that from the autumn of 2007, many of their customers complained about the poor quality of the glue. According to the witnesses of Masterplast, Koszolányi was not cooperative, this is why they circumvented him and asked directly Gánt Kő to produce the glue, adding more cement. According to Kosztolányi, this proves that Gánt Kő at least once produced the glue without his permission. The Orbán family, however, does not consider this as a breach of contract, because according to them, at that point they were not any more engaged in a contract with Kosztolányi’s company, and they manufactured the glue on Masterplast’s explicit request.

Győző Orbán and the representative of Masterplast said at court that they fell out with Kosztolányi due to quality concerns, after which they developed a new recipe. Kosztolányi, however, sees this differently. “It turned out that they had tricked me, made a deal over my head, to save the money that they should have paid me,” he said. Thus, he filed a counter-claim, in which he claims the money that he should have been paid, arguing that Gánt Kő keeps producing glue based on his recipe.

Almost four years passed until the court pronounced a first instance judgement. Based on expert evidence, it stated that the quality complaints expressed by Masterplast were unfounded, thus the unpaid bills have to be paid. At the same time, the court rejected Kosztolányi’s counter-claim, stating that nothing proves that Gánt Kő produced glue based on Kosztolányi’s recipe without his permission.

Kosztolányi appealed against the judgement. In July 2013, in a second sentence judgement the court repealed the first sentence judgement, arguing that it only took into account the statement of the Orbán company’s witness and disregarded Kosztolányi’s arguments. It was also unclear which evidence was taken into account for the decision. Whether the Orbán family used Kosztolányi’s recipe, had to be re-examined.

Four years passed since then, and there has been no judgement pronounced. Kosztolányi and his lawyer filed several complaints due to length of the trial, and for not having received important documents in spite of multiple requests. The court does not comment on ongoing lawsuits, thus we could not find out what the reason is for the slowness of the process. Data from the the National Office for the Judiciary show that this case is indeed among the longest lawsuits. Among similar economic lawsuits closed in the past five years, the longest one lasted for almost 5 and a half years. The court that examines Kosztolányi’s case currently has only five economic lawsuits that have been going on for over five years. The longest of these started in 2006.

It was only in February 2016, seven years after the lawsuit began, when experts were appointed to asses which recipe and technology is used in Gánt for glue production and whether the current recipe differs from the one used by Kosztolányi.

This was not an easy process either. First, the court asked the Budapest University of Technology to prepare the expert opinion, but they did not accept the request. After this, Kosztolányi noted in advance that he would not support the appointment of the state certification company named ÉMI, as he thinks the company has a good relationship with Gánt Kő. Instead of ÉMI, Kosztolányi suggested to appoint the partly privately owned TÜV SÜD Ltd as an expert, but this was not supported by the Orbán family. Finally, the court chose the candidate of the Orbán family, ÉMI.

Familiar logo, unknown glue

The appointed experts visited the industrial site of Gánt Kő in Gánt last July. "In the yard, products were lying on pallets, ready to be delivered. As I was looking at them, a familiar logo caught my attention [...] I cut the foil open, and under it there was my sack with the Herkules trademark, with a label saying: produced by Gánt Kő és Tőzeg Ltd. based on the licence of Herkules 777 LP,” Kosztolányi recalled the field visit. He said that there were several pallets with the Herkules label in the yard.

He cut one sack open, but the composition of the power inside could not be determined just by looking at it. “I was so nervous that although I remembered to take photos with my phone, it did not come to my mind that I should also take samples,” Kosztolányi said, adding that the experts did not take samples from the powder either.

helyszíni szemle

Kosztolányi said that he straight away asked Győző Orbán junior about the sacks, who stated that he had already paid for them when Kosztolányi was an employee of Gánt Kő. According to Kosztolányi, when the common glue production was launched, they ordered a huge amount of sacks as the printing house only took the job in bulk. Many of these sacks were still unused when their paths diverged. “I explained to him that although he purchased these sacks in 2005, now he could not put anything in them anymore,” Kosztolányi said.

After the field visit, Kosztolányi went to the police station to denounce the use of his trademark. “If it was my glue in the sack, it’s problematic because of that, but if it was his material sold in the sacks under my name, then it’s again problematic,” he said. Kosztolányi’s complaint was rejected due to his own fault. It turned out that the Herkules name was under trademark protection for ten years (between 2010 and 2015), but Kosztolányi did not pay the fee to prolong it. He only paid it shortly after the field visit, which means that at the time of the field visit the Herkules name was not under trademark protection. Kosztolányi was asked whether he knew about any cases when Gánt Kő sold glue in sacks labelled as Herkules between 2009 and 2015, but Kosztolányi does not have any proof thereof.

Since then, ÉMI prepared the expert opinion, which stated that Gánt Kő does not currently produce glue based on Kosztolányi’s recipe, but based on its own, new recipe. ÉMI’s conclusion, however, is only based on the description of the recipes. They did not take samples, and the experts’ opinion does not include any reference to the sacks found on the yard of Gánt Kő. On the Orbán family’s initiative – which was, after a bit of hesitation, was also supported by Kosztolányi – the experts were only asked to prepare a theoretical resolution that asseses whether the recipes are the same on paper or not.

What is in the sack?

The case, however, is still not over. As it is a building material, the glue produced in Gánt can only be put on the market together with a declaration of performance, which is based on the product’s technical permission. This means that if one of the employees in Gánt developed a new type of glue – as Gánt Kő has been stating so since the beginning of the lawsuit – the product needs to have a declaration of performance detailing its technical characteristics. During the lawsuit, Kosztolányi has repeatedly asked Gánt Kő to present the new glue’s documents, but Gánt Kő has not done so, nor the court ordered them to do it. The employee who developed the glue argued that examinations have been carried out both by him in his own laboratory, and also by Masterplast. Experts, however, told Direkt36 that a new product can only be put on the market following the tests of an independent laboratory and certification company.

One document, however, suggests that Gánt Kő produced glue based on Kosztolányi’s recipe even in 2011. Technical data sheets in pdf formats about Masterplast’s products are available on the company’s website. Last autumn, on one of the data sheets included information about the manufacturer of the glue. This information was blacked out on the document uploaded to the website, but the original text remained searchable in Google. What is more, if the document was downloaded and the blacked out line copied into a simple text editor, the name of the manufacturer became visible. It showed that the glue was manufactured by Gánt Kő és Kőzeg Ltd. based on the licence of Herkules 777 LP. Kosztolányi presented this document at court. Since then, the document was changed on the website, and it does not include references to the name of the manufacturer.

Due to expert evidence, Kosztolányi asked for another court hearing, where they would like to ask experts and Gánt Kő about the content of the sacks found on the yard. The hearing is scheduled for September.

For the Hungarian company data we used the services of Opten and Céginfo.