We looked into the contracts signed by the Hungarian government with “Mr. Russia”

While in the fall of 2021 the government was seriously engaged in efforts to buy back the Budapest Airport currently operated by international investors, seemingly Viktor Orbán suddenly gave up pursuing the deal. On December 13, 2021 the prime minister announced the multi-million-euro state deal was off the agenda for the time being, referring to the upcoming parliamentary elections and high inflation.

But behind the scenes, the government’s action showed the opposite intention. On the same day, they approached German businessman Klaus Mangold, an influential figure in European and Russian business circles, with an offer to act as an advisor in the matter of the airport. Three days later, an agreement was reached on the tasks to be carried out as well as on his remuneration.

Mangold has been in the German economic elite for decades and has been working as an advisor to the Orbán government for several years. He has maintained good Russian connections and helped for instance with the Paks II project, which the Hungarian government contracted Russia’s Rosatom to build.

It had been known that the government signed a lucrative 21.6 million euros consultancy deal with Mangold’s firm, Mangold Consulting GmbH, to help conclude the airport deal at the end of last year. But Direkt36 now gained access to the contracts between Mangold and the government, and we learned several details of the contracts, including when the parties started formally negotiating the airport deal.

It is unclear from the documents how much money exactly Mangold has received – or may receive in the future – as the details of the remuneration are not entirely clear. The amount of 21.6 million euros is referred to as a commission fee in some places and as a success fee in others. We have asked the government several questions about how much Mangold has been paid so far and how much the German businessman was entitled to for each of the titles in the contract but have not received any answers.

The documents made available to Direkt36 also revealed that, in addition to the airport contract, the government signed eight other consultancy contracts with Mangold’s company last year on various topics. These covered the period between April 2021 and March 2022, with a total budget of 1.2 million euros. Some of the contracts concerned the development of German-Hungarian economic relations.

His relations are his know-how

The 79-year-old Klaus Mangold has been active in the highest business circles in Germany for decades and has built exceptional relations also with the Russian elite, including Russian President Vladimir Putin. He is therefore often referred to as “Mister Russland” or “Mister Russia” by the German press. In the 1990s and 2000s, he held leading positions in various German companies, for example the carmaker Daimler. Later, he facilitated numerous deals between members of the Russian and European business and political elites as a consultant. As he once told a German newspaper, “my relations are my know-how,” adding, “This is the basis of my businesses.”

He first came into closer contact with the Hungarian government at the end of 2012. He was introduced to PM Orbán by János Lázár, at that time heading the Prime Minister’s Office. The Hungarian government even published a photo in 2012 showing Orbán, Lázár, and György Matolcsy, then minister for economy, sitting at a table and talking with Mangold. The government press statement referred to the German businessman as the German co-chair of the Rothschild Investment Bank and former CEO of DaimlerChrysler Services AG.

Mangold started working for the Hungarian government following this introduction. This was at a time when the Orbán government was deepening its relations with Russia and the advice of Mangold, who was well-versed in the close German-Russian economic ties, was particularly useful. According to Direkt36’s earlier article, Mangold helped the government with the preparations of the Paks nuclear power plant expansion. For instance, he played an important role in setting up a meeting between the Russian and Hungarian parties in August 2013 which paved the way for the decision to award Russia with the construction of Paks II without an international tender.

Klaus Mangold and Vladimir Putin, source: AFP

The Prime Minister’s Office kept Mangold’s contracts signed between 2013 and 2015 as confidential, so no details were known about his tasks and payments during that period. However, the contracts signed later were disclosed. These showed that the Prime Minister’s Office led by János Lázár signed four contracts with Mangold’s companies in the amount of 650 thousand euros gross in the period between July 2017 and May 2018. According to the contracts, these concerned electric cars, digitalization, energy policy, and EU budgetary issues.

Maintaining contact with Mangold was later transferred from Lázár to László Palkovics, who was responsible for the government’s industry and energy issues for years. (Palkovics resigned from the cabinet this November.) The public data request by Direkt36 from the summer of 2020 showed that the Innovation and Technology Ministry led by Palkovics signed seven consultancy contracts with Mangold in the amount of one million euros gross for the period between December 2018 and December 2020. These concerned primarily tasks related to the German-Hungarian economic cooperation.

A lucrative success fee

Mangold’s activities came back into focus in July this year when opposition MP from Momentum party Márton Tompos spotted from the contract lists published by the government that Palkovics’s ministry signed a contract with Mangold for a total amount of 21.59 million euros seven months earlier. The ministry later revealed that the consultancy contract was linked to the purchase of the airport.

This was another sign of the Orbán government’s serious efforts to take back the airport company which was privatized under the previous Socialist government before 2010. Palkovics was also appointed last May as the government commissioner responsible for preparing the planned transaction. Bloomberg reported last October that the Hungarian government-led consortium had offered 4 billion euros to the airport’s international owners. Followingly in mid-October of last year, Orbán said the purchase could happen at any moment. However, On December 13 last year, he suddenly announced that the deal would be postponed. The government-close media outlet Világgazdaság later reported that the government had not given up on the airport’s reacquisition but it wanted to avoid the issue becoming a campaign topic.

Nevertheless, a contract with Mangold was still signed last year on December 22, but it was not disclosed at the time. After the agreement was revealed in the summer, Direkt36 filed a public data request to the successor to the Ministry of Innovation and Technology, the Ministry of Technology and Industry regarding the contracts signed with the German businessman’s company after 2020. We were only allowed to study the documents for a limited time in the ministry’s building, and only to take notes but no photos.

Based on the documents reviewed, the highest-value contract by far was the one dealing with the airport. According to this contract, Mangold’s company was entitled to a fee of 21.590.000 euros gross for the work. The document refers to this 21.590.000 euros also as a success fee. According to the contract, an advance of 2.654.300 euros gross will be deducted from this amount, to which Mangold is entitled under the contract. The document also states that the monthly fee paid to the company totaling 997.900 euros gross between January and July was also deducted from this amount referred to as the success fee.

We wanted to clarify the details of the success fee, including whether the amount exceeding the advance and the monthly fees are considered the actual success fee and whether Mangold may still be entitled to it in the future. However, the government did not allow further access to the file and did not respond to our subsequent written questions.

It is therefore not entirely clear whether the remaining amount of approximately 18 million euros out of the 21.59 million euros was the actual success fee to which Mangold could be entitled if the deal goes through. The contract also states that the success fee is payable if the airport is repurchased within 12 months following the expiry of the consultancy contract, which would have been at the end of this July. However, the contract was amended a few weeks after it was signed, on January 25 this year. The 12-month period during which Mangold is entitled to the success fee was extended to 24 months.

As the Ministry of Technology and Industry did not answer our related question, we do not know the total amount paid to Mangold Consulting under the contract and the legal titles to which it has so far been entitled. The Ministry told several newspapers in the summer that the outbreak of war had made it more difficult to find the funds needed to buy back the airport, “and that the full amount of the contract would not be used.”

The contract we have seen also contains a general clause on the consultancy work, in addition to the remuneration. According to this contract, Mangold’s company was also tasked to assist in gathering information on the sellers, selecting business partners for the proposed purchase, examining the documents related to the transaction, and organizing the negotiations and meetings connected to the transaction.

The German AviAlliance, the majority owner of the airport, declined to comment on our inquiries regarding Mangold’s activities. We also contacted Mangold’s company but did not receive any answers.

In addition to the airport, the Ministry also disclosed eight other consultancy contracts with Mangold to us. These contracts totaled 1.2 million euros and covered the period between April 2021 and March 2022.

Two of the eight contracts were related to addressing labor shortages in Hungary. In one, Mangold advised on how to transform the Hungarian workforce from assembling products into higher value-added, innovative activities. The other one focused on the labor shortages facing foreign carmaker firms. The government also sought Mangold’s advice on the economic effects of the COVID-19 pandemic.

Two consultancy contracts dealt with the German industry. According to one, the government expected Mangold to help attract “foreign technology investors” to Hungary. In doing so, they probably had German investors in mind as the contract stated that Mangold would contact German industrial leaders and German politicians “who might be interested in Hungary.” The contract on increasing the competitiveness of the SME sector also mentions investments by German companies in Hungary. Several contracts also dealt with the mechanical engineering sector: one, for example, was about railways and rail logistics, and another on increasing the market for electric cars.

We asked the government why it requested Mangold’s help with such diverse challenges of the Hungarian economy but did not receive any answers. We have no information on the German businessman’s familiarity with these issues but he has held a number of positions in Western European automotive, rail, tourism, and financial companies over the past decades.

Shocked by the war

Russia’s invasion of Ukraine has not only made it difficult to take back the Budapest Airport, it has also affected Mangold’s other activities. In protest against the war, the German businessman resigned early March from his post of honorary Russian consul in Baden-Württemberg, a position he had held since 2005 (Direkt36 recently took part in an investigation of an international team of journalists to uncover the misconduct of honorary consuls).

The German weekly Spiegel reported in early December that while few Germans have met Putin more often than Mangold, the businessman now downplays his previous involvement in Russia. He told the paper that he has had no business dealings with Russia for years and has no ties to the Kremlin. He said he was deeply shocked by the Russian invasion. He added that the work he had spent the past 40 years of his life improving German-Russian relations had been invalidated by the outbreak of war. Spiegel notes that when they visited Mangold in November, a framed letter from Putin to Mangold hung on the wall of his office. They were later told by a PR consultant acting on behalf of the businessman that the letter had been left there out of carelessness and had since been removed.

Although Mangold supports sanctions against Russia and arms shipments to Ukraine, in contrast to the position of the Hungarian government, the relationship between the two parties has not deteriorated. This is reflected in the fact that Mangold was awarded the Hungarian Order of Merit on the recommendation of PM Orbán on Hungary’s public holiday on August 20. This was justified on the grounds of Mangold’s “outstanding” activities in strengthening and developing Hungarian-German economic relations.

Cover picture: Szarvas / Telex

  • András Szabó

    András worked eight years as a journalist at Origo, a then prestigious online news site, but also spent several years at Index and vs.hu news outlets. At Direkt36 he covers Russian-Hungarian relations, activities of business circles close to Fidesz, and political decision making processes of the Orbán government. In 2011 he received the Gőbölyös Soma Award dedicated to investigative journalism in Hungary, and in 2010 he won the Quality Journalism Award, both for a series of articles that focused on a corruption case connected to the former Socialist-led government.