The island of Malta, situated in the Mediterranean see between Sicily and North Africa, is a beloved destination not only for tourists seeking tranquillity. The smallest member of the European Union is also popular among businessmen, thanks to its favourable tax conditions and its quick, English-language business administration. As it turned out, hundreds of Hungarians also enjoy these conditions.

One and a half years after the publication of the Panama Papers, again a huge amount of data was leaked about companies whose ownership structure until now had been partly or completely hidden. The data contains information about more than 80,000 Maltese companies. In the company documents we identified 562 Hungarian individuals as officials or owners in these Maltese companies. We found that

• Former leaders of a company that prepares Hungary’s power plant expansion project founded an energy consultancy company in Malta;
• One of the members of a family close to the informal advisor of Hungarian PM is doing business with a former state treasurer;
• The state-owned National Sports Center’s two employees, who have ties to far-right Jobbik party, develop an e-learning system in Malta;
• A wealthy real estate businessman who used to have business dealings with the state owns a Maltese shipping company and a luxury cruise ship;
• Entrepreneurs close to socialist MSZP party have been using Maltese companies since the nineties.

The Maltese registry of companies has so far only been partially public, as it is not possible to filter the data by the companies’ owners and official. Thus, until now it has been difficult to get a full picture of all Hungarians that use the Maltese system. This has changed as the entire database became public. The leaks were obtained by German newspaper Süddeutsche Zeitung, and shared with the International Consortium of Investigative Journalists and a network of more than 380 journalists in 67 countries.

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From Hungary, Direkt36 has been involved in the investigation. Besides the Maltese business registry, we looked into company data from 18 other secrecy jurisdictions, and into documents from two offshore service firms. In our previous article, we uncovered hidden offshore activities of several Hungarian businesspeople, and now we show how Hungarians do business in Malta.

Offshore in Europe

Malta is somewhat different from classic, exotic offshore territories – such as Hong Kong, the British Virgin or the Cayman Islands. The owners of the companies registered in those areas usually have the possibility to remain completely hidden, and the firms often do not even have to carry out real business activities in order to benefit from favourable tax schemes.

Compared to the classic offshore world, the system of Malta, a former British colony, works in a more “cultured” manner, a Hungarian professional who works on offshore business registrations, told Direkt36 on condition of anonymity. Business registration in Malta is a relatively simple process, but – as opposed to many offshore countries – it is not enough to maintain a so-called mailbox company. It is expected that companies with a Maltese bank account also maintain at least one office with one employee, although they often just pretend to carry out business activities. “They often do frivolous, bullshit activities, such as asset management,” said a former employee of a consultancy firm that provides services connected to Maltese companies.

Malta is also attractive for business, because although corporate tax is high on paper (35%), thanks to the generous tax refund system the nominal tax rate approaches to zero. Shareholders can receive a tax refund of up to six-sevenths of their tax paid in Malta, while businesses receiving royalties are exempt from income tax in the country. Due to tax agreements with other countries, including Hungary, these incomes are not taxed outside of Malta either.

There are international efforts to curb offshore activity, but according to an expert on offshore company registration, Malta is “not the main target” because of its relatively stricter rules. Still, the country has already been criticised. According to a study commissioned by the Greens/EFA group in the European Parliament, some elements of the Maltese tax system “could be regarded as harmful and facilitating offshore structures.”

Although the Maltese Government argues that the country’s tax regulations are in line with international rules, the country has missed the deadline to transpose the EU’s latest anti-money laundering directive into its national law. This has led the European Commission to trigger the first stage of infringement proceedings this July. After the assassination Maltese investigative journalist Daphne Caruana Galizia, thousands of people demonstrated on the streets, urging a fight against corruption that has infiltrated politics and institutions.

Transported Hungarian profit

It had already been revealed before that some Hungarian entrepreneurs have business interests in Maltese companies. For example, a Hungarian-owned Maltese company reaped the profit on the refurbishment and sale of an office building called Eiffel Palace, located in the centre of Budapest, which was bought and eventually sold by the National Bank of Hungary. Real estate developer Attila Kovács, the majority owner of the Maltese company, earlier told Hungarian news website HVG that he did not choose Malta for business registration due to its favourable tax scheme, but because its legal system “carries a mix of Anglo-Saxon and continental elements”. The profits that they „transport to Malta are re-invested in new projects,” he added.

One of the most controversial projects of the government, Hungary’s residency bond programme is also connected to Malta. The program, which offered residence permits for foreigners for 300 000 euros, produced a loss for the state, but a hefty profit was gained by intermediary companies with opaque ownership structure, which were authorised to sell the bonds. One of these companies was Malta-based Discus Holdings Ltd, directed by Hungarian businessman János Demeter Zsoldos.

Energy consultancy by former leaders of power plant project

Discus Holdings was only one of Zsoldos’s Maltese business interests: currently he is the director of four companies in Malta, but he had held similar positions in more than ten other companies before 2015.

One of these was Power Consulting House Ltd., launched in 2013. The company was founded by Tamás Bán and Endre Gelencsér who, from 2015 until recently, had held high positions in the Paks II. Zrt., a state-owned company responsible for the preparation of the expansion of Hungary’s sole nuclear power plant in Paks.

Previously, both businessmen worked at the state-owned power company MVM, and then at the capital’s Budapest City Operations Centre (BVK). Bán used to be the deputy CEO of MVM and the CEO of BVK, while in 2015 he was appointed as the CEO of Paks II. Zrt.

A couple of months prior to his appointment, Bán transferred all of his shares in the Maltese company to Kristóf Bán, apparently one of his relatives. Gelencsér became chief of cabinet at the Paks project company, but, at the same time, he also kept his shares in the Maltese consultancy.

More than 90 percent of Power Consulting House’s activities are carried out outside of Malta, according to a company document prepared in 2013. MVM and Paks II. Zrt. did not make any deals with Power Consulting house, the firms wrote to Direkt36. The current and former shareholders of the Maltese company did not answer our questions. The management of Paks II. Zrt. was replaced this summer, neither Bán nor Gelencsér works at the company anymore.

Friends of the PM’s advisor doing business with former treasurer

An Israeli family that has been doing business in Hungary also has a business interest in Malta. The Gagel family, which is behind the „Princess” bakery chain in Budapest’s metro stations, is often referred to as the Israeli friends of Árpád Habony, the informal advisor of the PM. The 45-year-old Michael Gagel appears on several photos together with Habony.

The family has also been associated with Hungary’s controversial residency bond business. Weekly Heti Válasz revealed that Gagel family was connected to the offshore company VolDan, authorised to sell bonds for Russian citizens.

In a Maltese company one of the Gagel family members appeared, who had so far remained in the background. Brother of Michael Gagel, the 31-year-old Beni Gagel, grew up in Budapest, according to his LinkedIn’s profile. He worked as a property broker in London, and recently relocated to Budapest, “after recognising the return of the local property market and improving conditions.” He intends to leverage his “strong contacts in deal sourcing and project financing”. In 2016, he was appointed as the director of one of the real estate companies based in Budapest, owned by the Gagel family.

The same year, Beni Gagel also became the director of Apium Media Holding Ltd in Malta. This company is owned by Sándor Zelles, who held an important position under Ferenc Gyurcsany’s socialist government.

Between 2005 and 2007, Zelles led the state’s Treasury Property Directorate, which sold several state-owned properties worth over ten billion forints during this period. Viktor Orbán’s Fidesz party – then in opposition – repeatedly accused the agency of corruption. After the agency had been re-organised in 2008, for one year Zelles worked as an advisor to the financial ministry, but then he did not take any major public role. In 2015, Zelles appeared in some real estate development and asset management companies. In 2016, he launched his Maltese company with similar profile, which operates mainly outside of Malta, according to a business document.

“I am looking for investment opportunities in Hungary and in Israel,” Zelles told Direkt36, but he did not go into further details about his plans. Zelles said he chose Beni Gagel as the director of his company because “he has up-to-date information on investment opportunities in Israel and he also has perfect qualifications.”

Through Apium Media Holding in Malta, in 2017 Zelles also established two asset management companies in Hungary, VPP Invest Kft. and VPP Project Kft.

Life is simpler on Malta

Two sport entrepreneurs connected to the far-right Jobbik party also headed towards Malta. Levente Nagy-Pál participates in the work of the party’s sports cabinet, and he was the delegate of Jobbik in the organizing committee of the FINA World Aquatics Championship held in Budapest this summer. His associate, Zsolt Tömör-Tones, has been the head of the Jobbik sports cabinet since 2009, and formerly was the co-owner of Hunnia Handball Sport company. Hunnia quickly accumulated debts, and it was put under a liquidation process 2012. At that time, the club owed 620 000 forints (2000 euros) to the National Tax Authority, but according to the company manager, by now the firm has settled the debt.

In 2011, both businessmen began to work at a public institution called National Sports Centres (NSK), which is responsible for the maintenance of state-owned sports facilities. Their Maltese company, GC Academy, was founded in 2015, and it has developed a multilingual e-learning system primarily focusing on sports education. The volunteers that worked at FINA World Aquatics Championship were trained through the GC program, and the system is currently also used by the International Judo Federation. The Maltese company has no connection with NSK and Jobbik, the shareholders told Direkt36.

According to the shareholders, they developed a world-class product, but it does not have a great market in Hungary. “We are tired of the fact that in this country you can only get ahead through corruption,” said Nagy-Pál, adding that they were looking for a country where “only professionalism matters.” They chose Malta for business registration because it has the necessary standards and accreditation system for on-line trainings, and because it is not only a member state of the EU, but also of the Commonwealth. “In business, they have a different attitude towards Anglo-Saxon companies than towards Hungarians. Life in Malta is simpler,” said Tibor Kozsla, the third shareholder of the company, who previously had worked as the head of the international department the University of Physical Education in Budapest.

Last year, the company produced 15 000 euros of profit, and had to pay 6 200 euros in taxes, but 5 200 of this will be refunded. “It would not bother me if we didn’t get this back, I do not care how much tax we have to pay. The company does not pay dividends; we spend all our money on software development. That is done by a Hungarian company, which pays taxes at home,” said Nagy-Pál.

„No type of money laundering happened”

Dezső Walter, the former socialist mayor of Sopron, a Hungarian city close to Austrian border, founded a company in Malta last year. Walter, who was mayor between 2002 and 2006, was involved in a scandal often referred to as “Walter-gate”: his company purchased a part of a valuable municipal landfill site for only 22.7 million forints (73000 euros). The contract, however, was „contrary to good morals,” the court ruled later. Walter was a candidate for mayor in 2006, 2010 and 2014, but he every time lost against the candidate of Fidesz.

After leaving the mayor’s office, he worked in his family businesses, including car and real estate companies. He founded a Maltese company called LBVBL Limited in early 2016 with similar profile, but Walter did not answer our questions about his Maltese business.

Maltese companies enjoyed a great popularity among business people with ties to the Hungarian Socialist Party already back in the 1990s: the entrepreneurs linked the some of the era’s big business scandals – connected to a bank called Postabank and to a large milling company Hengermalom – became the owners of more than ten Maltese companies, while their Hungarian interests were accumulating debts.

The country’s largest milling company, Budai Hengermalom, was privatized by the former treasurer and vice-president of the Hungarian Socialist Party, László Máté, in 1994. For several years, Postabank provided loans to the company. The unprofitable Hengermalom was liquidated in 1999, and Postabank generated a loss of HUF 150 billion during its ten-year existence.

Vilmost Károlyi, the former managing director of Hengermalom, was sentenced to three and a half years in prison for mismanagement of funds in 2009. By 2000, he had founded six Maltese companies, and he has remained a shareholder in four of those until today. Two Maltese companies were also founded by László Máté’s brother-in-law, György Matyók, who was a member of the Supervisory Board of the Hengermalom.

“There has never been a link between the Maltese companies and the Hengermalom, no type of money laundering happened,” Matyók told Direkt36, but he did not share further details about the activities of the companies and about their profit.

Another business partner of the former treasurer was András Szász. Later, an investigation was launched against him, due to his alleged involvement in the state-owned energy company MVM’s intricate offshore deals. Szász was reported to have represented several offshore companies between 2006 and 2008, which received money from the MVM on the basis unfavourable contracts.

Szász was connected to a Maltese company registered in 2009, which provided consultancy services related to the generation of power for many years, primarily outside of Malta. Power Plant Advisory Limited, however, did not sign any contract with MVM, the state-owned company told Direkt36.

Szász was appointed as the company’s director in January 2013. By this time, both the name and the main profile of the company had changed: in 2012, it was renamed to Global Netprint Limited, and was involved in different printing activities until last August.

Szász was not the only Hungarian in the company: in May 2012, Ottó Hujber, another influential entrepreneur of the 1990s became the company’s secretary, and in 2013 he was also appointed as a director. The Maltese company was owned by an offshore company which has an unknown ownership structure, but has he same mailing address as Hujber’s offshore bank registered on Saint Vincent and the Grenadines.

The country of yachts

Malta also attracts ship and yacht owners, thanks to its fast and inexpensive registration process and favourable tax incentives, making the island’s shipping register the largest in the EU. Some wealthy Hungarians also registered their ships here. The Panama Papers had already revealed last year that Hungarian bank leader Sándor Csányi owned a luxury yacht through a Maltese company. Lőrinc Mészáros, a businessman with close ties to the Hungarian PM, was also photographed on a yacht that is registered under the Maltese flag.

Kristóf Nobilis, a real estate entrepreneur who made some deals with the state, also owns a Maltese company and a ship. Nobilis confirmed to Direkt36 that he co-owns the ship named Cassiopeia 68 with one of his sons, through a Maltese shipping company. “Cassiopeia is a fast yacht, which is equipped with modern technology and elegancy at the same time,” and it is  “ready to participate in a match to its category or a world tour while providing luxury circumstances,” says the ship’s website, which also includes videos with Nobilis steering the yacht. In 2015, the ship finished at 5th place out of 250 racers in a competition across the Atlantic Ocean, Nobilis wrote to Direkt36.

Cassiopeia 68 Ltd., the company that owns and leases the yacht, was founded in early 2015. According to Nobilis, in view of its geographical location, Malta has a great experience in overseeing the legal and economic activity of shipping. “Malta is part of the EU, so it is fully understandable if a ship rental company is registered there. My company that is involved in the forestry sector if registered in Transylvania, and if I wanted to run café in Vienna, I would probably do it through an Austrian company,” he wrote to Direkt36.

For Hungarian company data, we used the services of Opten.