Getting Raided Is Cost of Doing Business for This Millionaire

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Hungary’s Laszlo Bige says his troubles come from a long-running dispute with one of the country’s most influential men. Sándor Csányi denies the accusations…

 

 

A year ago, 300 law enforcement officers raided a fertilizer plant in eastern Hungary, kicking off a chain of investigations into health and environmental practices that led to a shutdown in production.

The factory, the smaller of two owned by millionaire Laszlo Bige, is now back up and running after a court ruled on Oct. 24 that the closure was unlawful. Checks by the authorities into possible offences such as the illegal disposal of hazardous chemical waste are now down to two a month. Bige estimates the lost output cost him millions of dollars.

But what might look like an acrimonious dispute between a company and industry regulator has taken on a dimension that’s not unusual in Hungary nowadays and involves conspiracy claims that run right to the country’s leadership. Bige alleges the interest in his business is likely linked to a long-running feud with Sandor Csanyi, the head of Hungary’s biggest bank and an ally of Prime Minister Viktor Orban.

Speaking in an interview in Budapest, Bige, 61, didn’t point the finger at Csanyi, though said he’s being unfairly treated because he’s not part of Orban’s inner circle. “I can’t hope for anyone’s help at the moment in Hungary because all branches of power are in one hand,” he said.

Bige, who competes with Csanyi in the fertilizer distribution business, painted a picture of concerted attacks aimed at forcing him into selling his larger factory, which he recently rebuilt for more than 450 million euros ($500 million).

Csanyi has no interest in buying the plant, according to OTP Bank Nyrt., where he is chief executive and chairman. In an emailed response to Bloomberg, OTP’s communications department wouldn’t comment on any dispute between the two men. A lawyer for Csanyi’s fertilizer distribution company, meanwhile, described Bige as an entrepreneur trying to stay afloat after a series of bad investment decisions.

Whatever the case, Bige’s travails show how a country whose economy once was the darling of post-communist development is now rife with allegations of cronyism and intimidation.

Orban has clashed with the EU over rule of law in what he calls “illiberal democracy” while also proving to be a popular leader, winning three straight election victories, and helping swell corporate profits with one of the EU’s fastest economic growth rates.

There’s no doubt he rewards his favorites. Lorinc Meszaros, a childhood friend of Orban, has become Hungary’s richest man in a few years, helped by lucrative state contracts. His rise coincided with the fall from grace of Lajos Simicska, who lost a construction firm and a media empire after an unusually public fallout with the government in 2015. Meszaros has credited Orban with contributing to his success.

During Orban’s premiership, Hungary has tumbled down the rankings in Transparency International’s Corruption Perceptions Index, to 64th from 50th in 2010. Only Bulgaria and Greece are now worse in the EU.

“A lot of businesses think their significance and value is incomparable to what they could achieve via good connections,” said Attila Chikan, a former economy minister in Orban’s first government in 1998 and a professor of business at the Corvinus University of Budapest.

Bige declined to spell out the exact origin of his dispute with Csanyi, whose almost three decades at the helm of OTP Bank have made him one of the most influential people in Hungary. Csanyi endorsed Orban in the 2018 election, while Bige said he stays away from politics.

Likewise, OTP said the bank and its executives keep their distance, striving for a balanced and professional relationship with all governments, regardless of who is in power.

Born in Romania, Bige moved to Hungary in the 1980s where he started bartering goods toward the end of the communist regime. He entered the fertilizer market in 1997 with the privatization of Tiszamenti Vegyimuvek in the town of Szolnok, southeast of Budapest. In 2002, he bought the larger Nitrogenmuvek plant in western Hungary from oil company Mol Nyrt. The two facilities are the only substantial producers of fertilizer in the country.

The conflict with Csanyi dates back to at least 2008, when OTP withdrew 9.2 billion forint ($55 million) in loans to Bige’s companies. Nitrogenmuvek then lost a legal claim for compensation.

In 2013, they locked horns over the purchase of KITE, one of the largest providers of agricultural services to farmers in Hungary. Outbidding Bige, Csanyi bought the firm from its management as a personal investment. OTP Bank funded part of the transaction.

Speaking at the 2014 inauguration of a KITE facility, Csanyi joked of the “particular joy” at how the company avoided going into the ownership of a businessman who “uses his monopoly in a certain area for banditry.” Orban also spoke at the event.

Bige, whose business has higher debt compared with the industry average, has been forced to look abroad for funding a multi-year investment plan to renew his Nitrogenmuvek fertilizer plant. That, too, has had its difficulties.

Last year, a former associate of Csanyi wrote a letter to banks and law firms organizing Nitrogenmuvek’s 200 million-euro bond sale, alleging fraud and a competition probe into Bige’s fertilizer production and distribution network. Bige said it was a ploy to derail funding and force him to sell with other debt approaching maturity. The attempt ultimately proved unsuccessful, with the European Bank for Reconstruction and Development purchasing 25 million euros of the bonds.

The letter’s author, Laszlo Csizma, previously an executive at one of Csanyi’s holding firms in 2016, confirmed to Bloomberg that it was aimed at raising awareness that Nitrogenmuvek had withheld important information. Through OTP, Csanyi said he had no knowledge of any letter. Csizma said he’s not a friend of Csanyi and never advised him.

The allegations include a competition probe by Hungarian authorities, which was mentioned in the bond’s offer documents, and fraudulent activity in the distribution of fertilizers. A police inquiry has so far led to charges against one manager on suspected misappropriation, Bige said.

An initial antitrust investigation, which closed in 2017, found that Nitrogenmuvek didn’t have an abusive position in the Hungarian market. Another was launched within weeks and will close in August 2020, according to the regulator.

Meanwhile, Bige has moved away from day-to-day operations at his firms, despite retaining a 95% stake in Nitrogenmuvek. The business is run by his sons and keeps at least 50 million euros on its bank account at all times, he said. “We are in a constant state of defending ourselves,” Bige said. “I don’t think this will last forever. We have seen large empires fall.”

(Bloomberg)

OTP issued the following statement after the Bloomberg article appeared:

“On March 7, 2012, OTP Bank announced to the public in a legal release that it had finally won the Nitrogénművek Zrt’s over 25 billion HUF compensation claim against Nitrogénművek Zrt.

In response to Bloomberg’s interest in Bloomberg prior to this article, OTP Bank had previously contacted Nitrogénművek Zrt. To authorize Nitrogénművek Zrt. To authorize OTP Bank, in view of Bloomberg’s planned (and published on November 21, 2019) you can share your bankruptcy information with the public regarding the above litigation. These facts would surely have helped to know the real situation. To the best of OTP Bank’s knowledge, Nitrogénművek Zrt.

We confirm that Sándor Csányi has not planned and is not planning to acquire Nitrogénművek Zrt. Or any other company belonging to the Bige Group, and does not comment on the financial position of Nitrogénművek Zrt. The annual business reports and financial statements published by the Group provide sufficient information for everyone to judge.

In the light of the above, it is regrettable that the Bloomberg News Agency did not fully cover the issue in question and did not actually disclose the financial, economic and technical situation of the Bige Group, which, due to its lack, published an article containing false assumptions. It is also extremely regrettable that Bloomberg failed to inform the public that OTP Bank would be prepared to disclose the true facts of the assumptions referred to in the article if Nitrogénművek Zrt. Had agreed to do so.

In particular, Sándor Csányi complains that Bloomberg links it with official procedures whose cause and contents are unknown, and of course they could not and have not been influenced by them.

The President and CEO of OTP Bank also draws attention to the fact that allegations of both false and untruthful and offensive facts and their rumors are illegal. “