TI: Authorities Should Crack Down on Corruption

Many developed countries in the world take little or no steps at all against companies that engage in international bribery when investing and doing business abroad, according to a new global survey published by Transparency International (TI) in Berlin. The situation is even worse in Hungary, as local authorities not only fail to crack down efficiently enough on Hungarian investors that engage in corrupt practices abroad, but are also reluctant to fight corruption within Hungary. According to TI Hungary, the Hungarian government and the prosecution service should launch an immediate investigation into the corruption allegations expressed by the United States.

Berlin – Transparency International, the global coalition against corruption, has completed its annual progress report in 2014 on the enforcement of the Organization for Economic Cooperation and Development (OECD) Convention on Combating Bribery of Foreign Public Officials. The report published by Transparency International’s Berlin headquarters on October 23 reveals that only four of the about 40 signatory countries – the United States, Germany, the United Kingdom and Switzerland – enforce the provisions of this agreement in a consistent and strict manner. Meanwhile, more than half of the countries that have signed the agreement, 22 in total, have little or no enforcement of its provisions. The remaining 13 countries, including Hungary, have moderate or limited enforcement of the convention’s measures.

The goal of the OECD convention is to not allow companies carrying out foreign investments to go unpunished if they bribe local officials that make decisions on contracts, permits and government orders. “For the anti-bribery convention to achieve a fundamental change in the way companies operate, we need a majority of leading exporters to be actively enforcing it, so that the other countries will be pressured to follow suit,” said José Ugaz, the recently elected global chair of Transparency International. The head of the global anti-corruption organization, a former criminal prosecutor, added that “unfortunately, we are a long way from that tipping point, and that means the vision of corruption-free global trade remains far away.”

Similar to last year, Hungary was again listed among the group of countries that have only limited enforcement of the convention. The classification, which corresponds to a D grade, is due among others to the fact that Budapest has still not passed a law that provides genuine protection for citizens who report acts of corruption. As TI Hungary earlier already pointed out: the law on the protection of whistleblowers that entered into force this year does not provide sufficient protection for citizens trying to fight corruption, therefore the organization last year asked president János Áder not to sign the act into law.

Hungary’s assessment was not helped by the fact that the government – to say it mildly – took a questionable approach to the investigation of the sole significant bribery case committed by a Hungarian company abroad. In the Mol-INA case, the Hungarian government refused to cooperate with fellow EU member state Croatia, citing reasons of national security. The stakes are to find out whether Mol gained control over oil company INA by bribing former Croatian Prime Minister Ivo Sanader. Meanwhile, the Croatian ex-prime minister was sentenced to a jail term based on these allegations in his home country, while no responsible parties have been found in Hungary.

Budapest – In the opinion of TI Hungary, neither the Hungarian government nor the prosecutor’s office reacted adequately to the allegations of corruption made by the United States, based on which the country has banned the entry of six Hungarian citizens to the U.S., including state and government officials. According to Prime Minister Viktor Orbán, “as Hungary has the rule of law, proceedings cannot be launched without evidence,” therefore there is nothing the government can do with the signals given by Washington, which according to the prime minister “essentially amount to an accusation.” With regard to this, TI points out that according to the Hungarian Act on Criminal Procedures, an investigation has to be launched already based on the mere suspicion of criminal activities, and it is the task of the proceeding itself to uncover any potential evidence. The anti-corruption organization believes it is counter to the standards of the rule of law that in the case of Hungarian government officials being banned from the United States due to suspected corrupt activities, the Hungarian government has so far been concerned with covering up its responsibility, while the prosecutor’s office has not done anything either to help uncover the details of the events in question.

TI expects the government and the prosecutor’s office to launch proceedings on their own initiative (“ex officio”) to clarify the alleged acts of bribery and fraud against U.S. companies investing in Hungary and to find out what role, if any, the Hungarian tax authority played in these corruption cases, provided that they occurred. It would also be important for the government to investigate the allegations made by former tax authority employee András Horváth last year against the National Tax and Customs Administration (NAV) and which have been left uninvestigated ever since, despite repeated calls made by TI Hungary. Law enforcement agencies have been unable to provide credible information to the public even after a full year of investigations on the serious allegations made by András Horváth – which basically say that there is institutionalized tax fraud ongoing in certain sectors and at certain companies while NAV passively stands by – while the former NAV employee Horváth has been, in absurd fashion, harassed and had files charged against him.

TI Hungary also calls attention to the fact that the banning of Hungarian citizens involved in cases of corruption from entering the United States is a politico-diplomatic measure which cannot be expected to uncover the facts and lead to those responsible being taken to court. Therefore, it is necessary that the U.S. companies involved report the alleged bribery case to the authorities both in Hungary and in the United States. If the latter also happens then U.S. authorities, based on for example the U.S. Foreign Corrupt Practices Act (FCPA) – which sanctions certain acts of bribery carried out abroad –, or by asking for mutual legal assistance in criminal matters or by issuing a subpoena, could force Hungarian police and prosecution to investigate the matter.

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