Residency bond business: profit in offshore hands
As we reported, the residency bond program was organized by shady offshore companies all having strong connections with Head of Cabinet to the Prime Minister, Antal Rogán. In addition, according to Magyar Nemzet, their 165 billion HUF (approx. 0.5 billion EUR) gain exceeded expectations. However, profit landed in offshore hands mostly, on the bank accounts of a firm founded on the Cayman Islands.
Profit landed in offshore hands close to cabinet minister
As we wrote before, approximately 20,000 people received a national permanent residence permit based on data of the Immigration and Asylum Office (IAO). They had to register state bonds worth of 300 thousand EUR and pay further 45-60 thousand EUR service charge. However, the Hungarian state guaranteed a 29 thousand EUR yield to all investors after 5 years.
Thus, opposition parties strongly criticized the bond program before. To their mind, it gave a perfect opportunity for even potential terrorists to come to Hungary and gain free movement within Schengen if they pay the required money. In addition, the program was organized by
offshore companies all having strong connections to Head of Cabinet of the Prime Minister, Antal Rogán.
With one exception, all of these companies are in tax havens. Their altogether profit was 155 billion HUF (approx. 0.5 billion EUR) in the program. Additionally, the lawyer’s office of Kristóf Kosik gained 10 billion HUF because they took permanent residency permits for 5,000 EUR each. This is not surprising since he has strong connections to minister Rogán and Hungarian media mogul Árpád Habony. Thus,
residency bond business produced a 165 billion HUF (approx. 0.5 billion EUR) profit to some Fidesz-close interest groups.
Offshore companies everywhere
In fact, 78% of the foreigners came through Hungary State Special Debt Fund, a company founded in the Cayman Islands. This is because Parliament’s Committee on Economics gave only this firm permission to sell bonds to Chinese customers. Of course, members of the government parties have a majority in this committee.
However, the company gave over its permission to Hungary State Special Debt Management, a company registered in Hongkong. Nobody knows the answer to the why question. But we know that the owners of the company are three offshore firms registered on the British Virgin Islands.
Interestingly, one of these companies was
founded only one day before Rogán submitted the bill on the program.
Offshore companies gained, Hungary lost billions
Therefore, Jobbik and other opposition parties would have liked to call together a parliamentary standing committee investigating residency bond business. However, government parties outvoted them, so they formed a shadow committee. This committee invited heads of the offshore companies and even minister Rogán to a hearing, but nobody showed up. According to their findings, the
Hungarian state lost at least 20 billion forints in the business this year.
Clearly, this is the sum with which state paid more than market interest rate to foreign investors after residency bonds became due. If they have financed state debt from the market this money could have been saved. To make matters worse, police or IAO work costs is not included in the sum. Many think that this means budgetary fraud the police should investigate.
Finally, because of collective outcry, the government suspended the program in March with a decree. However,
this means that they can start it again whenever they want.
The decision maker is not responsible
Basically, it is worrying that Parliament’s Committee on Economics and not a state institution had to authorize the companies to sell residency bonds. Clearly, the committees of the parliament are not responsible from a legal point of view. Thus, they are not accountable for their decision.
In addition, the government chose the protection of Hungary from immigrants to be their leading message in the 2018 electoral campaign. In contrast,
they let approximately 20,000 foreigners in Hungary for money.