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Jan 24, 2018 - Zoltán Kovács

Q&A on the case of Jobbik’s illegal party financing

Hungary’s State Auditor recently imposed a fine on the political party Jobbik. Some reports of the decision missed some essential details, so I thought a little briefer, in the form of a Q & A, would be helpful

Q: Why is Hungary so strict about political party financing?

In fact, the Hungarian rules are not any stricter than regulations we find in other European countries. The point is to regulate the funding to prevent the possibility that political parties receive financial support from unknown or illegal sources.

Q: What is illegal financing?

As stated in Act 33 of 1989 on the functioning and financing of political parties, political parties in Hungary may receive funding from three sources: party membership fees, subsidies from the central budget and individual donations of natural persons with Hungarian citizenship. The funding, according to the law, should be transparent. Anything that’s not transparent – as in this case with Jobbik where a company provided billboard space at little or no cost – is illegal.

Political parties in Hungary are prohibited from receiving donations from the following entities: foreign states, foreign organizations (irrespective of their legal status), persons and organizations without a legal personality in Hungary, natural persons without Hungarian citizenship. Parties in Hungary are also barred from accepting money from anonymous sources.

Q: But Hungary’s ruling alliance, Fidesz-KDNP, changed the election laws to make it more difficult for opposition parties. No?

The limitations on television media – the rule that requires that airtime during the campaign period must be provided to all parties equally or not at all – are favorable to smaller parties who would otherwise be at a disadvantage in paying for television advertising time.

The law also explicitly prohibits political parties from receiving billboard space for less than the official list price and prohibits them from running billboard campaigns outside of the election campaign period.

Yes, the previous parliament passed new election laws, but the new rules favor the smaller and financially weaker parties by reducing the possibility for illegal funding and by creating a more level playing field.

At the same time, the rules come down hard on those who try to break them. Infamous cases like the CDU’s Schwarzgeldaffäre (‘black money affair) in 1999 are examples of how hidden donations or undisclosed donations to political parties can have grave consequences.

Q: On the surface, though, it seems like the government has used a state body to cause a major setback – in the form of a fine of over one million euro – for one of its political opponents, Jobbik.

That’s why the details here are important. In fact, the State Auditor, in the course of a routine audit that all political parties have to undergo, caught Jobbik carrying out what is possibly the biggest case of party financing fraud in Hungary’s democratic history.

According to media reports, Jobbik signed a contract with a company to rent billboard space. The contract says that Jobbik would pay 27.5 million HUF (90 thousand EUR) for space that was in fact worth 129.4 million HUF (430 thousand EUR). If Jobbik failed to pay, then Jobbik would “buy” the actual ownership of 1019 billboard spaces for about 430 thousand euros (129,4 M HUF), but – here comes the twist – would only pay about 90 thousand euros (27.5 M HUF). If it fails to pay the rest, the billboards go back to their original owner after May 31, 2018. When they signed the contract the exact date of the elections was not announced, but it was clear they would be in the spring.

That would mean that Jobbik would receive a billboard space for about 12 euros per month during an eight-month period. Putting that in perspective, the same billboard space would normally go for 370 to 1000 euros per month.

That’s a donation that has a very real cash value and Jobbik did not disclose it properly. According to the law, a party that is caught cheating suffers a fine twice the amount of the value of the illegal financing.

Back in 2013, during the parliamentary debate these party financing rules, Jobbik argued for a penalty twice as high, according to Gergely Gulyás, Fidesz parliamentary group leader. Had Jobbik’s proposal passed the parliament, the party would today be facing a fine double the amount of the current penalty.

Q: But isn’t the head of the State Auditor a former member of Fidesz?

True, however it is also true that during the audit, the second in command at the State Auditor’s office was a member of the Socialist Party. The State Auditor is an independent body, and the government has no authority over it.

Q: Will Jobbik be forced to pay the fine prior to the April 8 parliamentary elections?

No. Minister for National Economy Mihaly Varga instructed the country’s tax authority to delay the collection of fines until after the elections. Gulyás also suggested that the law may be changed so that penalties would be suspended for an interim period of six months prior to the elections.

Q: But why has the State Auditor inspected only Jobbik’s compliance with the rules and not Fidesz’s?

Fidesz was audited as well. The act on party financing (cited above) calls upon the State Audit to look into party finances every second year.

The penalty imposed on Jobbik became news because of the large size of the fine in the case. Other parties were also audited, and the State Auditor found irregularities in those cases as well. But nothing compares to the magnitude of the fraud that Jobbik committed.