Hungary could lose billions due to the Microsoft scandal
As early as 2018, it will be revealed that the US Securities and Exchange Commission (SEC) is investigating Microsoft Hungary’s public procurement transactions on suspicion of corruption. There were signs that the investigation into Hungarian public procurement was under way: at the end of 2017, Microsoft unexpectedly terminated contracts with three of the four large companies and its public administration partners.
The relationship with Humánsoft Kft., Euro One Zrt. And Racionet Zrt. After his detour, he became the Ministerial Commissioner of the Prime Minister’s Office, while the company’s former CEO, István Papp, was transferred to the position of Vice President of Business Development of the National Investment Agency (HIPA) in 2016.
Napi.hu then revealed in detail that irregularities were found during an internal microsoft compliance audit (compliance audit in company jargon). Our paper showed why the acquisition of the National Tax and Customs Administration and the National Police Headquarters (ORFK) had become suspicious. In response to a question from Napi.hu in 2018, János Lázár, the Minister leading the Prime Minister’s Office, confirmed in a government briefing that the public administration modernization program was involved. In the case of the aforementioned tax procurement, we also indicated that this was at the expense of an EKOP program. The grant agreement signed on 22 August 2012 was originally for HUF 1.99 billion, but the government decision 2026/2013 (XII.29.) Allows the modification of the grant amount of HUF 5 billion by expanding the professional content of the project.
Here we come to 2022, when hvg360 writes that OLAF, which has been investigating the case since the announcement of Benedek Jávor, MEP of the Dialogue, since 29 July 2019, has already partially closed the investigation. The European Anti-Fraud Office has proposed to the European Commission to exclude part of the amount paid for software licenses from EU co-financing. According to the newspaper’s report, Hungary also used the resources of the Regional Development Funds and the European Social Funds for some of the software purchases concerned, ie this European item has to be repaid.
In the meantime, however, the investigation of the authorities in Hungary has not yet reached. In the proceedings initiated by the Central Trial Prosecutor’s Office on 23 August 2019 for fraud and other charges causing particularly significant damage, an investigation continued in mid-January 2022 that no suspect had been questioned in the case, including OLAF and the investigating prosecutor’s office. agreed in person and online.
The prosecution alleges that the prosecutor said the investigation was addressed (i.e., requested) to the U.S. Department of Justice (DoJ) and the Department of Justice, to which no response has yet been received. The EU anti-fraud body confirmed that they had agreed with the Hungarian side. (Earlier, the American DoJ did not want to confirm or deny the fact that a request was received from the Hungarian side.)
Interestingly, few public procurement corruption cases are known in as much detail as the acquisition of Microsoft software licenses: the U.S. company was fined $ 8.75 million (HUF 2.6 billion) in July for its suspected corruption deals alone. they have entered into with the authorities, committing themselves to modifying their administrative software valuation process globally. The U.S. Stock Exchange and the DoJ have also released several examples of how corrupt transactions went according to their investigations – the FBI was also involved.
In addition to the NAV and ORFK procurements mentioned in detail earlier by our paper, the Procurement of the Institute for Educational Research and Development (OFI) was also presented in this paper. In the three cases, the practice was to either request a rebate from Microsoft’s Irish headquarters for the sale of the software licenses, arguing that the Hungarian State would not enter into a contract without it, or that intermediaries were wedged into the sales, but the discounts did not appear in the final prices.
However, these procurements alone may not have been problematic, only the US Department of Justice gave examples of bad practices. From the Directorate – General for Public Procurement, which is a framework agreement contracts with potential partners who can bid for government software, through hvg.huhas now announced that it has registered a total of HUF 22.2 billion worth of 334 Microsoft software license orders on the centralized procurement portal of public institutions in 2013 and 2014 (in the recent period, which was found to be a problem for the US authorities).
The case is complicated by the fact that the General Prosecutor’s Office headed by Péter Polt also purchased Microsoft licenses in these two years, on four different occasions, with a total gross value of HUF 236.5 million. The prosecution did not automatically indicate that it had a KEF acquisition of Microsoft during the period in question. But the Ministry of Justice also had to purchase a few tens of millions of forints.