Hungarian Businessman Held in Detention on Allegations of Spying for the United States

Was a Hungarian businessman with access to Prime Minister Orban’s Swiss Bank Account and Hungarian military secrets passing that information on to the Pentagon? Or was his arrest on espionage charges a politically-motivated response to U.S. pressure on Hungary to combat corruption and reverse its slide into authoritarianism?


 

In late November 2015, the Hungarian police arrested Maxin Norbert, the head of Arcade LLC, for allegedly spying on the Hungarian government and providing classified information to the International Monetary Fund and Pentagon. Taken to prison and locked up in a room without heating in the cold Hungarian winter, Norbert wasn’t allowed to contact either his lawyer or his relatives. He was held in detention in substandard conditions for the first sixty days in the National Investigation Offices’ building on Aradi Street in Budapest’s District Six. He was released in August 2016, but currently lives under house arrest. His case is still being tried.

In 2008, Norbert was accused of instructing one of his Arcade employees, Bela Bukta, who was also jailed in November 2015, to disclose secret information to the Pentagon through the Embassy of the United States in Hungary. Bukta was also taken to the Aradi prison and held in solitary confinement for one month. He was released in August 2016.

The two have also been accused of contacting the representative of the Swiss Fund in Hungary and handing information over to her. Now, a separate investigation has been launched into this affair. It is rumored that the two had insights into Prime Minister Viktor Orban’s Swiss Bank Account and money transfers. Norbert’s lawyer has squarely denied this.

Apart from imprisoning Norbert and Bukta, the Hungarian police also withdrew Arcade LLC’s rights to secrecy and confidentiality in 2015, even though it is an American company. The rationale for this was that its collaboration with various international institutions involved spying.

Established in 2008, Arcade LLC and its Hungarian subsidiary, Arcade Ltd., focused on promoting technology, industrial investments and high-tech industrial activity. The company sought investors for viable Hungarian inventions, finding investment capital and suitable tender opportunities in Hungary, the EU and the US. Norbert revealed that Arcade had a relationship with the “Pentagon, in order to introduce them to the inventions and support Hungarian research activities, as this department deals with Hungarian technological research from the American side.”

The allegations against Norbert and Butka are mainly based on a document found in Bukta’s storage with no evidence as to whether or not the eight-year-old document was ever handed over or not. Norbert’s lawyer emphasized that “there is no concrete deposition or any other kind of evidence,” except for a digital memo found on Bukta’s computer, allegedly written by him.

According to Norbert, the official accusation was that the memo contained Hungary’s military strategy in a file that the police had ‘restored.’

“It would be purely a state secret and had already been lapsed, so that would not be a crime, but next to it was also a statement, ‘a confession,'” he said.

In the latter document, Bela Bukta apparently revealed that he’d handed the memo to the Pentagon’s Office of Defense Cooperation at the Embassy of the United States in Hungary on behalf of Arcade LLC.

Norbert’s lawyer expanded on the allegation. “According to the 2008 digital memo, Bukta showed a paper to ‘Jeff.’ That document’s title was not the same they found on the storage. Norbert Maxin’s name is not mentioned in the memo, though they think he wrote it to Maxin. There is neither evidence that the memo would have been written by Béla B. nor that it would have contained the truth or reality.”

In addition to supposedly leaking information to the Pentagon, Norbert has also been accused of instructing Bukta, in 2010, to provide secret information regarding Hungary’s financial situation to the IMF representative in Hungary at the time, Irina Ivascsenko. The two suspects allegedly warned the IMF to be cautious in extending loans to Hungary, due to the country’s high level of political corruption. The information provided seemingly referred to some of the key risks of the Hungarian state budget, including Malev Airlines re-nationalization in February 2010, and Budapest’s budget, including the construction of the Metro Line Four and its costs. The document allegedly contained exact information about the actual and estimated debt levels of multiple companies, which had ‘placed debts’, — hiding public debts. The IMF delegation came to Hungary in July 2010 to conduct a quarterly supervision of the 2008 financial rescue loans, so the official accusation deems Bukta directly responsible for endangering Hungary’s financial and international interests. The official allegation states:

“Bukta confessed that he indeed had a meeting with Ivascesenko at her office. But he stressed that it was only to introduce her to several Hungarian bankers, IT specialists and politicians, as she had indeed requested first-hand information about the real Hungarian economic environment.”

According to a representative from 444.hu, one of the striking aspects about this investigation is the fact that it is led by the Art Treasure Department of the National Investigation Office. He stressed that it is unlikely for them to have the resources or know-how to properly conduct the investigation.

​“It is a curious choice for other reasons, too,” he said. “As for the published facts, Maxin Norbert and Bela Bukta are suspected of transferring financial information, which has nothing to do with the Art Treasure Department.”

Two journalists from​ atlatszo.hu had something similar to say. “If this would be a real spy case, it would be investigated by the secret services and the investigation would be classified. Our working theory is that they are wannabe spies and have stepped on the toes of some powerful politicians,” they said.

Photo credit: deadmind/flickr/some rights reserved
Photo credit: deadmind/flickr/some rights reserved

When asked why he believes this case has been opened against him at this particular point in time, Norbert claims that there are political interest groups involved. He believes that the allegations against him are an attempt to scapegoat him for the U.S.’s increasing anti-corruption attacks against Hungary’s political class in order to hide other people’s crimes, including money laundering and theft of company securities and structures.

In October 2015, shortly before Norbert and Bukta were arrested, the U.S. Ambassador to Hungary, Colleen Bell, gave a speech about the state of corruption in the country.

“Corruption in Hungary is a serious concern – quite clearly a top concern of average Hungarians, as I have heard, and as public polls consistently show. Wherever systemic corruption has effectively undermined fair governance, it creates an environment ripe for civil unrest, resistance to the government, and even violent extremism,” she said.

Ambassador Bell’s statements are the most recent expression of the U.S.’s growing concerns about Hungary’s levels of corruption and slide toward authoritarianism. In late 2014, the U.S. ​imposed visa bans on ten members of Prime Minister Orban’s inner circle, denying them entry to the country.

Norbert confessed that he had in the past opposed the controversial privatization of the Budapest Airport in 2005.

“​I did not agree with this because it was a profitable state monopoly company, it was unnecessary to sell it,” he explained. “I was on good terms with the pilots, air traffic controllers and airport workers. Together we have established an association, which dealt with the Hungarian Air case.”

In the end, the British company BAA obtained a tender for concession, with 75 percent minus one vote of the Airport’s shares going to the British company BAA.

During the previous left-wing government, Bukta had good relations with several of the current members of Orban’s government and political leaders. He was one of the political advisors to the current Minister of Finance, Mihaly Varga.

“The current Foreign Minister Peter Szijjarto previously led the youth organization for the right-wing party, Fidesz, which supported the Youth for Democracy Foundation, focused on enhancing youth service for and outside the Hungarian school system.” The latter was founded by Peter Szijjarto and chaired by Norbert until 2013. The Foundation was based in the same office where Arcade LLC used to operate.

Norbert also claims that it is for political reasons that investigators want him and Bukta to undergo a psychiatric examination, in order to suggest that the Pentagon was enlisting and paying attention to informers who had psychiatric problems. If the claim about the nature of the psychiatric examination is true, this would mark a return to the kinds of communist abuses of psychiatry that existed in the Soviet Union, which made political opposition and dissent into mental illness.

The Soviet attraction to using psychiatric treatments revolved around the fact that patients could be ​deprived of their freedom for unlimited periods of time, kept in complete isolation, and refused rights that they would otherwise benefit from as a prisoners. Substantial coercion can be applied in psychiatric care, ​ranging from involuntary admission and treatment to seclusion/restraint, rendering it a modern form of torture, which places it in opposition to European Union principles and international conventions.

The espionage investigation is currently looking at Arcade’s negotiations and relationship with several groups, including the Swedish Wallenberg group member SAAB, the US defense contractor Raytheon and Sikorsky. Norbert dismissed any accusations of a professional relationship between these companies and Arcade as unfounded.

“If these companies jointly provide military technology to Hungary, they (mainly the Swedish partners) invest in Hungarian industry and technology, involving Hungarian universities. In these cases, the investments’ values are bigger than the purchase prices were,” he said.

Nevertheless, some of the companies that Arcade has worked with have in the past been involved in cases in which information was acquired through spying or questionable behavior, including widespread corruption. In 2015, Sikorsky Union was placed under trusteeship, after an independent review found systemic corruption, failure to ​comply ​with required financial controls, and key representatives’ breaches of fiduciary duties plagued the company. While there are no signs of direct mismanagement in Hungary, the company’s recent systemic corruption indicates an overall lax approach to monitoring managerial behavior internationally.

Similarly, in May 1999, Reuters ​revealed ​that Raytheon had allegedly hired a security firm to eavesdrop and steal documents from AGES and would pay $3 million to AGES group, while acquiring $13 million worth of AGES aircrafts. Furthermore, in 2003, Raytheon ​paid $3.9 million to settle charges that its aircraft division overcharged the U.S. Defense Department while invoicing the liability insurance cost. The company ​revealed that the U.S. Securities and Exchange Commission was investigating corrupt accounting practices at the aircraft unit. Raytheon settled this matter in 2006, agreeing to pay a penalty of $12 million. It has also since been praised for its internal anti-corruption measures, including by receiving the 2014 Transparency International Integrity and Corporate Leadership Award. Nevertheless, its management’s historical records raises a red flag about its willingness to bend the rules and allow a culture of corruption and spying to flourish.

While an official procedure against Norbert was only launched after the discovery of Bukta’s alleged memo in 2015, the police apparently had first accused Nobert, his subordinate and company of spying in 2013. Norbert declared that in May 2013, the police, wearing GD Security Staff clothes, broke into the Arcade LLC office in Budapest without a search warrant, and removed many company documents, precious manuscripts and works of art.

“Later I received several life-threats from GD Staff, in which they wrote that I would be killed and drugs would be hidden in my apartment,” he said.

Norbert said he was so shocked by the apparent murder threat that he consulted with his lawyer and went into hiding in an apartment in Budapest — to save his life and possessions.

Once the proceedings were started in 2015, he said that his apartment was raided twice by the police, first at the end of November 2015 when he was arrested and again two weeks later. Around 200 of his books were seized in two warehouses. They were apparently individually flipped through by the authorities in search of spy codes. Many of the over 35,000 volumes in his collection, which contained some rare medieval and books from the 1800s, as well as his precious Zsolnay collection, with Hong-shan artifacts, as well as paintings, engravings, Rembrandt and Dürer engravings and a few, rare Fabergé objects possessed by Tzar Alexander III have been stolen. The police have done nothing to investigate the theft.

This is not the first time that Norbert and his businesses have come under investigation. Another of Norbert’s companies, Polygon Kft., came under fire for alleged identity theft and money laundering. Polygon Kft. is IBM’s largest and oldest Hungarian partner, and dealt with sales of IBM technologies specifically for the financial sector. It also sold the US Euronet INC credit card systems to Raiffaisen, to CIB and many Hungarian banks. Nobert handled the acquisition of Polygon as the strategic director of Polygon-Invest, which acquired a majority stake in Polygon Kft.

In 2013, the OTP Bank terminated Polygon’s credit from one day to the next, supposedly at the secret service’s request. This meant that Polygon accounts were locked and company operations became impossible. The reason for the account’s closure was apparently money laundering and identity theft, conducted by the chief executive director at that time, Gyorgy Gal.

Polygon had taken out a $2.5 million USD loan from OTP Bank. However, instead of transferring the funds to Polygon, Gal’s leadership team transferred the income from Euronet — around $5 million USD — to a Swiss company, also called Polygon. The fraud was discovered in 2012 and the new management filed a complaint against Gal. According to Nobert, Hungarian police have yet to start investigating this case.

Cover photo credit: Carlos ZGZ/flickr/some rights reserved

Raluca Besliu
Raluca Besliu

Raluca is a journalist originally from Romania. She has published extensively on refugees and human rights as well as environmental and international issues. She holds a Master of Science in Refugees and Forced Migration from the University of Oxford and a Bachelor of Arts in International Studies from Vassar College. You can follow her on Twitter: @Raluca_Besliu

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