Will ex-cops involved in massive VAT fraud be brought down by secret audio?

Authorities have yet to give up on solving a case linked to a criminal gang that made billions in profits, and whose leaders were once high-ranking police officers at Hungary's National Investigation Bureau (NNI). Sometime around 2013, two former police chiefs teamed up with several underworld tough guys boasting lengthy criminal records to create one of Hungary's most significant criminal networks specialising in precious metals. Authorities launched an investigation into the criminal case which stretches beyond Hungary's borders, after a death threat was reported by a gang member. A secretly recorded audio obtained recently by authorities also appears to help the investigators' work.

WORLD DECEMBER 31. 2022 17:30

The joint Hungarian-Polish investigative team continues its intensive work. The team was set up after a multibillion-forint racket that’s spanned multiple countries, benefited many former officers and attracted the attention of the authorities. The threads of the story date back to 2013, when two police chiefs – who previously worked for Hungary’s National Investigation Bureau (NNI) – connived to organise one of Hungary’s biggest VAT fraud networks specialising in precious metals, the daily Magyar Nemzet writes.

The hierarchically structured ring was run as a typical criminal network: the tasks were divided with the strongmen and foot soldiers being able to pocket around a thousand euros a month, while the two ex-policemen, Laszlo F., the actual leader of the gang, and Sandor R., who was still in the workforce when the criminal gang was founded, have amassed billions of forints in revenues.

All this came to the knowledge of authorities after a gang member who wanted out, along with his family, began receiving death threats, so he spilled the beans and lodged a complaint with Polish and Hungarian authorities for suspected budgetary fraud.

Cops turned robbers

In his complaint, he described in detail one of the most important gang members named David H., who contributed to the fraud scheme with his expertise in the precious metal business, as well as his contacts able to provide the goods that could be “VAT-ed” later. According to the document sent to the authorities, David H. had excellent police connections due to his previous deals, and it was through him that Sandor R. has also joined the team as an active NNI officer, bringing with him retired lieutenant colonel Laszlo F., who eventually took over the management of the VAT fraud network. The whole operation was described in the complaint as follows: a Romanian company, Cs Trade, established by the gang, bought silver at a net price from Hungarian wholesalers who ordered it from Italian manufacturers, and then sold it on paper, also at a net price, to their strongman’s company in Poland, which then resold it to Polish buyers at a gross price.

As part of the VAT fraud scheme, the purchase was recorded at gross price in the accounting documents of the company owned by the gang’s frontman.

With this fraud, the company became liable to pay tax not on the total purchase value, but only on the difference between the purchase price and sales price.

The Chechen criminal and the Ukrainian strongmen

While the delivery of goods to Poland was ongoing, they started to establish new business entities, as they had to get rid of the ones that had grown suspicious, the ex-gang member revealed. A Chechen criminal in the network of David H. was contacted and asked to find Ukrainian nationals who would agree to have these businesses registered in their name for “peanuts.” According to one of our sources, F. and his team did not over-complicate the deal because they primarily caused budgetary damage not to Hungary but to Poland, which is important as Polish tax authorities are known to be lagging many years behind even in comparison with Hungary’s National Tax Authority (NAV). According to a source close to Laszlo F., the “bureaucratic fatigue” was the other reason. In other words, given that these crime groups work trans-nationally, ending an investigation successfully can be hindered for years by requests for legal aid and other procedures.

Gold seized from drug dealer

After dealing only in silver, the gang eventually decided to switch to gold in order to increase their profits. According to our source, this meant that they had special gold jewelry manufactured by their partner in Hungary. Meanwhile, however, paranoia took over and the gang began to fear that the tax authorities would take action against them. Because of this, they hid a large amount of pure gold, worth nearly a hundred million Hungarian forints, in the home of David H.’s friend. However, something went wrong. In the evening hours on 14 August 2015, a few days after the goods were hidden, officers from the Budapest Police Headquarters (BRFK) searched the home of David H’s friend and later charged him with drug trafficking. Besides the drugs, police also seized the gold hidden by F. and his team.

Investigation by joint Polish-Hungarian team ongoing

The complaint also mentions a former politician, Gabor Staudt from the radical Jobbik party, who retired from politics for “personal reasons” in 2019. Before launching the “business,” Laszlo F. was part of the closest circle of advisers and confidants assisting Jobbik’s former deputy parliamentary group leader, and he also worked to help Jobbik’s group in Budapest’s Municipal Assembly at the time. In October 2019, the retired police lieutenant colonel took part and spoke at a professional conference organised by Jobbik on the theme of law enforcement. Six months later, as a special attorney for Jobbik, Laszlo F. sharply criticised the secret services law adopted by the Socialists and Fidesz back in 2010. According to the complainant, Laszlo F. had a plan to propel Mr Staudt into the post of interior minister with the help of his illegally-acquired wealth. Both in Hungary and Poland, authorities launched an investigation against the criminal gang dealing in precious metals. In Hungary, it was started by the Budapest Investigative Prosecutor’s Office while Poland set up a special police unit, coordinated by an “anti-mafia” prosecutor, to fight organised crime, terrorism, international drug trafficking and economic crime. It began its investigation against the team led by Laszlo F. and the investigation is still ongoing, according to information sent to the Hungarian Magyar Nemzet newspaper by the Investigative Prosecutor’s Office in Budapest.

“Bribes” amounting to tens of millions of forints

It’s also worthy of mention that the other group members have already been implicated in connection with other crimes as, after a while, they have swapped their “fraudulent VAT schemes” for “bribes.” In early 2017, Laszlo F. and his former colleague at the police – named Sandor R. – managed to take some 40 million forints’ worth of euros from an investor in Italiy. Hungarian police accused Laszlo F. with theft in connection with the case. Another VAT fraud scheme – putting a dent of tens of millions of forints into the state budget and carried out in Sweden – can be linked to one particular member of Laszlo F.’s circles named Balint P., who connected F.’s associates and the Polish buyer of the massive VAT fraud scheme, according to a key witness testimony. According to the charges, Balint P. has somehow managed to get a precious metal trader involved in a shady deal in Sweden, at the end of which the businessman lost some HUF 85 million at today’s exchange rate, as they stole 300 kilograms of sterling silver from him. It’s interesting that putting together the charge sheet has also proved difficult. In the first round, the 9th District Police Department terminated the investigation on the grounds that the crime cannot be proved, because the suspect denies it and the two available witnesses have corroborated his account.

Secret audio recording on massive VAT fraud

The victim’s legal representative submitted a complaint to the prosecutor’s office. In it, they argued, among other things, that the witnesses must have been lying, as evidenced by the transcript of a secretly recorded audio file, which they had also submitted to police. The audio has added significance, as one gang member can be heard giving away some valuable information about the aforementioned multibillion-dollar VAT fraud case. This is why the audio was recently attached to the investigation files by the Budapest Prosecutor’s Office, daily Magyar Nemzet writes.

In terms of the fraud case, the 9th District Prosecutor’s Office eventually established that the complaint was well-founded. It overturned an earlier resolution issued by police and ordered the investigation to continue, paving the way for the actual indictment, after which the court sentenced Balint P. to a suspended prison term. Following the final court ruling, the victim lodged a complaint with police citing wrongful accusation, false testimony and incitement to false testimony, as the aforementioned audio proves that the witnesses had lied and even accused the victim of various crimes. The Budapest Police Headquarters recently ordered an investigation on suspicion of false accusations but, as part of the process, the act of perjury will also be examined.

Accomplice, handed over to police

Another intriguing fact is that one of those testifying in favour of the man convicted of fraud was a criminal held to account earlier by authorities for running a drug lab. Peter B. had testified shortly before his arrest but was unable to come face-to-face with the adverse witnesses at court, because he and his accomplices were caught by Hungarian police’s anti-drug unit and the detectives of its criminal investigation department. The officers found a total of 300 million forints’ worth of methamphetamine in their possession, of which the Hungarian and Serbian criminals could have produced at least 100-150 kilograms of amphetamine. The fact that the man busted in the drug case – himself a former member of the VAT fraud gang – was entrapped years ago by Laszlo F., ex-lieutenant colonel at Hungary’s National Investigation Bureau (NNI), is not negligible, either.

Our sources suggest that Balint P.’s circles – which also included Peter B. – became a burden to the team over time, who knew that the two were going to make billions through VAT fraud, yet they would be unwilling to share the profits. The fact that Peter B. became a wanted criminal in Hungary for an economic crime and was forced into hiding came in handy. However, he had unconditional trust in Laszlo F. and his associates, who accompanied him to the hostel where he lived under an fake name one day. The next morning, staff at Hungary’s National Investigations Office in charge of wanted criminals knocked on Peter B.’s front door, according to sources close to the daily Magyar Nemzet newspaper, who also underlined that when Peter B. was released from detention, he “wanted to hunt down” F. and several members of the organisation. In the end, the situation did not escalate because the conflict was smoothed over by a known convict of the infamous Kecskemet mafia trial, who maintained close ties with David H., a key member of the VAT fraud group.

WORLD

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crime, gold, Hungary, silver