Dr. Csaba Hende Evaluated the Last Year of the MoD and the HDF

“In the course of the first year following its taking office, the government has been working on the renewal of Hungary. Within this program, the renewal of the entire system of national defence has also begun: the aim of the Ministry of Defence has been to create a fair and transparent economic management and regain public confidence in the Hungarian Defence Forces", Csaba Hende began his briefing. He said the system had been screened during this period, and its evaluation is in progress. The Minister recalled what they had discovered in this area after the transfer of authority: “Moral disintegration, non-transparent and irresponsible economic management, wrong structures, the obvious lack of efficient control, an unsubstantiated defence plan, guilty and irresponsible attitude to the Force Protection of the troops on missions abroad", he listed.

The Minister said that in parallel with the extensive staff replacement and with the contribution of subject matter experts (SMEs), the examination of the situation had started without delay. Grave legal injuries have also been revealed. "We are talking about legal injuries which can be demonstrated by the documents themselves", said Dr. Csaba Hende. He added that he had reported to the prosecutor general the cases in which the violation of the criminal code could be suspected– as required by the law. “However, our goal was not to hunt for criminal acts but to rationalize the use of public funds in the interest of public good", he stressed.

Investigations

As regards the details of the screenings (audit), Dr. Csaba Hende pointed out that the MoD had identified several irregularities in the management of companies the assets of which belong under the supervision of the Ministry of Defence. The economic associations supervised by the Ministry dispose over more than HUF 50 billion in total per year. “The minutes of the screenings have shown that the economic associations and the MoD Development and Logistic Agency had been operating in a non-transparent and uncontrolled way", said the Minister, who informed the press that as a result of the aforementioned cases, between 2005 and 2010 in the period under review, based on estimations, the portfolio and the HDF suffered a loss of HUF 1.773 billion. The legal examination has revealed 45 cases of criminal acts, part of them committed on a continuous basis, which affected 12 senior officials of the companies concerned. It is the task of the investigation to produce a report on the exact amount of financial loss, but the proportions are already known, for the screenings have shown the following damages: HUF 250 million at MoD Zrínyi Communication Co., HUF 540 million at MoD Recreation Co., HUF 382 million at MoD Mapping Co., HUF 596 million at MoD ED Co., and around HUF 5 million at MoD Currus Ltd.
Dr. Csaba Hende cited a number of general and concrete examples of corrupt practices. Concerning procurements of significant value it can be stated that an overwhelming part of them had been implemented by applying the rules laid down in Government Decree No. 143/2004 excluding the public and the Act on Public Procurement, often in an unlawful way. This government decree applies only to procurements involving classified data or national security interests.

In all probability, the majority of the implemented procurements do not involve classified data or national security interests. “For example, the maintenance of the fence around the sports ground of the Zrínyi Miklós National Defence University, and in another procedure, the partial renovation of the changing rooms and the classroom of the sports facility were carried out exempt from public procurement procedures", Dr. Csaba Hende said.

He added that in the case of some orders, frequently the payment had already been made prior to the performance of service. In other words, the Ministry ‘pre-financed’ the respective entrepreneurs. “Another specific feature of the contracts that give grounds for concern was that the companies submitting the tenders were the same which won the procurement procedures, therefore the system became non-transparent and “the business of insiders", said the Minister who also referred to possible interlockings between the company owners.

The former leaders of the companies had entered into long-term contracts with the subcontractors, thereby cementing overpriced services until 2014. The examples indicate that certain private companies had carried out as subcontractors activities for the companies of the Ministry of Defence, evading real competition and realizing a considerable profit. “In the last moment, they cemented these contracts until the end of 2014. One of the most important steps was that the Ministry has agreed with each service provider in a price reduction of 10 per cent. Having considered the legal terms, we have created the possibility of restoring our capacity as from mid-2012 on", said Dr. Csaba Hende.

The Minister also briefed the press about the immediate measures taken by the MoD such as the cuts in the number and salaries of senior officials of the companies, the cost-saving steps aimed at increasing efficiency and the screening of business activities that had been outsourced. In doing so, the so-called basic activities, i.e. activities serving the purpose of national defence have been taken back, and in the negotiations with public utility companies a significantly better price was agreed upon thanks to their unified action. “In the future, we will save HUF 800 million per year taken the electricity bill alone", Dr. Csaba Hende gave an example. He said the practice of public procurement had been thoroughly revised and the rules of selling excess military equipment had also been simplified. To combat corruption, the Ministry of Defence has established a department that deals exclusively with controlling. The SMEs of the Ministry have compiled a new Code of Conduct, an Anti-Corruption Strategy and an instructional package.

The Defence Minister confirmed that the MoD wants to claim compensation in court for damages in every single case where it is proven that the subjects of the contracts of the previous years had only been implemented partly or had not been fully implemented, or a contract had breached the law, or losses have been caused to the Ministry.

Looking into the future

“I must emphasize this because it is the most important and encouraging thing as regards the future: the morale of troops serving with the HDF units has not faltered even for a moment, and honest soldiers were never involved in these corrupt practices", pointed out the Minister, underlining that the troops’ performance in flood control operations and during the red sludge disaster had demonstrated to all of us how excellent the personnel of the Hungarian Defence Forces are. “According to some estimates the financial value of what we have saved exceeds the amount of the annual defence budget", the Minister referred to the extent of their performance. In June 2010, 4,560 troops, 344 pieces of military equipment and four helicopters took part in flood control operations, while in Devecser and Kolontár 2,300 soldiers and more than 350 trucks, buses, items of engineering equipment and six helicopters carried out consequence management operations in the wake of the red sludge disaster.

While listing last year’s achievements, the Minister mentioned the introduction of the volunteer reserve system, the most extensive military development project of the last two decades. “In 2010 we had eighteen reservists, today we have more than 2000", said Dr. Csaba Hende, who also called attention to the following: on May 30 the HDF took over the guard duties of the Holy Crown and they will also take over the protocol guarding of the Sándor Palace in 2012; upholding and cherishing our military heritage; and the conservation and care of war graves as an important social and diplomatic activity, adding that a separate department was set up and assigned the latter tasks. Progressive steps were also taken including the formation of the HDF Ludovika Battalion, and the National Public Service University  to be established on January 1, 2012, partly from the Zrínyi Miklós National Defence University  will provide the students with the possibility of cross-registration among the faculties of the various specialized fields of state service at the new University. “We have removed the main obstacle that had blocked the construction of the third 3D radar station that will help us guarantee the safety of Hungarian airspace, for we have chosen a new location in Medina, based on professional, social and environmental considerations", said the Minister.

Speaking about the pillars of the future, the Minister mentioned a predictable military career model, and he also praised the tendency of decreasing bureaucracy. Dr. Csaba Hende emphasized that the objectives of the Ministry of Defence include the restoration of Hungary’s once famous defence industry’s capacity, since we have products that can satisfy both domestic and international demands.

Photo: Zrínyi Média