Closing of investigation no. VIZSG_11_2024 – cases of misuse in six Somlószőlős projects

Budget fraud, agreement in restraint of competition, misappropriation of funds, forgery of public documents, use of a forged private document – the Integrity Authority has filed a complaint concerning six construction and equipment procurement projects in Somlószőlős. The investment projects received HUF 418 million in European Union grants.

Based on a whistleblower report, the Integrity Authority has conducted an ex officio investigation into projects of the Municipality of Somlószőlős, a village of 500 inhabitants, which were supported as part of the Rural Development Programme (RDP) and the Territorial and Settlement Development Operational Programme (TOP). The total grant amount of the six projects under investigation was HUF 418,490,019. Five of the six projects were aimed at the reconstruction and extension of Somlószőlős’s public institutions, while one project was directed at an equipment procurement by a consortium formed by the Muncipality of Somlószőlős and two partner communities (Doba and Borszörcsök).

To execute the construction projects, a cooperative that has been in liquidation since 28 February 2024 was selected in each case. This cooperative had no revenue or employee at the time of the first invitation to tender, while its management has been handled by public service workers, amongst others, employed by the Municipality of Somlószőlős.  During the time of the cooperative’s operation, the vast majority of its revenue was associated with the Somlószőlős projects, and there was a case where the cooperative sold on works carried out by the subcontractor to the municipality at nearly eight times the purchase price.

The Authority has established that the cooperative was selected through public procurement procedures in which the regulations of the public procurement act were not adhered to. The municipality invited the same companies to tender even when they had a week earlier stated that, because of capacity shortages, they could not submit a tender in the previous procurement either. The Authority maintains that this also shows that it was not in the municipality’s interest to ensure fair competition during the procurement (i.e. to invite independent companies with suitable capacity to tender). Furthermore, in many cases, the name of one of the mayor’s relatives appears amongst those who prepared the documents submitted by the cooperative in the tender procedures, raising questions about the cooperative’s independence of the municipality.

Based on this, the Authority maintains that the orderly implementation of the projects and the efficient use of European Union funds were not ensured. Therefore, the Authority has filed a complaint against unknown person for suspicions of budget fraud, forgery of public documents and misappropriation of funds. It has also initiated irregularity proceedings with the managing authorities of the projects and is initiating remedy proceedings with the Public Procurement Arbitration Board.

Regarding the equipment procurement carried out by the consortium of the Municipality of Somlószőlős and the two partner communities, the Authority has identified that the estimated value of the procurement (which is determined by the contracting authority) was set based on offers obtained from tenderers that were not independent of each other, as well as a presumably fictitious offer. The Integrity Authority has uncovered circumstances pointing to suspicions of collusive practices regarding the two companies invited to tender by the municipality as well.

Based on these factors, the Authority has filed a complaint against unknown person for suspicions of agreement in restraint of competition in public procurement and concession procedures and for the misdemeanour of using forged private documents. The Authority is also initiating remedy proceedings with the Public Procurement Arbitration Board and irregularity proceedings with the managing authority of the project.