George Soros finances corruption monitoring while previously involved in numerous corruption cases

Corruption is a complex phenomenon, and states can best fight with internal legal norms to curb it. Several international documents set out requirements, obligations, or recommendations for a successful fight against corruption, while the judiciary itself is a target of corruption and organised crime. Yet it is precisely within judicial systems that states have the most effective tools against corruption.

In Hungary, the offence of budget fraud – created on the revenue and expenditure side, from the combination of several previous special partial facts – was included in the previous Criminal Code on 1 January 2012. (The new Act C of 2012 on the Criminal Code entered into force on 1 July 2013.) On the revenue side of the budget, this includes tax fraud, tax fraud in connection with employment, abuse of excise duties, smuggling, VAT fraud, and all cases of fraud prejudice to the budget. On the expenditure side of the budget: the acquisition of an undue economic advantage, the infringement of the community's financial interests, and all relevant cases of fraud prejudice to the budget.

Research that can be taken seriously aimed to comprehensively address the topic. In addition to the characteristics of those who commit corruption crimes, the project examined, among other things, the creation of the acts, the motives of the perpetrators, the form, extent and method of the withdrawal of the benefit, and the characteristics of being brought to the attention of the enforcement authority. The basic thesis of the research is that there are few such acts based on domestic crime statistics (in the twenty-three years from 1990 to 2012, the number of recorded corruption crimes ranged from 330 to 963 per year). In other words, according to the authors of the study, the Hungarian criminal justice system is only able to deal with such a small number of corruption crimes, while perceptions of the phenomenon of corruption indicate a very widespread form of behaviour in society.

During the period under review, the number of registered offenders ranged from 190 to 513, which is explained by the considerable number of concurrent offences. The number of people convicted in public prosecutions fluctuated between 110 and 391. (In connection with the research, it is worth mentioning as a comparison – in terms of the number and social weight of corruption crimes – that at the same time, for example, the number of registered cases of disorderly conduct in the first half of the 2010s was around 12,000-13,000, and has been steadily decreasing since 2014, but as recently as last year about 8,300 such cases were registered in Hungary. This, of course, does not make the much smaller number of cases of corruption insignificant, but the fact is that many crimes are much more present at the social level (see, for example, theft, violence against an official and a person performing a public function, etc.).

The results of the research seem to confirm the difficulty of detection. In the crimes under consideration, there are practically no direct victims, and situations of benefit to both parties arise, therefore, conspiracy and secrecy are characteristic. The authority is only made aware of cases through control processes, when one of the parties does not want to be involved in the act, or when for some reason confidence in the relationship between the parties is shaken in view of the expected development of events and circumstances. According to the results, these acts are usually revealed through official knowledge, official proceedings, or when the official who was intended to be used to obtain an undue advantage in exchange for a benefit reports the case (this is a case of corruption or, more narrowly, bribery). According to one of the authors, the research summarizes the sub-question in such a way that corruption is difficult to detect and difficult to prove, there is no injured natural person in the acts, while the possibilities of material proof are limited, the commission of the acts leaves no tangible trace. It is also mentioned as a problem that third parties do not have knowledge of the events, and the moral judgment of individual behaviours is not always clear.

Other important lessons learned from investigative experience are included in the study, namely that some of the secret information obtained by operational means cannot be properly accessed in the proceedings, cannot be made open, and most of the time, there is no material evidence, while there are only limited possibilities for testimony. In the investigative process, expert examinations do not allow for direct conclusions as to the facts and guilt, so the research considers it important to summarize the investigative experience and to analyse the difficulties and challenges encountered in the investigation of acts of corruption.

In early 2022, an international professional organization published its 2021 report, in which the level of corruption in countries around the world was examined on the basis of a corruption index. States were scored on a scale of one to one hundred, and the higher the points, the less corrupt the country was rated. Within the European Union, Bulgaria received the fewest points, 42 to be exact, followed by Hungary with 43 and then Romania with 44 points. Our country thus received a rather negative evaluation.

The fight against corruption requires difficult and complex work, and this would also be required in the case of an external professional judgement of the country in question. In many cases, however, corruption research by individual international organizations can also be highly criticised methodologically. For example, based on the weighting of measurement risks, it seems that only one party (state briber) could be a subject of corruption, while a private actor (even a foreign one) does not seem to be someone potentially affected. The methods used by the CPI (Corruption Perception Index) do not distinguish simple correlation from causal relationships that can be well verified by scientific methods, thus raising serious doubts about the comparability of individual states on the basis of a CPI index.

Rather, CPI reinforces individual stereotypes and allows clichés to be applied. A 2013 Foreign Policy article suggested that the CPI should be omitted because the index conveys bias against smaller social groups of higher level or rank, reinforcing popular perceptions of corruption and ultimately creating incentives for inadequate policy responses. (Alex Cobham, "Corrupting Perceptions," foreignpolicy.com, 22 July 2013)

Of course, political considerations can also appear in the preparation of such research material, so what the aforementioned 2021 country report says, for example – claiming and emphasizing the absence of social aspects and the rise of oligarchs – is a political rather than a professional statement, given that they have not been supported by scientific methods per se.

According to a domestic topic review that also provides an opinion on the article of a British journalist, Ian Fraser, the main professional problem is that such materials are not based on primary research, and that the definition of corruption is, in some cases, tailored to the interests of the commissioning funders. For example, it is applied only to the role of public officials, while at the same time the role of the private sector is not intended to be presented in an emphatic way.

Interestingly, Microsoft, one of the main supporters of NGOs conducting such research, once paid a $25 million fine to settle corruption allegations against it, after representatives of the company in their Hungarian office increased profit margins when selling software licenses to Hungarian government agencies. Although an exceptional benefit was promised to be legally provided, the discount did not go to government customers, but was recorded as a "discount" in a corrupt manner. Another NGO-friendly global company, Google, has also previously been embroiled in a fraud case after transferring $23 million to a Bermuda tax haven in 2017 through a Dutch shell company.

The opinion of American economist Branco Milanovic is also quoted in a Hungarian article. As a visiting professor at City University of New York, he is a world-renowned and respected authority, and in a post on Twitter, he expressed a strong professional opinion, calling one of the well-known democracy indexes "another great scam" for the work of NGOs. Milanovic cited Hungary as an example, noting a high degree of bias in relation to the poor Hungarian score.

Earlier this year, the international organization Transparency International published the results of the Corruption Perception Index (CPI) again, which “traditionally” ranks 180 countries in the world, starting with the least corrupt one.

According to Transparency International's corruption report for the year 2022, the social and political situation of corruption in Hungary has further deteriorated, making Hungary the most corrupt country in the European Union, with its corruption perception index of 43 points in 2021 deteriorating by one point by 2022. According to the organization’s measurements, this places Hungary in the 77^th place in the world ranking, forming a tie with Trinidad and Tobago, Burkina Faso, Kuwait, the Solomon Islands, and East Timor.

The report says that in 2021 Hungary was the second most corrupt state in the European Union, but by 2022, according to the organization, it was the most affected country in the EU, where the fact of bribery characterises the operation of economic, political and official life. Denmark, Finland and Sweden are considered the least corrupt on the European list, while Bulgaria is considered the most corrupt after Hungary by a report made by Transparency International. Romania, also near the bottom of the list, received 46 points, but unlike Hungary, Bulgaria and Romania improved one point each compared to their score a year earlier.

The fundamental problem with the report is the methodology. Transparency International's Central Secretariat in Berlin used 13 opinion surveys and analyst group evaluations from a total of 12 organizations to carry out its research. Since the CPI of 2012, the process of compiling an index has consisted of four steps: the selection of data sources, the standardization of data, the aggregation of standardized data with the formation of an average value, and the reporting of a measurement of uncertainty in the data.

In general, we also noted in the analysis that in many cases individual corruption research NGOs should also investigate their own scope of operation, their cooperating partners, and supporters. In fact, NGOs are, at best, funded to continue and carry out efforts to improve society in some way. Most donors prefer organizations that are credible and have financial clarity and transparency in their professional relationships. Therefore, NGOs, donor organizations and agencies should be increasingly vigilant for suspicious signs of corruption or other abuses in the projects and programs they fund, regardless of the type of funding involved, or who or which organization can be the implementer or beneficiary of the support.

Starting with the fact that transparency and understanding the financial background and real intentions of organizations, and access to data that helps this, although it affects the world of NGOs – often active in a network-like way – in sensitive areas, can significantly reduce corruption and could strengthen trust in some organizations. The phenomenon of corruption is now more difficult to deal with within the borders of a country, and since such organizational networks are very extensive internationally, the speculative activity behind them can affect the market and macroeconomic processes of even individual states and nations.

For example, the American businessman George Soros also machinated illegally in the financial products market in Western Europe. In connection with the suspicious 1988 financial transactions of Société Générale, one of the largest and one of the oldest French banks, Soros's activities were also investigated by the French Stock Exchange Commission, and when the case was retried in 2006, he was fined nearly one million euros by the French Supreme Court. The billionaire's action in the case was finally dismissed by the European Court of Human Rights in Strasbourg in 2011.

In addition, two Soros actions against OTP are known, the second of which was carried out at the outbreak of the world economic crisis. On 9 October 2008, before the stock market closed, Soros Fund Management LLC, with the help of an investment service provider in London, pushed down the price of its bank securities, resulting in the activation of investor exit limits. Thus, a total of 390,000 OTP shares entered the market – bringing hundreds of millions of forints to the short-selling businessman. The Hungarian Financial Supervisory Authority later issued a statement that Soros and his partners had violated the legal regulations on the prohibition of market manipulation. In 2011, the Supreme Court's decision upheld the lower court's ruling dismissing the action against the PSAF's decision.

Soros and his foundations are also trying to use money to influence domestic political processes in other countries in Central Europe, a fact that has also been confirmed by a Polish court decision. In Poland, two feminist organizations linked to the Open Society Foundations (OSF), the Global Fund for Women and the International Women's Health Coalition, also funded protest marches. Considerable money was also raised by the Association for Women’s Affairs and Family Planning, which also received grants through the Norway Grants. At that time, the funds of the Norway Grants were managed by Soros’s Báthory Foundation. The think tank has supported left-wing and liberal organizations through public funding from the European Economic Area (EEA) and the Norway Grants, according to Polish conservative rights organization Ordo Iuris. At the beginning of 2021, the Polish Administrative Court ruled in favour of the Ordo Iuris in a lawsuit and ordered the Báthory Foundation to disclose the content of contracts concluded with natural and legal entities regarding the local funds of the Norway Grants. Furthermore, the foundation had to finally reveal the names of the beneficiaries, the amount of money awarded, and the justification for each grant, which the Soros-led support organization had not done for years.

At the same time, organizations acting along the lines of transparency and the values of the rule of law are often forced to explain themselves because of donors. In early 2015, for example, the press reported that Transparency International had accepted $ 3 million from the German multinational company Siemens. In 2008, Siemens had to settle a corruption case with a record fine — $1.6 billion — after the engineering firm bribed government officials in several countries. Siemens eventually reached a settlement with the U.S. Securities and Exchange Commission for violating the Foreign Corruption Practices Act (FCPA). In doing so, the company acknowledged its responsibility for bribery charges related to corruption practices in Greece, Norway, Iraq, Vietnam, Italy, Israel, Argentina, Venezuela, China, and Russia. This was therefore already a known fact when Siemens provided a grant to Transparency International in 2014. Transparency applied for and eventually received the grant at Siemens, although the NGO’s due diligence procedures prohibit the organization from accepting money from companies that donate to the organization in an attempt to whitewash their own reputation. Also: "If any corporate donor is accused of being involved in corruption, the donor cannot count on the protection of Transparency International," the organization's procedural standards state.

Another major NGO supporter, Microsoft, paid a $25 million fine to settle corruption charges against it over the profit margins increased by Microsoft representatives at the company's office in Hungary (this was related to the sale of software licenses to government agencies). Another global supporter of Transparency, Google, was previously embroiled in a fraud case after it transferred $23 billion to a Bermuda tax haven through a Dutch shell company back in 2017. In connection with tax evasion investigations and audits, a financial authority investigation was carried out against a Soros organization in Macedonia (now North Macedonia). In 2017, a group of local organizations came into the spotlight as they might have received money from abroad to destabilize the country. The Metamorphosis Foundation, facing a series of financial audits by the Macedonian tax office due to its activities since 2012, naturally claims that the tax investigation launched against them is a politically motivated attack.

In 2018, an investigation began in America at the initiative of the independent rights organization Judicial Watch to find out what role Soros and his partners may have played in overthrowing the Macedonian government. There was a strong suspicion that the American billionaire's Open Society Foundation and the US Embassy in Skopje may have collaborated in the background. Judicial Watch, which has already had three lawsuits pending against the State Department over government funding for Soros's foreign activities, this time filed a public interest request with the State Department, but after it refused to present the materials, Judicial Watch eventually filed a lawsuit seeking public interest data in connection with U.S. development funds. The distribution of funds was previously coordinated by the US Agency for International Development (USAID), but from 2012 the Soros Open Society Foundation became the main distributor of US government funds in Macedonia. The difficult transparency in the case, the suspected corruption phenomena, already affected levels that were related to the national sovereignty of another state.

What can be the operational and financial transparency of NGOs on this basis? Financial transparency is (would be) the willingness and ability of an NGO to provide adequate and credible information about its background, assets, income, and expenses to clearly understand its goals and motivations.

In this particular framework of normative legal and social expectations, this is represented by financial transparency as a kind of credibility variable so that it can be clearly seen and judged in the case of NGOs whether or not it itself adheres to transparency standards at all.

Richard Holloway, a specialist writer who previously worked as a national program manager for PACT, a U.S.-based NGO, in his book entitled NGO Corruption Fighters’ Resource Book – How NGOs can use monitoring and advocacy to fight corruption, deals with the basic issues of corruption research conducted by NGOs.

In his book, Holloway points out that corruption is also a defining issue for NGOs' own operations and that they must take responsibility. Only by minimizing corruption risks and sanctioning corruption cases within their own organization will they clearly indicate that they are actively fighting the practice of corruption. Clear rules for them make it easier for organizations to work with partners and donors. NGOs must make it clear within their own system that breaching their anti-corruption program will cost a lot because it puts their reputation at stake.

Without a good reputation, an organization loses the trust of donors and funders, as well as its partners and even target groups. With an effective anti-corruption program, they will be more credible and will be able to manage their projects more effectively. Rather than communicating about corruption only as a response to corruption cases, one of the main takeaways of Holloway’s book is, among other things, that an NGO must sensitise its employees, partners, and funders, as well as donors, to the risks of development cooperation.

It is important that progress, setbacks, and sanctions are always reported within an NGO. The anti-corruption administrator should regularly inform the managers about the results of the evaluation, and the organization must effectively communicate the program to the internal and external public, as well as in relevant brochures, on the Internet, at events, or through public hearings.

The book cites the work of the Open Society Georgia Foundation in Georgia on the civil monitoring of the Georgian Presidential Decree No. 95 of 15 March 2001 as a case study. A total of $20,000 in funding for the Civil Monitoring project was provided by the Open Society Georgia Foundation, which also assumed the role of project coordinator. According to the description, monitoring during the project was carried out at both the central and local government levels. The methodology included studying relevant government documents, conducting interviews with civil servants at various levels of the Georgian government, and field observations. The research was closed after two and a half months, and the monitoring also ended after the dates specified in the decree expired.

By analysing the results of the monitoring, experts with the leadership of the foundation concluded that “the government lacks the proper political will” to implement the number one anti-corruption measures envisaged by the presidential decree. This research example presented is just one of many.

The author, although he takes the work of the organizations seriously overall, mentions as a problem with NGOs that the advocacy programs of such organizations are often determined by the negatives – or by what needs to be changed or reformed. Organizations often do not even have a clear idea of what they want to achieve at the same time or what alternative they offer to the status quo. Since advocacy is usually about getting a lot of people to apply pressure to change something, the organization is unlikely to mobilise such pressure unless it can clearly explain its alternative.

Recently, evidence has been mounting that non-governmental organizations (NGOs) covering a significant part of their activities from foreign sources intend to gain an ever-increasing influence in the domestic political arena, overshadowing their former, purely human rights function. Similar entities in the United States are treated as foreign agent organizations, and their activity is closely monitored and subject to registration. Századvég Foundation is committed to national sovereignty, legal certainty and transparency. Therefore, in a monitoring system called NGO-radar, it continuously analyses the operation of the relevant organizations in Hungary.