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MFB-Transelektro deal investigated

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The acquisition of a 42% stake in financially challenged Ganz Transelektro Villamossági Rt (GTV) by state-owned Hungarian Development Bank Rt (MFB) in September 2004 violated the latter’s investment policy, the State Audit Office (ÁSz) found in a recent audit. While MFB’s  investment guidelines identify potential investment targets as financially stable companies with a successful track record, good growth prospects and a positive earnings outlook, Ganz Transelektro had been generating massive amounts of loss for two years when MFB decided to invest Ft 4.9 billion. In the information of daily Népszabadság, MFB requested the ethical committee of the Hungarian Chamber of Auditors to investigate into the professional conduct of GTV auditor Ernst & Young Kft, suspecting that the latter’s reports presented the struggling company in a too favorable light and left the investor unaware of financial risks. (Nb)

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