Hungary's 'apartment mafia' offers shady loans

BUDAPEST, Hungary -- Gizi Kiss sheds a tear every time she looks out the window of her tiny room in her sister's house.

Directly opposite is the apartment building where Kiss, 62, lived for nearly 20 years in her own three-room flat -- until Hungary's "apartment mafia" tricked her out of it and threw her onto the streets of Budapest.

"This is all I have left," she said, pointing to a few dusty framed photographs on the table.

Many Hungarians have struggled to adapt to the new ways of capitalism and a market economy since the end of communism in 1990. The transition has created fertile ground for shadowy criminal enterprises that offer housing loans with tempting terms -- only to play tough with those who fall behind on payments.

Victims say the groups, which have sprung up nationwide, involve not only con artists, but corrupt lawyers, public notaries, police and judges who use their powers to whitewash shady deals in return for a cut of the profits.

"The problem is corruption," charges Erzsebet Torok-Szabo, who runs Fellows in Fate, a self-help group for victims of the loan scams. "The apartment mafia can pay off lawyers, police and the officials at the land office so that everything they do seems perfectly legal."

Needed venture capital

Kiss' ordeal began in 1995, when her son wanted to cash in on the new economy and open a pool hall. She wanted to help, but she had little money saved and banks were reluctant to make loans to fledgling small businesses.

Then Kiss saw a newspaper ad offering the 300,000 forints, or about $2,200, in venture capital that she needed, so she signed the papers.

All was well until Kiss went into a hospital for a major operation and had to suspend her loan payments for a month.

"I phoned the lender and he said we would have to sign an agreement to extend the contract on the loan," she said. "I thought that was fine and signed the papers he gave me."

But a week after returning home from the hospital, Kiss answered a knock at her door to find a woman claiming to be the flat's new owner -- with two bodyguards in tow. They threw her out onto the street.

"They had forged my signature on a contract to sell the flat and a lawyer had stamped it as if I had been present," she said. "I didn't have a leg to stand on."

The lawyer refused to testify in court, and the judge showed little interest in finding out whether the signature was genuine.

"I lost my 9.5 million forint ($70,000) flat to them when I owed only 210,000 forints ($1,500)," Kiss said. "It has been sold twice since I lost it, which makes it even more difficult to try and get it back."

Panel investigating

Victims of the apartment mafia are pinning their hopes on a parliamentary panel that began investigating the apartment mafia in mid-January and also will look into ways to compensate victims for lost homes.

Fellows in Fate has more than 700 victims of the apartment scam on its books, but Torok-Szabo said the real number is several thousand.

"People are afraid to say what happened to them," she said.

Critics contend that often the lawyers involved are crooked, but lawyers deny they give legitimacy to dubious deals.

"We cannot check whether an identity card or other document is real or not, or whether a person was beaten up to make them sign before they entered a lawyer's office," said Janos Banati, president of the Budapest Lawyer's Association. "This is a sociological problem. So many people were given good flats downtown under communism and now cannot afford their upkeep."