Agonies of Historic Budapest Coffeehouse Offer Bitter Taste of Local Hospitality Business

If you’ve ever thought it would be great to own a historic old café in Budapest – or any business in the country – the following story may put the notion out of your mind forever. According to a recent investigative piece on index.hu, the once-grand Hauer Cukrászda is currently closed due to a bizarre legal tangle that, were it taking place in Prague, could only be called Kafkaesque.

As of last week, there was a sign on the door of the café saying it was closed for “technical reasons.” In reality, however, the “technical” problem is a forced liquidation of the company that operates the confectionary, Friss Kft, which started about two years ago and has been dragging on ever since. Owner Miklós Fehér told the portal that the problem started with a contested Ft 3.5 million (roughly €13,300) bill, and has since descended into a story that involves more than a sprinkle of official incompetence and a dash of corruption. “Every law that could be breached has been breached in this case, and the whole liquidation process has been irregular from the start,” said Fehér.

The café, which sits on a now-unfashionable stretch of Rákóczi út, was bought in 1896 by Rezső Hauer, the son of the chef to the Archbishop of Esztergom. It was nationalized after WWII and closed shortly after it was privatized in 1991. The ownership rights went to the District VIII municipality, which sold it in a tender to Friss for Ft 3 million. The new owner spent over Ft 450 million to remodel the café, which eventually reopened in October 2002. The current problem began just two years after the café’s reopening, when one of Hauer’s suppliers filed a liquidation procedure against the company over the aforementioned bill, which Fehér said hadn’t been paid because of an “accounting error.”

But according to Fehér – who owns 95% of the company, with the rest held by its managing director, Istvánné Bodó – the firm had more than enough cash to pay its debts, and that such a liquidation process is supposed to be initiated only in the case of insolvency.

Instead, the reason he could not reach an agreement with the creditor was the lack of a needed official document detailing its financial position, i.e. the company’s financial closing balance Apparently, the document has not been created due to “strange” financial transactions at the company. As an example, Fehér mentioned that over Ft 30 million disappeared from the company’s cash in hand in 2006 – provided the numbers officially submitted to him were correct. In another case of probable embezzlement, Ft 10 million disappeared from the company’s books in 2004, he said, raising the possibility that the company’s accountant at the time had sticky fingers. (Though Fehér himself held the managing director post of Friss until May, 2005.) In yet another case, machinery worth Ft 30 million listed in the inventory is now missing in action.

József Katona, an insolvency practitioner at Kurátor Felszámoló Kft (“Trustee Liquidation”), refused to answer questions placed by the portal regarding the balances, citing an ongoing investigation into the case by the National Investigation Office (Nemzeti Nyomozóiroda). He said he could not tell who was responsible for the situation, adding that the acting managers (ügyvezetők) might have been, and expressed his hopes that the investigation will find the responsible parties soon.

So far, Fehér has not been able to learn anything about why the liquidation process was begun, after asking the national tax office (APEH), the investigators, the company court or the Budapest Court. He said he has contacted all of them, but they have yet to respond, and were similarly reticent when approached by index. The Budapest Court said they were not allowed to give information on an ongoing liquidation processes, while the tax office cited “tax secrets.”

“Our real debt can’t be more than 50 to 60 million forints, and this amount is currently available, but until the balance sheet is created, which is unlikely in the foreseeable future, the court decision doesn’t allow an agreement to be made with the creditors,” Fehér said.

If the case is ever settled, he said he would reopen the Hauer and – according his original plans – give the company to a foundation and the confectionary to the City of Budapest as present, provided the city takes care of it. But after what Fehér has been through, they might not want to even stop by for a coffee.