BUDAPEST, Hungary – Russia's Avtotraktorexport, or Atex, is suing bus-maker Ikarus Rt and its managers for nearly $60 million in a dispute over Atex's minority stake in the Hungarian company, and has already won a major court decision.

In a verdict dated Oct. 27, Budapest City Court ruled in favor of Atex's request to force Ikarus to convene a general shareholders' meeting, at which Atex wants to examine the last two years of the company's operations and appoint a new auditor.

Looting assets

In addition, Atex, a joint-stock company, wants the firm's shareholders to file a joint suit against Ikarus President Gabor Szeles, CEO Zsolt Szekely and senior managers Balazs Schmidt and Maria Vissi for Ft 3 billion ($10.6 million) each, essentially accusing them of looting the company's assets at the expense of minority shareholders. Finally, Atex wants to force Ikarus to pay a minimum of $16.5 million for its 31.7 percent stake.

"We need to re-establish observance of the laws that were broken by the Hungarian management," said Atex CEO Igor Terentev. "We were illegally pushed out of the workings of the company. The company's major assets were sold in a process that was kept secret from us."

While Szeles' private holding company MT Liz Kft controls the majority of votes in Ikarus, Atex's Hungarian attorney Peter Pallag said that if its motions are rejected Atex will file a separate Ft 3 billion lawsuit against Ikarus' management.

The dispute dates back to two separate instances when most of Ikarus' assets were distributed or sold off to other companies, leaving Ikarus a shell of its former self, which now only manufactures bus parts and not the buses themselves.

The first dispute has its roots in 1998, when an agreement with Hungarian engine manufacturer Raba Rt seized control of Imag Kft, an Ikarus subsidiary that makes bus components, in return for unpaid debts. Igor Knyazev, Atex's representative in Hungary and a member of Ikarus' board, tried in vain both to veto the deal and get access to documentation.

Imag accounted for half of Ikarus' revenue, Knyazev said. And after trying to block the transaction, he said he has been barred from entering Ikarus' headquarters on his own.

"Gabor Szeles is treating Ikarus like his own family business," he said.

The next dispute arose two years later, when the remaining part of Ikarus' bus manufacturing assets – gathered into a holding called IkarusBus Rt – were sold for $20 million to IrisBus, a joint venture of France's Renault and Italy's Iveco. Knyazev said Atex has been unable to find out what happened to that money.

"While it is known that most of the proceeds went on clearing debts, the balance sheet for 2000 did not show adequate details in this respect," Knyazev said. "The fact that at the moment the company has no approved auditor, and no approved consolidated balance sheet, doesn't seem to bother Mr. Szeles."

No grievances

Szeles did not respond to requests for comment, but has told the Hungarian press that, although he has no grievances against Atex, he believes they are impeding Ikarus' development.

As a result, Atex is suing to enforce a 1996 agreement, in which Szeles agreed to buy Atex's stake at market price – but not less than $16.5 million – should the Russian company wish to sell. Because it does not trust financial figures prepared by Szeles' management team, Atex cannot even guess at the actual market value of their stake, Terentev said.

Atex has held its stake in Ikarus since 1991, when it bought into what was then Hungary's state-owned bus manufacturer for $50 million. During the communist era, the company supplied buses to the entire Soviet Union, and manufactured almost 15,000 units a year. But according to a 1996 British Embassy privatization report, sales had fallen to 1,150 units by 1995.

In 1996, Ikarus' owners – Atex and majority owner the State Privatization and Holding Rt (APV) – tried unsuccessfully to find a buyer for the company. Among other international firms, Volvo, Scania, DAF and Daimler Benz (now DaimlerChrysler AG) showed interest, but the potential buyers, wary of excessive modernization costs, offered prices below what the APV and Atex considered acceptable, the report said.

Chairman appointed

The company was nearing bankruptcy when Szeles – who is also board chairman at electronics manufacturer Videoton Holding Rt – became chairman of Ikarus' board in the second half of 1996.

According to Knyazev, Szeles promised he could turn the company around if given the top job, and eventually a 53.9 percent stake was sold to MT Liz Kft.

A court hearing scheduled for March 14, 2002, will decide on the case against Szeles, in which Atex claims he is obliged to buy its stake in Ikarus.

Meanwhile, Atex continues to work with IkarusBus, recently arranging the sale of 300 buses to the Moscow city government.

(Gabor Szabo contributed to this report).