Photo Gallery: Something Rotten in the Heart of Austria

Foto: DPA

Corruption Scandals in Austria A Web of Sleaze in Elegant Vienna

A series of corruption scandals revealing the close ties between politics and business has shaken Austria. Entrepreneurs have allegedly received multi-million commissions for non-existent services, and there are reports of cash-stuffed plastic bags changing hands in Vienna's back alleys. The population is losing faith in the political establishment. 

The case takes place in central Vienna, between St. Stephen's Cathedral and Ringstrasse, in the first district. Here, where tourists are served up Viennese cakes and romantic cliches about Empress Elisabeth, it appears that shady deals were sealed behind the city's grand facades by politicians, lobbyists and unsavory characters in pinstripe suits -- in other words, by those who rub shoulders every day in the heart of the Austrian capital.

In the wake of the recent wave of scandals, an air of suspicion surrounds the country's political establishment. Anyone who still wants to participate in the current debate on Austrian domestic politics needs to be "an expert in criminal law," writes Vienna's Kurier newspaper. According to the Austrian tabloid, breach of trust has become part of "the basics" of politics, and abuse of office is now widely seen as a mere trifle.

Austrian President Heinz Fischer characterizes the revelations that have come to light as "shameful and sad." He is calling for a "clean hands" policy -- an allusion to the nationwide investigations into political corruption and mafia links in Italy during the 1990s. At the time, many of the old Italian parties were ultimately disbanded and new ones were formed.

In Austria, though, they still have a long way to go. The political parties are too busy hurling accusations at each other. They still disagree on the issues of the parliamentary investigations to be held, on the time schedule and on the legal implications.

Modern-Day Robber Barons

Since the turn of the millennium, so much seems certain, a band of modern-day robber barons with close links to the government, working out of offices and law firms in the center of Vienna, swindled the state out of billions of euros. Police are looking into the involvement of five former ministers from the days of the coalition of conservatives and right-wing populists (2000 to 2007) under then-Austrian Chancellor Wolfgang Schüssel of the conservative Austrian People's Party (ÖVP). The right-wing populists from the Austrian Freedom Party (FPÖ) and the Alliance for Austria's Future (BZÖ) who are under investigation include former Vice Chancellor Hubert Gorbach and former Minister of Infrastructure Mathias Reichhold, both of whom are suspected of corruption in the so-called Telekom affair, which is one of a total of four scandals currently rocking Austria. Former Defense Minister Herbert Scheibner is being investigated under suspicion of bribery and money laundering.

The second scandal is the Buwog affair, in which former Finance Minister Karl-Heinz Grasser is allegedly guilty of abuse of office and embezzling funds in connection with the sale of 60,000 government-owned apartments. And former ÖVP Interior Minister Ernst Strasser -- in scandal number three -- allegedly intervened in the awarding of a contract for a new digital police radio network worth hundreds of millions of euros in return for kickbacks. All of those under investigation deny the allegations levied against them.

Such claims of innocence are the only thing connecting these former members of the administration with the current government under Chancellor Werner Faymann of the Social Democrats (SPÖ), which is under investigation in yet another case. The chancellor himself and his state secretary, Josef Ostermayer -- in scandal number four -- are suspected of abuse of office and misappropriation of public funds in the so-called advertisements affair. They allegedly purchased favorable media reports at taxpayers' expense, at a time when Faymann was the Austrian transport minister.

Finally, no portrayal of Austrian sleaze and corruption would be complete without the murky business deals of two lobbyists, Peter Hochegger and Alfons Mensdorff-Pouilly. Both men have collected millions of euros in commissions for vaguely defined services. These days they are being subjected to hours of police interviews -- and they deny all the allegations. Their testimony could play a crucial role in determining which politicians may have received payoffs in connection with privatizing public property or awarding public contracts -- and how much money changed hands.

Nouveau Riche Gone Wild

As in most countries, lobbying is legal in Austria, so, in a sense, political corruption in business deals has been "outsourced" to the lobbyists, says Walter Geyer, head of the Federal Public Prosecutor's Office against Corruption, which was established in 2009. Working with a staff of 14 rather moderately paid colleagues, Geyer deals with an average of 2,000 complaints a year. In order to get the best state prosecutors, he says, more financial incentives are needed. To clear up the largest cases, he argues, new laws and regulations would be helpful: stricter rules for lobbyists, legal protection for whistleblowers and a new political party financing law.

In the meantime, the Viennese continue to discover new unsavory details in their morning papers. Is Austria really "Europe's boil," as the late Austrian novelist Thomas Bernhard once scoffed? Has the Alpine republic become an open buffet, plundered at will by members of the nouveau riche gone amok?

"We reveled in life's pleasures and took delight in wine," wrote the poet Josef Weinheber, describing the prewar atmosphere in Vienna. In the end, he continued, everyone wanted to be a "little Rothschild." A memorial statue in his honor stands in Vienna's first district. It is as if little has changed since then.

'Nothing Short of Organized Robbery'

To view the scenes of the crimes and scandals, all it takes is a tour in a horse-drawn cab around Vienna's center. The Weinheber monument is only a stone's throw away from the sites of business and politics. To the right is the office of the aristocratic lobbyist Mensdorff-Pouilly. He is said to have prepared the way for his millions of euros in commissions during lavish hunting parties around his estate in the eastern Austrian state of Burgenland with partners from the world of politics, government and industry.

Straight ahead is the Hotel Sacher, where Peter Hochegger, who is suspected of having committed a wide range of offenses, can occasionally be seen on the café terrace, looking well-tanned and undaunted. Around the corner to the left is the 600 square meter (6,500 sq. ft.) penthouse owned by former Finance Minister Grasser. From there, the tour proceeds to a palace behind the Burgtheater.

This is the headquarters of "the party of the respectable and virtuous," as Peter Pilz, the spokesman for the Green Party, puts it without a hint of irony. For a quarter of a century, Pilz has been raging at Austria's political establishment. "What has happened in this republic is nothing short of organized robbery," he says. "We should clean up this mess and, if necessary, put a few of them behind bars."

Stealing the Coffee Machine Too

Who do the Greens accuse? According to Pilz, Chancellor Faymann and his SPÖ have swindled the republic out of €1.5 million. Former Chancellor Schüssel's ÖVP and the right-wing populists, on the other hand, are responsible for up to €10 billion in pilfered money, he claims. They have taken things to an unprecedented level, he says. "Politicians used to, figuratively speaking, merely nibble at the whipped cream on top of the coffee. But Schüssel und Grasser have taken the mug and the coffee machine as well."

Pilz's fellow party member Gabriela Moser, who has been appointed to lead the investigative committee in Austria's lower house of parliament, the National Council, prefers to use numbers to paint a picture of the extent of the damage. In addition to countless other scandals, she says it is above all the Buwog affair and the irregularities at Telekom Austria, including share-price losses, that have cost taxpayers "billions in losses."

As a prime example of the "moral decay" in the country, Moser recalls a dinner with a high-ranking Telekom manager. She says that she asked him why his company, which is partly state-owned, didn't purchase a Bulgarian mobile phone company directly, but instead opted to pay a price that was €800 million higher via an Austrian middleman. The manager told her bluntly that acquisitions that are "associated with extensive preparation on the ground, such as bribes," cannot unfortunately be concluded by Telekom on its own.

The scandals engulfing Telekom are well documented and provide an indicator of the extent of corruption within Austrian society. Indeed, this company, in which the government still has more than a 25 percent stake, has apparently experienced an entire decade of rampant megalomania at management level. The firm's former top executives, including ex-CEO Heinz Sundt, are suspected of manipulating share prices. They deny all the allegations. Senior staff members reportedly made millions in profits from the deals. In addition, Telekom is accused of paying too much for acquisitions of mobile phone operators in Eastern Europe, and of indirect bribery or covert party funding through millions of euros in payments to consulting firms.

Plastic Bags Full of Cash

Hochegger, for example, received €9.06 million in fees over the years "without any documented services" being provided in return -- all booked under headings such as "government lobbying." This is the conclusion, at any rate, that was reached by the company's own internal task force. For 10 years of "consulting" provided to the Telekom press office, which already had plenty of employees of its own, Hochegger's firm submitted invoices totaling an additional €10 million. Documents reveal subsequent flows of cash from Hochegger to former Vice Chancellor Gorbach and former Minister Reichhold. Was it payment for past favors?

Austria's other top lobbyist, Count Mensdorff-Pouilly, also received transfers from Telekom amounting to €1.1 million for consulting services. The prosecutor's office suspects a connection here with the contract awarded by then-Interior Minister Strasser for a new digital police radio network. In any case, the order ended up going to Telekom, working in a consortium with Motorola and Alcatel. Could it be that this deal was sealed months previously when senior officials from the ÖVP-led Interior Ministry attended a dinner at the count's estate?

Needless to say, in the better circles of Viennese society, where they still have breast-pocket handkerchiefs sewn to match their sports coats, blatant theft is seen as ungustiös ("unappetizing"). Not surprisingly, the public was exceedingly shocked by what has allegedly transpired in recent years, events which the newspapers have been reporting on for months.

The Viennese are dismayed to read about a Telekom manager, for instance, who allegedly personally handed over a plastic bag filled with hundreds of thousands of euros in a back alley of the Naschmarkt, a popular traditional food market. The recipient was allegedly a broker who had earlier manipulated share prices, allowing Telekom managers to rake in €8.7 million in extra income. According to the news magazine Profil, there must have been scenes in Vienna reminiscent of a "tawdry crime thriller."

But not everyone shares this sense of moral outrage. There are also people who like to present themselves as innocents. Take, for instance, the former finance minister who owns a €5 million penthouse and who turned himself in to the authorities because he had forgotten to pay a portion of his taxes. Or the CEO of a publicly traded company who says that he doesn't know what "breach of trust means in legal terms."

Culture of Cronyism Continues

In reaction to the daily new disclosures, a long-serving ÖVP strategist speaks of unsightly glimpses into the "bowels of the republic." Speaking in the Do&Co restaurant high above Vienna's Stephansplatz square, the strategist says he objects to only conservative politicians being condemned. Austria's culture of cronyism, he contends, continues to flourish under SPÖ Chancellor Faymann.

But observers point out that it was former ÖVP Chancellor Schüssel who took office in February 2000 with the promise of clearing away the old structures. Flanked by the then-FPÖ leader Jörg Haider, Schüssel said that he intended to break up the symbiotic relationship between business and politics. "More private sector, less government," was his slogan. "Who, if not him?" was the slogan for Schüssel's 2002 re-election campaign. Nowadays a more appropriate question would be: Who, if not him, as head of government, could have put an end to the wheeling and dealing at taxpayers' expense?

On Sept. 5, 2011, after 32 years in the National Council and 18 years as a member of the government, the former chancellor threw up his hands and announced his resignation from politics. Although he is credited with achievements in fiscal consolidation and reforms, Schüssel now has to make himself available as a witness for public prosecutors. Mark Pieth, an expert with the Organization for Economic Co-operation and Development, says that Austria has degenerated into a "corruption haven."

Insisting on His Innocence

In an office on Vienna's Kärntner Ring, decorated with a stuffed mouflon sheep and pieces of scented cedar wood, someone who may know the truth recently granted an interview: Count Mensdorff-Pouilly, lobbyist and husband of the former general secretary of Schüssel's ÖVP. After being briefly remanded in custody in both London and Vienna, the count is a free man again -- and he intends to keep it that way. He says that he was recently questioned for eight hours. Even the United States Securities and Exchange Commission has been investigating Mensdorff-Pouilly on suspicion of "improper payments" that he allegedly received in the form of a €2.2 million fee from Motorola. Talking to the newspaper Kurier, the count insisted on his own innocence, and also said that Schüssel knew nothing.

There is no telling what still lies in store for the ÖVP, other political parties and especially for Austria's judicial system. It's as if one domino after the other has been falling since the global financial crisis sparked this series of scandals in Vienna. Indeed, it was only by coincidence that investigators stumbled across suspicious transactions in the wake of the near-collapse of the Viennese real estate company Immofinanz AG in 2009. Among the eye-opening discoveries was a €9.6 million fee that was paid to lobbyists Hochegger and his pal Walter Meischberger in connection with the purchase by Immofinanz of 60,000 government-owned apartments. Meischberger was Finance Minister Grasser's best man at his wedding.

Investigations were launched into the role of Grasser, Meischberger and Hochegger. All three deny the allegations.

Since then, the country has been plagued by one scandal after the other. The tracks left by Hochegger's PR empire led investigators to the shady dealings of Telekom and other companies with close ties to the government. As a trader of political inside information and an expert on the associated bribes, Hochegger was apparently active on many fronts. He is regarded as a key witness by investigators.

'In Our Day, There Were Also Black Sheep'

Their problem, however, continues to be that, in many respects, Austria's legal system is in need of modernization. The proportions of the political parties in power determine which public prosecutors and influential high-ranking justice officials remain in office. Apparently nothing has changed for decades in the basic constellation that made corruption in Austria possible in the first place: "The sensitive area is where politics meets businesses that are closely linked to the government," says Geyer, the anti-corruption state prosecutor -- in other words, in the areas of telecommunications, rail networks, energy or interstate highways. "That was already the case back in Kreisky's day."

Geyer knows what he's talking about. Starting in 1970, the Social Democrat Bruno Kreisky united his people and opened up his country during his 13-year tenure as chancellor -- and he had a promising heir apparent: Hannes Androsch, his finance minister who also served as vice chancellor for a number of years. Androsch was brought down after a host of scandals, and Geyer was the young state prosecutor who charged him with tax evasion in 1984.

Androsch is now 73 years old. He is an entrepreneur estimated to be worth hundreds of millions of euros, and still so fabulously well-connected that his fellow party members in power continue to seek out his advice.

"In our day, there were also black sheep," says Androsch, without batting an eye, when asked about corruption in Austria. "But we didn't allow them to get to the top. Compared to back then, they shamelessly cashed in under Schüssel, virtually out in the open, in broad daylight and systematically. They acted as if their motto were: Now that we're together at the trough, let's really pig out."

Call to Arms

Incriminating documents recently surfaced concerning SPÖ Chancellor Faymann. Primarily the ÖVP, but also the right-wing populists of the FPÖ and the BZÖ, appear determined to spread suspicions of corruption to their political rivals. As a result, the Austrians soon learned that while Faymann was still transport minister, he allegedly ordered state-owned and partially state-owned companies like the railways to run advertisements worth millions in publications that were well-disposed to him, at the taxpayers' expense. The firms had no choice but to pay for the ads and play by his rules. Investigations are underway against the chancellor and his strongman, Secretary of State Josef Ostermayer. Both men deny the allegations against them.

Voters are now punishing all the parties by refusing to show them respect or give them any attention. According to a recent opinion poll, the number of Austrians who are interested in domestic politics has halved since 2000, falling to just 26 percent. Partly in reaction to this dismal situation, two weeks ago a group of veteran politicians established a platform called "The Last Call to Arms." They propose using referendums to spur reform of the country's democratic structures. Their circle of supporters includes the political satirist Florian Scheuba.

Scheuba's reputation as an Austrian cult figure was cemented when, in front of an audience of thousands, he lampooned former FPÖ politician Walter Meischberger by reading out transcripts of wiretapped conversations containing such gems as "Now I'm super-naked." The height of the fun was when the millionaire lobbyist tried to remember what he was actually supposed to have done in return for his fees and asked his co-conspirators over the phone: "What were my services?"

How to Buy a Country

This follows on the heels of earlier brilliant Scheuba performances, such as in the TV series "Living Richer with Martin Schlick," in which the character of Schlick -- who is obviously based on billionaire Austrian businessman Martin Schlaff -- gives tips on how to buy a republic.

Virtually every sentence from this television satire could come from Viennese public prosecutors and investigators. The real Schlaff threw a party with champagne and oysters for SPÖ Chancellor Alfred Gusenbauer on the evening of his inauguration in 2007. Schlaff also took ÖVP Chancellor Wolfgang Schüssel on trips in his private jet and arranged for former Vice Chancellor Hubert Gorbach to receive a position on a supervisory board.

There are no current investigations into Schlaff, the grand master of cultivating politicians. After all, he only helped out a little, at most -- for example as a middleman in transactions in Bulgaria and Belarus, when Telekom simply couldn't make any progress.

For someone who pulls the big strings in the Austrian capital, cases involving bundles of cash in plastic bags or ministers neglecting to pay their taxes are little more than embarrassing, amateurish slip-ups.

In other words: cases for the public prosecutor.

Translated from the German by Paul Cohen

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