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Photo Gallery: Something Is Rotten in the State of Carinthia

Foto: Peter Schinzler/DER SPIEGEL

Jörg Haider's Legacy Corruption Scandals Shake Faith in Austrian Democracy

When the late right-wing populist Jörg Haider went into politics, he vowed to free the country of corruption. But the scandals he left behind reveal that Haider's time in office did not represent the end but the height of cronyism in the country.

The Austrian right-wing populist politician Jörg Haider and his horse-loving associate Wolfgang Kulterer were responsible for some pretty outrageous stories in their time. Now those stories are written down -- sealed and filed in A4 format, forming chapter upon chapter of an unsolved case, all carefully identified by file numbers.

It's quiet here in the courtyard behind the police headquarters building in the small town of Krumpendorf, which is located in the Austrian state of Carinthia. The offices are quiet, too, sealed off from the noise of day-trippers and the rattle of boat engines on nearby Lake Wörth. There is nothing to disturb the men of the "Soko Hypo" ("Hypo Special Commission") in their investigation into the near-bankruptcy of Carinthia's Hypo Group Alpe Adria (HGAA) bank, which even now has cost billions. Their scanners are running nonstop, search engines are going through thousands of gigabytes of data while plotters spit out organizational charts. At the center of these charts, like spiders in a web, are the suspects.

"More than 3 million pages of files -- if you piled them on top of each other, they would be 11 times as tall as St. Stephen's Cathedral in Vienna," says Lieutenant Colonel Bernhard Gaber, the head of the special commission here in its inner sanctum. "Forty-one defendants, 140 interrogations to date. We've never had this sort of thing before."

The Hypo affair is only the shiniest tile in a monumental mosaic, however. When fully assembled, it portrays the legacy of a government that came into being 10 years ago in the face of European protests, scaring away friends and appalling Austria's neighbors. Then, for a few years, it seemed to do its work quietly enough. Nevertheless, that administration apparently gave birth to a monstrous scandal involving millions in commissions that lobbyists collected during the privatization of state-owned companies, suspected party donations from the coffers of government companies, deals with Saddam Hussein's Iraq and Moammar Gadhafi's Libya, money laundering, offshore companies and questionable diaries.

A System in Jeopardy

The key figure in this tale, Jörg Haider, the former leader of the right-wing populist Austrian Freedom Party (FPÖ), is no longer alive. He died in a car accident on Oct. 11, 2008, just outside Klagenfurt, the capital of the state of Carinthia. Did Haider's death change anything, or has the daily barrage of new revelations rocked Austria's political landscape? Not so you would notice.

The FPÖ, a successful party under Haider before it split in two, managed to double its share of the votes in the Sept. 26 election in the state of Styria. And Haider's successor, Heinz-Christian Strache, could even finish in second place in the elections to the Vienna City Council and district councils this coming Sunday.

When he listens to the right-wing populist candidate Strache, he sometimes yearns for "the intellectualism of Dr. Haider," says Strache's rival, Vienna Mayor Michael Häupl, ironically. And when he sees Häupl, Strache retorts, he has the impression that to find Social Democrats of any stature these days, one would have to "visit the military graves at the central cemetery" -- where former Austrian Chancellor Bruno Kreisky is buried.

With their conclusions, both Häupl and Strache involuntarily join those who, in the wake of the most recent scandals in the Alpine republic, see a system in jeopardy. The legal preoccupation with Haider's failed "carnival regime" on Lake Wörth doesn't just offer a portrait of Haider's regiment, but also delivers a "withering assessment of this republic," says political scientist Anton Pelinka. The major parties that have run the country for decades, both the left-leaning Social Democratic Party of Austria (SPÖ) and the conservative Austrian People's Party (ÖVP), are "completely worn-out intellectually," says constitutional law expert Heinz Mayer.

A Trio of Scandals

Austria has recently been consumed by three groups of scandals, with alternating involvement of the three main political camps: the Bawag affair, a business thriller involving a trade union bank; the Buwog deal involving the sale of 60,000 government-owned apartments, for which a lobbyist and a PR advisor collected almost €10 million ($13.9 million) in commissions; and, finally, what is undoubtedly the most outrageous of them all, the Hypo Group Alpe Adria scandal, which investigators in Germany, Austria, Liechtenstein and Croatia are now looking into.

Lieutenant Colonel Gaber, in his office on Lake Wörth, probably has the best understanding of what these affairs in the recent past say about the condition of Austrian democracy. For years, the portly Tyrolean has been in charge of all major cases in Austria.

Gaber began investigating the Bawag affair in 2006. In the end, he personally escorted Helmut Elsner, the former head of Bawag, which had close relations with the SPÖ, in a Learjet from his exile in France to Vienna. It was a matter of honor, says Gaber. "After all, I used to be with the Cobra special-forces unit."

Then he turned his attention to the near-collapse of Vienna's Immofinanz, a company that bought the 60,000 Buwog apartments under conservative former Chancellor Wolfgang Schüssel. Insider information was allegedly involved in the bidding process. The Vienna public prosecutor's office is investigating former Finance Minister Karl-Heinz Grasser on suspicion of embezzlement.

Visits with Gadhafi

Meanwhile, Gaber's investigations have taken him to the far right of the political spectrum, to the milieu of former FPÖ leader Jörg Haider. A very lax approach to financial accounting was taken under his leadership. It appears that the Carinthia-based HGAA, controlled by the state government and more or less Haider's house bank, was practically looted.

Gaber and his staff are looking into real estate development projects in the Balkans, where millions disappeared. They are examining money transfers to Liechtenstein. And they are asking questions like: Why did a tax accountant rake in €6 million, which amounted to €136,000 per sentence, for an insubstantial report? And what role did Haider's house banker, Wolfgang Kulterer, the former CEO of HGAA, play?

It is known that Haider would put in a call to Kulterer whenever he needed money. When Haider visited Gadhafi in his desert tent, Kulterer flew with him. When Kulterer was in a good mood, he talked about his eight military horses, valued at between €400,000 and $4 million each.

In 2006, Haider made Kulterer the chairman of the HGAA supervisory board, even though Kulterer had just been accused of cooking the books. And it was Kulterer who then helped palm off the ailing bank to Bayerische Landesbank (BayernLB), a German state-owned lender.

On Friday, Aug. 13, 2010, Gaber, his service pistol in its holster, was finally able to arrest the powerful Carinthian banker in a Klagenfurt parking garage. Since then, Kulterer has been in detention awaiting trial, partly on the suspicion of establishing a criminal organization. The former Hypo CEO denies the allegations. Some 40 other defendants are still at large.

The Rich and Powerful

A short drive to the top of one of the hills surrounding Krumpendorf offers a view of Lake Wörth that reflects the distribution of power in the state. Lining the shore like pearls are the mansions of the rich and beautiful, the very same people who are now so outraged over the growing interest the courts and the public are showing in their business dealings.

They are the residences of investors in the Hypo deal, who quickly raked in profits of 40 to 60 percent when their shares were sold to BayernLB. They include Ingrid Flick, the widow of billionaire industrialist Friedrich Karl Flick, in her villa in the resort town of Velden; Hans Tilly, Austria's largest owner of privately held forests, in his Gut Walterskirchen estate; and furniture store magnate Herbert Koch, in his house in Pörtschach.

The southern shore of the lake also has its share of the rich and powerful. One of them is former Austrian Finance Minister Karl-Heinz Grasser, who lives in the village of Maria Wörth, next to the town's famous pilgrimage church, with his second wife, crystal heiress Fiona Swarovski.

Grasser was "Mister Zero Deficit" and the media star of the ÖVP and FPÖ coalition government that came into power in February 2000. As a glamorous neoliberal, he was invited to appear on German TV host Thomas Gottschalk's popular game show "Wetten, dass…?" He also spoke at a presentation at the Daimler subsidiary Maybach, which makes luxury cars, in Sindelfingen, where he impressed the audience by saying: "We (Austrians) are natural friends of capital." Public prosecutors and financial market regulators are now investigating Grasser on suspicion of abuse of office and embezzlement.

Nonpartisan

Grasser is the most postmodern of Austria's politicians. He is an unpopular figure who symbolizes a country in which scandals arising from cronyism can no longer be clearly assigned to political camps on the left or the right.

He has had a remarkable career. An admirer of Haider, he joined the FPÖ at an early age and, at 25, became deputy governor of Carinthia. Eight years later, he and Haider parted ways and, even though he was no longer affiliated with any party, he was widely regarded as an ÖVP minister and eventually even as Chancellor's Schüssel's heir apparent.

Grasser thinks in a nonpartisan way, which means that he thinks mainly of himself. As a result, he is embroiled in virtually every scandal from his days as a cabinet minister. In the trial against Bawag executives, he initially denied, but was later forced to admit, that he and one of the later defendants spent time on the yacht of coffee heir Julius Meinl.

Grasser is considered a defendant in the Buwog affair, because the best man at his wedding, lobbyist Walter "Meischi" Meischberger, collected millions in commission payments, which he failed to report on his tax return -- after receiving a tip from Grasser, as prosecutors believe.

In the Hypo scandal, Grasser is seen as a beneficiary. He insists, however, that he was merely representing the financial interests of his mother-in-law from the Swarovski family.

'I Feel Like I'm in a Bad Dream'

These are serious charges. But can those watery blue eyes lie? Grasser is sitting in the Restaurant Do&Co, not far from his 600-square-meter (6,456-square-foot) loft on Vienna's Ringstrasse. He orders a white wine spritzer and says: "I have largely withdrawn from public life, with the exception of the two or three charity balls my wife Fiona and I attend each year. Nevertheless, my name is constantly in the papers."

This upsets him. "I feel like I must be in a bad dream. I constantly ask myself when I'll finally wake up to find that it's all over." Grasser insists that he is the target of an "inhuman chase," and he doesn't understand why he, as a former finance minister, hasn't been permitted to make his case in court for 11 months -- "while classified documents are constantly being leaked to the press."

According to those classified documents, Grasser's former best man Meischberger, who was previously convicted for tax evasion, isn't the only one in the hot seat. "Meischi's" diary, which has been seized by the authorities, and the public prosecutor's files on the investigation, offer an enlightening view into a robber-baron system among people with close ties to the government.

His "former friendship with Mr. Meischberger," Grasser says primly, has undoubtedly become a problem. "Am I guilty of naïveté? Yes. Am I being portrayed in a disastrous light? Yes. The only problem is that I did absolutely nothing wrong. I didn't accept a single cent, nor did I provide anyone with information."

The Occasional Gift

"Meischi" ingenuously assured investigators that the only gifts the finance minister ever received from him were the occasional ashtray, good bottle of wine or used golf club. But who were those unidentified business partners in the Buwog affair that, according to an e-mail seized by the police, demanded millions of euros in payment as part of the missing commission?

Grasser had nothing to do with that -- at least according to Grasser, who suspects that envy was behind the accusations against him. "I'm maybe not so bad looking, I have a great wife and a wonderful family," he says. The ÖVP/FPÖ coalition's golden boy seems unconcerned about the progress of the investigations. In the end, he says, he will "rise like a phoenix from the ashes, fly over the country and successfully tackle new challenges."

Whatever else may come to light in the Grasser case, former Chancellor Schüssel insists that he had nothing to do with it, as he told the news magazine Profil in one of his rare statements. Schüssel, who is now an ordinary member of parliament and sits on the supervisory board of the German energy giant RWE, says that when he was chancellor he made it clear to everyone in his administration that, should anyone be caught stuffing money into his pockets, he, Schüssel, would unrelentingly intervene.

Apparently no one was caught.

Paid in Cash

But this isn't really all that surprising, says Florian Klenk, who works for the Vienna weekly newspaper Falter. "In Austria, when one person falls, so does everyone else." The parties have plenty of skeletons in their closets, he says.

Klenk and a handful of his colleagues at publications like Profil, Format, News and Standard are part of a small group of journalists that have been a thorn in the side of politicians in the Alpine republic. Klenk, a lawyer by trade, has noticed a rapid rise in "corruption at the high end of the money scale."

The major parties, by which he means the SPÖ and the ÖVP, "paid their supporters with positions. The FPÖ paid in cash. As a result, they all became millionaires."

It is now up to the courts to prove who collected the cash. This is an arduous process in Austria, because of resistance from within the system.

The Austrian Justice Ministry imposes stricter reporting requirements for so-called "clamorous" cases, that is, those that promise to attract public attention. Each step in the procedure, at eight official levels, has to be approved. This dampens the enthusiasm of investigators and encourages those people seeking to influence the cases at party headquarters.

'Oasis of Corruption'

The Justice Ministry's Directives Department decides whether charges are ultimately brought against a prominent defendant. This could very well work in former Finance Minister Grasser's favor: His attorney was a guest at the justice minister's wedding. The minister, for her part, didn't seem to mind when, at another banquet, a banker with ties to the ÖVP proudly and unabashedly introduced her as "my minister."

Is Austria an "oasis of corruption," as Mark Pieth, chairman of the Working Group on Bribery in International Business Transactions at the Organization for Economic Cooperation and Development (OECD), recently said? Is it a country in which, ever since the most recent amendment of the criminal code in 2009, it is now even more difficult to prosecute politicians -- even if they, as anti-corruption federal prosecutor Walter Geyer scoffs, accept an "invitation to go bear hunting in Alaska?"

The investigation into the Hypo affair in Carinthia is likely to drag on for years. Haider can no longer be questioned, because he's dead.

Today Carinthians are paying for the years of implementation of his recipe for success -- based on spending tomorrow's money today -- with the highest per-capita debt in all of Austria.

Haider "made himself scarce by kicking the bucket," scoffs Austrian writer Josef Winkler, a native of Carinthia and winner of the Georg Büchner Prize, Germany's most important literary award. To this day, the grave of the deceased governor remains decorated like the final resting place of a savior who died too soon: with plaster angels, wreaths made of antlers and hand-written letters of devotion.

Atoning for the Sins of Their Leader

In the end, will Haider's "boys" -- those dashing young men who were paid for their loyalty with borrowed power -- have to atone for the sins of their leader? Green Party politician Peter Pilz derisively describes those men as "parvenus" tainted with German nationalism, who transformed themselves from "Teutons into kleptomaniacs" the minute they were in power. Now that the billions in losses are public knowledge, some of Haider's acolytes will have some explaining to do.

A few of them are still living high on the hog. Haider's former press spokesman, for example, has been seen standing at the bar of the "Pumpe," a traditional Klagenfurt pub, with a man from the national bank, and he also continues to do business with Libya. Haider's former office manager, who was in charge of the Hypo business, is still in office as the state finance minister in Carinthia. Even Gerald Mikscha, the presumed key figure in the system of party-related offshore companies and Liechtenstein bank accounts, has resurfaced -- and is now being questioned.

All it takes is a short drive around Lake Wörth to witness the permanent monuments to excess. There is the Hypo Group Arena, which was built for the 2008 European Football Championship but which has been abandoned ever since the local club, SK Austria Kärnten, declared bankruptcy. Then there's Freyenthurn Castle, which the Hypo bankers used as a discreet branch. It is now a high-end brothel complete with a statue of Venus, where customers can rent rooms for 30 minutes at a time plus a €350 "female entertainment fee." And there's also the luxury hotel Schloss Velden. The magnificent building, which Hypo bought from German multimillionaire Gunter Sachs before spending more than €100 million to renovate it to a six-star standard, is only 30 percent booked.

The Kaiser Suite is available, at €5,600 a night. But these days the hotel's bright yellow façade is more likely to serve as a backdrop for Germans on short getaways, wearing windbreakers and sensible shoes as they pose for a snapshot. The scenery has symbolic value -- is a white elephant on Lake Wörth all that is left of Haider's legacy?

Right-Wing Still Popular

No one has the right to "sully Jörg Haider's grave," says the current FPÖ chairman, Heinz-Christian Strache. Haider's "historic achievement," he adds, "was to break up the SPÖ/ÖVP stranglehold on the country." Strache admits that mistakes were made, and that he now intends to pay more attention to "social policy instead of expensive projects."

Quite a few Austrians are apparently willing to help the right-wing populist turn his plan into reality. According to polls conducted in the runup to Sunday's election in Vienna, the FPÖ is already the frontrunner nationwide -- at least among those voters who will shape Austria's future, the under 30s.

Translated from the German by Christopher Sultan
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