Something Rotten in the State of Austria

Four-hundred pages was the length of the report issued by forensic experts in August this year, identifying the extent of dubious payments and contracts conducted by Telekom Austria, the country’s largest telecom provider and a former public utility that is still 28 per cent state-owned. And as the investigation into the suspicious payments proceeds, two names come up again and again: long-standing PR consultant Peter Hochegger and Alfons Mensdorff-Pouilly, lobbyist and husband of former Health Minister Maria Rauch-Kallat (People’s Party, ÖVP).

A number of inconsistencies have also emerged in the granting of contracts for the nationwide upgrading of emergency services radios to digital in 2003, involving former Interior Minister Ernst Strasser of the ÖVP, and evidence suggests diverted payments to former Vice-Chancellor and Minister for Infrastructure, Hubert Gorbach (formerly of the Freedom Party, FPÖ, after the party split in 2005, Union for Austria’s Future, BZÖ), and former FPÖ Minister for Transport, Mathias Reichhold.

Meanwhile, amid the unravelling corruption scandals engulfing his one-time ministers, former Austrian chancellor and head of the ÖVP Wolfgang Schüssel gave up his seat in Parliament, withdrawing altogether after a 22-year career in public service.

This convoluted Telekom story of suspected slush fund payments to politicians and lobbyists marks the most recent example of a series of corruption scandals dating from the ÖVP-FPÖ/BZÖ coalition governments of 2000 to 2007, dubbed a Wenderegierung, or "transformation government" due to its liberalising thrust, that are the subject of a federal inquiry. Meanwhile, U.S. authorities are also examining payments made by Motorola to Mensdorff in connection with the emergency services radio contract, which was handed over to the Motorola-Telekom Austria consortium after being withdrawn from the winning bidder Siemens for spurious reasons.

Mensdorff also appears to have played a role in the Austrian purchase of Eurofighter defence jets, for which former Defence Minister Herbert Scheibner (BZÖ) is under investigation for alleged bribery. Former Finance Minister Karl-Heinz Grasser is also in court for corruption charges in the so-called "Buwog affair" (Bundeswohnung Gesellschaft, or federal housing association), regarding the preferential privatisation of state-owned apartments. The Carinthian Hypo Group Alpe Adria Bank is also being investigated in Austria, Germany, Liechtenstein, and Croatia for funding corrupt elites in the successor states of Yugoslavia and illegally financing FPÖ political projects, as well as enriching the friends of the late head of the FPÖ, Jörg Haider.

In early 2011, alleged political corruption in Austria reached international notoriety, as undercover reporters of the British The Sunday Times posing as lobbyists secretly filmed Strasser, the former Finance Minister and then-Member of the European Parliament, as he accepted offers of up to €100,000 in exchange for proposing amendments to water-down financial regulation laws. Shortly after the story was published Strasser resigned, while denying any wrongdoing.

For all parties, there is a legal presumption of innocence until proven guilty.

 

Payback day

In face of the burgeoning allegations of political corruption, the government intends to initiate a parliamentary inquiry (Untersuchungsausschuss) by year end. In spite of former disagreements, the coalition partners ÖVP and SPÖ both support this measure and are now finalising the topics that should be tackled.

"Should the accusations of corruption be true, there would be no mercy, regardless of the fame of the persons involved," warned Finance Minister Maria Fekter of the ÖVP at an extraordinary session of parliament on the Telekom scandal on 13 September.

However, Austrian Federal President Heinz Fischer thinks that more is needed than tighter legislation: "It is not enough to strengthen laws alone, it is also a matter of attitude and personal correctness," Fischer said during his official visit to the International Anti-Corruption Academy in Laxenburg, on the outskirts of Vienna. "A strategy including both approaches is needed."

 

On the path to reform

So far, the Ministry of Justice has issued a final draft for a lobbying and transparency law that should be in place by 1 January. The legislation focuses on creating an official register of lobbying and consulting companies, with defined public disclosure requirements. A failure to comply could lead to a number of sanctions, including a company’s permanent removal from the register.

But the lobbying bill has attracted mixed views. "It contains some positive provisions," Hubert Sickinger, the vice-president of Transparency International Austria, told the The Vienna Review. "In contrast to lobbying registers in other European countries, registration in Austria will be compulsory and lobbying agencies will have to declare their briefs before they start work."

Lobbying industry representatives, however, are sceptical: "There are too many grey areas, and yet again there is no universal design for transparent lobbying in Austria," commented the Austrian Lobbying and Public Affairs Council (ALPAC).   "Instead, one should remove all regulatory distinctions between various lobbying groups and treat them all in the same manner," the industry association suggested.

A previous attempt in 2008 to strengthen Austria’s stance against corruption failed. In that year, the acceptance of gifts by civil servants and leaders of state-owned enterprises was outlawed. But by the following year, the law had been dismantled due to pressure from lobbyists. In light of the current scandals, the removal of this prohibition "had sent the wrong signal," commented Franz Fiedler, the president of the advisory board of Transparency International Austria, on the evening news of public broadcaster ORF this September.

The current efforts at combatting corruption, however, have a better chance of success. "The prolonged economic downturn following the financial crisis of 2008 could help uncover more cases of high-level corruption, since everyone, including the government, is chasing money and looking for funds" argues business consultant Daniel Thorniley. "Also, combatting high-profile corruption may be popular at a time when governments are asking voters to make sacrifices", he stated. Sickinger is also optimistic: "The next months are a window of opportunity to implement reforms."

 

Ripples making waves

The global Corruption Perception Index of 2010 lists Austria on 15th place, with an average score of 7.9 out of 10.0, on par with Germany, but lagging behind Scandinavian societies and Switzerland. But this in fact marks a significant drop from its former score of 8.7 in 2005, and in light of current revelations a further downgrade in this year’s Index is likely.

In addition to passing the lobbying bill, Sickinger argues that more has to be done: "The most striking weakness of Austrian legislation is the lack of rules for party funding" he points out. "We need stricter disclosure rules for donations to political parties and politicians, stricter rules in the penal code for political corruption, and stricter adherence rules for members of parliament."

After trickling for years, it seems the tide has finally turned on political graft in Austria: 72 individuals are currently being investigated and new allegations continue to surface in the press. Meanwhile, politicians sense that they risk long term public trust unless they move quickly to mend lobbying and party financing regulations.

More generally, as the privatisations under the Wenderegierung are cast into a new light, a debate about the "take-it-all ethos" of the years before the financial crisis has been kicked off in public fora and the media [see "The Politics of Miracles" in Oct 2011 TVR, p.3], leading to calls for a wealth tax which meanwhile even the conservative ÖVP espouses. As such, the very direction of Austrian social and economic policy may ultimately be at stake.