Commerzialbank – A Tale of Criminal Generosity and Incompetent Oversight

Reality set in August 15th “at an ungodly hour” for Burgenland’s governor Peter Doskozil: A telephone call warned him that the Commerzialbank Mattersburg was in trouble, along with a €1.2 million in state agency deposits. Doskozil immediately ordered the money withdrawn. But it was too late. The bank’s long time director Martin Pucher had closed the business down just hours earlier. 

By morning, the bank was revealed to be some €528 million short, most of it probably unrecoverable. Private deposits  up to €100,000 are insured by a federal guarantee program, but dozens of local businesses and neighboring communities who had parked their reserves with the bank are not.  

System Failure

As the experts picked their way through the financial wreckage, it seemed the bank was already effectively bankrupt in 2005. How could no one have noticed? How could Austria’s notoriously intrusive bureaucratic controls have failed? 

The real scandal is perhaps less the dishonesty of the bank’s senior managers than it is the apparent incompetence of those charged with the oversight – the auditors TPA, the BFA (Bank Control Authority), the Austrian Nationalbank and the WKStA, the public prosecutor’s office responsible for economic criminal activities.  There were plenty of warning signs for those who should have been paying attention. Claus Raidl, ex-governor of Austria’s Nationalbank injected a note of common sense on Ö1 radio: “If I pay 4% interest on savings accounts, but only charge 2% for bank loans, any auditor must see that that is not going to work.”

A Football Addiction

The central player in the disaster is more tragic than villainous. Martin Pucher is a quiet unassuming man who enjoyed the role of everybody’s favorite uncle, offering favorable conditions to local businesses and dispensing generously to good causes.  And he loved football – perhaps too much.  He was never happier than in the stands cheering on the local team, his beloved SV Mattersburg. He was the club’s financial lifeline, organizing events and arranging sponsoring contracts that enabled the team establish itself in the national league alongside the big city clubs. 

But what is now clear that most of these contracts never existed: The deals Pucher claimed to have signed with major companies like Wustenrot (insurance) and Energie Burgenland (the local power company), were pure fabrications.  The money was actually siphoned off from the bank, usually with untraceable cash withdrawals that Pucher alone could authorize. How much of other people’s money went to support Pucher’s football passion over the years is unclear; It certainly runs into millions of Euros.

Loyal Lady Forger

The Pucher system for plundering the bank was disarmingly simple. The Commerzialbank had a management board that never met and a supervisory board of aging amateurs, specifically (as Hanna Kordik reported in Die Presse): five farmers, two pensioners, a publican, a butcher and a roofer. Pucher (who never mastered basic computer skills) had one loyal accomplice, his financial director and employee of over 30 years, Franziska Klikovits, who made all the necessary fictional entries in the system – most importantly, some €426 mio. in deposits allegedly at six other Austrian banks.  The actual total of these deposits was about €6 mio. When investigators went through the files, they found neat stacks of blank stationery and deposit slips from the institutions concerned, the raw material of forgery.

As most observers have pointed out, this crude financial fabrication should have been noticed long ago, and fingers are now pointing at the official watchdogs charged with financial oversight. Each of these, in turn, is blaming colleagues further down the supervisory food chain, with not one of them admitting liability. Common sense suggests that this is mainly humbug and Burgenland’s no-nonsense Governor Doskozil is having none of it. He has initiated legal action charging official liability. His lead counsel, Johannes Zink, is optimistic: “Our chances are good” he told Kamil Kowalcze (Die Presse 29.7.20)

Taxpayers Pay

With so much money at stake, teams of lawyers are gearing up for action.  If federal oversight agencies have been negligent, then the Republik (meaning us, the taxpayers) could be liable for the losses.  At the same time, the Commerzialbank could claim refunds on taxes paid on the fictitious business transactions; under the law, a taxpayer cannot be held liable for business that never took place. As Kowalcze commented in Die Presse: “The deeper you dig into the decades of fraudulent bookkeeping, the more confusing it becomes.”  

The only certainty: Tax payers will be poorer and lawyers richer.

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