UPDATE 1-Ex-Telekom Austria bosses sentenced for corruption

Wed Feb 27, 2013 4:31pm EST

(Adds details of fines, background)

VIENNA Feb 27 (Reuters) - Three former Telekom Austria managers were sentenced to jail for share-price manipulation in the latest sign of a crackdown down on corruption in the Alpine republic.

The three were found guilty on Wednesday of breach of trust for arranging the mass buying of shares in 2004 to push up the share price and activate an incentive scheme that paid out a total of 9 million euros ($12 million) to 96 managers.

"They knew they were abusing their authority," Judge Michael Tolstiuk told a Vienna court, putting the overall damage to the company at around 10 million euros.

Over the two-week trial, the court had heard of cash deliveries of hundreds of thousands of euros (dollars) in paper bags, covert meetings in bars and contracts for market studies that were never delivered.

Former Chief Financial Officer Stefano Colombo was sentenced to three-and-a-half years in jail, former deputy Chief Executive Rudolf Fischer to three years, and former wholesale manager Josef Trimmmel to three years, of which two are conditional.

A fourth defendant, former chief executive Heinz Sundt, was acquitted due to lack of sufficient evidence.

The three were impassive as the verdicts and an order to pay a total of 10 million euros ($13 million) in damages to Telekom Austria was read out. Their lawyers said they may appeal.

CHANGING CULTURE

The convicted executives hired banker Johann Wanovitz of Viennese investment firm Euro East to buy 1.2 million Telekom Austria shares at the end of a key five days in February 2004 during which the closing share price had to average 11.73 euros.

After their bonuses were paid out - all but one of the 96 managers opted to take cash rather than shares - they paid him about 1.5 million euros for his services out of company money, some of it in cash.

The verdict on Wanovitz will be delivered later after a further witness who has been out of the country is available to give evidence next month.

The case was the first to reach court from multiple corruption investigations into the former state telecoms monopoly that have damaged its reputation and may have cost it tens of millions of euros.

Lawyer Rudolf Mayer, defending ex-Chief Financial Officer Stefano Colombo, had argued that the former executives were victims of a changing culture in Austria, where business has traditionally been done on the basis of friendships and favours.

"What in the past was considered business on the basis of good relationships is corruption today," he said.

A new generation of Austrian politicians and prosecutors has begun to crack down on a cosy interplay of money and politics in the affluent country.

Former interior minister and European parliamentarian Ernst Strasser was sentenced to four years in jail for bribery last month, and the Austrian parliament enacted a sweeping ethics package last year, hoping to stem a series of scandals. ($1 = 0.7628 euros) (Reporting by Georgina Prodhan; Editing by Elaine Hardcastle)

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