Austria corruption crackdown spreading its net wide

VIENNA Fri Jun 14, 2013 10:42am EDT

Austrian National Bank (OeNB) Vice Governor Wolfgang Duchatczek addresses a news conference after a meeting in the finance ministry in Vienna May 3, 2010. REUTERS/Heinz-Peter Bader

Austrian National Bank (OeNB) Vice Governor Wolfgang Duchatczek addresses a news conference after a meeting in the finance ministry in Vienna May 3, 2010.

Credit: Reuters/Heinz-Peter Bader

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VIENNA (Reuters) - Suspicions of bribery at Austria's central bank have dragged it into a nationwide crackdown on corruption that has shaken confidence in the country's highest ranks of power and prestige.

Vienna prosecutors this week charged nine people, including the deputy governor of the Austrian National Bank, over suspected bribes and kickbacks for banknote contracts with Azerbaijan and Syria.

Wolfgang Duchatczek, 63 and set to retire next month, has denied any wrongdoing, insisting through his lawyer that he was in fact the person who exposed the scandal at a banknote printing unit of which he is chairman.

But the headline-making charges add the central bank to a parade of court cases and investigations into the interplay of money and power in the wealthy Alpine republic.

One regulatory official called the indictments "very embarrassing" for an institution that shares responsibility for overseeing the country's financial sector.

The European Central Bank, poised to take over responsibility for banking supervision in the euro zone next year, declined to comment.

Egged on by a new generation of campaigning journalists, Austrian courts and prosecutors are taking an increasingly tough line on corruption.

Former Interior Minister and European lawmaker Ernst Strasser got a four-year term for bribery in January after being caught on camera offering to amend European legislation for cash. He is appealing against the verdict.

Three former Telekom Austria managers were sentenced to jail in February for share-price manipulation in a case that had one defense lawyer bemoan his client was victim of a changing culture in Austria, where business has traditionally been done on the basis of friendships and favors.

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

SLIDING

But it is a campaign driven by increasing public unrest.

Eight out of 10 Austrians surveyed in a European Union Eurobarometer poll published last year said corruption was a major problem, up from 61 percent in 2009.

Austria fell to 25th place out of 176 on Transparency International's latest corruption perception index last year, from 16th a year earlier and 10th in 2005.

A parliamentary investigative panel made headlines last year by grilling officials, lobbyists and business executives about suspected dirty deals.

It looked into payoffs and perks financed by Telekom Austria, an ex-monopoly still partially state-owned; into whether kickbacks flowed in the 2004 privatization of public housing; and examined the award of emergency service radio network contracts, among other cases.

Telekom Austria is trying to claw back tens of millions of euros from people it suspects of defrauding the company.

The parliamentary panel's work helped prompt parliament to adopt a sweeping ethics package a year ago that sheds more light on politicians' finances, hoping to draw a line under the scandals.

Austria is a relatively small country of 8.4 million, and all the major players in business and politics are based in the capital Vienna, where "everyone knows everyone" is a watchword for close ties among movers and shakers.

(Additional reporting by Eva Kuehnen in Frankfurt Editing by Jeremy Gaunt.)

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