Corruption at A1 Telekom Austria: a million Euro fine for tax evasion

The former Austrian monopoly A1 Telekom Austria used the PR agency Hochegger in a variety of ways. From 2000 to 2010, 38 million euros are said to have flowed – partly for genuine PR work, partly for illegal machinations, including hidden party financing. Company founder Peter Hochegger has confessed and has been sentenced to several prison terms. On Thursday, he was also fined one million euros for deliberate tax evasion.

And this is how it happened: Hochegger submitted bogus invoices to the network operator on behalf of Telekom Austria (TA) managers. TA paid, Hochegger took the money and passed it on to third parties on the behest of TA managers. In particular, politicians and party-affiliated organizations from ÖVP, FPÖ and SPÖ were given money in order to obtain political decisions in favour of Telekom Austria. This had negative consequences for competitors, competition and consumers. The scandal was dealt with in several court proceedings.

One of the companies that issued bogus invoices was Valora. Hochegger once founded it together with Karl-Heinz Grasser, formerly FPÖ and former finance minister, who was also involved in court proceedings. Valora booked the cash flows as if the services claimed on the fictitious invoices had been provided. Input tax deductions and operating expenses were claimed from the tax authorities; however, as the services were not provided, there can have been no tax-reducing expenses. Black money is legally taxable without deductions. The indictment alleges intentional evasion of turnover tax, corporation tax and capital gains tax amounting to 2.46 million euros in the years 2004 to 2009.

Hochegger was sentenced to a fine of one million euros by the Vienna Regional Court on Thursday for signing the false tax returns. The verdict is not final, as the convicted man has asked for time to reflect and can still appeal. As far as is known, compensation payments to Telekom Austria and the many court proceedings have meant that Hochegger is no longer a wealthy man. He is therefore facing a substitute prison sentence, which the court has set at ten months.

Acquittal for former manager Fischer

Co-defendant Rudolf Fischer, head of the fixed network and deputy CEO of Telekom Austria until 2008, was acquitted of the charge of intentional tax evasion. The public prosecutor may have chosen the wrong TA man: Fischer was indeed corrupt and has been convicted for this in other criminal proceedings, but he was not responsible for tax matters at TA.

In addition, Hochegger testified in the criminal proceedings that his contacts at Telekom Austria were Gernot Schieszler, who became known as the "bullying board member", and two board members who have since died, not Fischer. Fischer's acquittal is not legally binding, as the public prosecutor has not yet issued a statement.

Comparatively high fine

The amount of the fine for Hochegger is striking when compared with other amounts in connection with A1 Telekom Austria or Hochegger. In 2022, a criminal case involved illicit money from network equipment supplier Alcatel-Lucent; Hochegger was convicted of embezzlement but was not sentenced. The ÖVP politician and Alcatel-Lucent manager Harald Himmer got off without a conviction at all thanks to a diversion payment of 11,500 euros; Fischer was also acquitted there.

After years of a data protection scandal at Telekom Austria, administrative criminal proceedings were initiated in 2018. The manager responsible was threatened with a fine of seven to 218 euros at the time; the legal situation today would probably be different. Only conditional prison sentences were imposed for illegal financing of the Graz ÖVP, Schiezsler went unpunished as a key witness; the Styrian ÖVP politician Bernd Schönegger obtained a new trial and was acquitted.

The former Austrian Vice-Chancellor and Telecom Minister Hubert Gorbach (FPÖ/BZÖ) took 260,000 euros from Telekom Austria. Nevertheless, Gorbach did not have to answer for this in court. According to Austrian media reports, Gorbach accepted a diversion offer from the public prosecutor's office in 2017: a fine of 1,680 euros, 5,000 euros in legal costs and 100,000 euros in partial restitution to Telekom Austria (TA).

In February 2004, Fischer and Co had the price of Telekom Austria shares manipulated in order to obtain bonus payments totaling 9.2 million euros for themselves and other TA managers. The manipulating bank was fined by the Financial Market Authority, against which the bank appealed. The outcome of these proceedings is not publicly known; the maximum fine was 20,000 euros. Fischer was initially sentenced to three years in prison in this connection, but this was reduced on appeal to six months plus one year's probation. With such short prison sentences, offenders regularly get off with an ankle bracelet instead of spending time in prison.

The machinations at A1 Telekom Austria have kept heise online busy for years. A selection:

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