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René Benko and “Inside Signa”: How deception took place in the Signa Group

René Benko and “Inside Signa”: How deception took place in the Signa Group

A new book describes how information was concealed in René Benko’s Signa Group – and why top managers didn’t mind punishment for breaking the law.

Rainer Fleckl and Sebastian Reinhart

This article is adapted from the business magazine Capital and is available here for ten days. Afterwards it will only be available to read at again. Capital belongs like that star to RTL Germany.

In the Signa corporate world, they were regularly sent through the ranks of management. From managing director to managing director. From accounting to controlling. Right up to the office of the founder and decades-long mastermind. Custom-made data sheets in Excel format. These files played a key role until the late autumn of Signa. Meetings and conference calls were scheduled at regular intervals to discuss these Excel spreadsheets. Society for society. One after the other. With more than a thousand companies, this represents no small effort.

In the complex Signa construct, camouflage and deception with the involvement of tax advisors was apparently made a principle. A group was not simply formed here that insisted on secrecy and discretion. No: Signa was and is clearly a conglomerate in which a system of unlawful lack of transparency was made an essential maxim.

It is documented from internal documents: At Signa, applicable laws have been systematically broken for years. Numerous top managers from the first management level have not submitted the annual financial statements of their Signa companies to the commercial register court for years. For this reason, they have been given mandatory sentences every few months over the years. Not among the recipients of the compulsory penalties: Benko personally, who was not officially in a responsible position in any of the group companies and who therefore could not be sentenced to a compulsory penalty by the courts.

However, Benkos Signa did not abandon the company’s managers, who were slapped with numerous compulsory penalties by the judiciary for refusing to publish the balance sheets. An internal memo shows how mandatory fines – apparently totaling hundreds of thousands of euros – were converted into business expenses and deducted from taxes. For this system of illegal lack of transparency, separate processes were even set up in the tax department, accounting and human resources departments of the Signa Group.

A separate account has also been created. By the way, the tax authorities should also be taken into account in the Signa penalty system: On the one hand, the mandatory penalties imposed on the Signa managers were dutifully paid by Signa and properly taxed like benefits in kind. On the other hand, these additional personnel expenses for the penalty payments were tax deductible as business expenses. According to a review of numerous documents, there were probably around a quarter of a million euros in compulsory penalties per year. The system ran for many years. Even if it was to be refined again almost two years before the big crash.

René Benko was also informed

In an internal email conversation between managers, there is fairly clear evidence that Benko, who, as is well known, has not taken on any official functions since a criminal conviction in 2013, continued to be the de facto managing director at Signa. And played a decisive role in the Signa penalty system, which obviously had the aim of systematically hiding the annual financial statements of key group companies from the public. In this email, which also included René Benko, one manager wrote to another in the fall of 2020:

I received information from RB today that the annual financial statements for 2018 and 2019 should not be submitted for the time being.

Why did Benko not want the balance sheets to see the light of day despite the existing legal situation – as required by law? Why was so much effort put into ensuring that the interested public would often only find out years later how the individual group companies were doing economically: what balance sheet total they had? How many claims? How many liabilities? And what equity? One can only speculate about the exact motive. What is certain is that the Signa Group and its founder Benko obviously showed little interest in making it transparent to the outside world what economic condition individual companies, but also the holding company, were actually in. The end is known. After reviewing the available documents, it didn’t come out of the blue.

Own account for fine payments

The most explosive document consists of two pages on which it is meticulously listed in nine points how the violation of the law regarding the obligation to publish was handled by the Signa Group accounting, tax and human resources departments – with the involvement of the tax advisor. The email is from December 17, 2021. Sender: Signa’s top internal tax man. The recipient group: all top managers such as Christoph Stadlhuber, who has been running the business at Signa Holding for many years. But also Manuel Pirolt, the financial director of the Signa Group, who, according to the company register (Austrian commercial register, editor’s note), has now held around 200 executive functions.

The head of the tax department immediately goes into medias res:

This year we noticed the mandatory company book penalties, which we were not aware of before. We have developed a process so that these are recorded correctly in payroll and accounting for tax purposes and so that the managing director himself is not left with the costs, but rather these are taken over and paid by the company in a tax-correct manner.

The Signa manager explains the tax background to his colleagues in bold:

Corporate fines imposed on the managing director are personal penalties for personal misconduct that are generally borne by the managing director, similar to traffic fines or penalties for overloading trucks. If the company assumes these penalties, then this is a monetary benefit or is treated like an additional salary payment and is therefore recorded in payroll. This additional personnel expense is subsequently also tax deductible. A separate account is created in SAP for this effort.

Briefly to clarify: At Signa, managing directors have accepted fines from the commercial register courts for years – most likely with René Benko’s knowledge and intention – so that the key figures of their companies are not publicly visible. These high fines were then recorded internally in Signa’s accounting and reimbursed to the managers. Like a benefit in kind that accrues when using a company car, for example. And in the end, the Benko Group claimed the penalties of its directors for tax purposes.

Dozens of administrative Signa employees and several departments at the company headquarters in Vienna and Tyrol were involved in this Signa penalty system. They all kept quiet. Over years. To the bitter end. The head of Signa’s tax department writes in the email, which was also sent to two employees of Benko’s tax consulting firm TPA:

I would also like to ask the Innsbruck + Vienna accounting department to create an overview or evaluation of the penalties for the company (which should actually be in a separate account) so that we can collect the total costs of the company’s accounting penalties in 2021 (our own and assumed penalties, including additional wage costs). and can report.

What did this organized lawbreaking in the Signa Group mean from a legal perspective? According to the Corporate Code, fines are imposed on companies and managing directors every two months, but these fines do not increase if the law is continually broken. This means that anyone who wants to afford it – and like Signa was obviously able to make hundreds of thousands of euros under René Benko’s leadership – can keep the public in the dark when it comes to business development. It was simply a matter of deliberately ignoring the law, sometimes for years, without having to submit annual financial statements to the public commercial register.

If the judiciary imposes compulsory penalties on the managing directors, these are paid by the group and can then apparently be converted into tax-deductible operating expenses – as is the case with Signa, systematically in the form of a specially set up internal process. This sounds like a bug in the system. After the first bankruptcies in the Benko Empire, the Austrian Minister of Justice also picked up on this mistake and wanted to try to correct it.

Disloyalty towards the co-owners?

This organized procedure in the Signa penalty system becomes more exciting when you look at it through the lens of criminal law and look for possible victims: Experts who have already been entrusted with the matter have raised the not uninteresting question of whether the Signa investors benefit from this system had knowledge. If hundreds of thousands of euros in fines for managing directors were actually paid by the Signa Group, Benko’s co-shareholders could well feel like they were injured. With the possible consequence of an accusation of infidelity against the people who make decisions in the system.

Even if the Signa penalty system had been set up and operated with René Benko’s knowledge: the largely insolvent Signa Group never belonged to Benko alone. Prominent investors such as Hans Peter Haselsteiner, Torsten Toeller, Ernst Tanner and Robert Peugeot are also involved.

Source: Stern

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