Austrian court finds former property tycoon Benko guilty of fraud

INNSBRUCK, Austria - An Austrian court found former property billionaire Rene Benko guilty of one count of insolvency-related fraud on Wednesday, his first criminal conviction related to the collapse of his real estate group Signa, but cleared him on a second count.

The court in his home city of Innsbruck handed him a two-year prison sentence over a transfer of 300,000 euros ($348,600) to his mother, ruling that it was an attempt to keep the money from creditors.

Signa became the biggest casualty of Europe's property downturn when some of its main units filed for insolvency in 2023. Prosecutors are still conducting a sprawling investigation into possible crimes committed and estimate the related damage caused at around 300 million euros.

FUNDS DIVERTED BEYOND THE REACH OF CREDITORS

This week's case focused on only a fraction of that sum - about 660,000 euros in total - which prosecutors alleged Benko diverted in an attempt to keep the money beyond the reach of creditors in the context of his insolvency as an entrepreneur.

Benko, 48, pleaded not guilty, and his lawyer Norbert Wess told the court the accusation was "absurd".

Benko has been in custody since his arrest in January.

He had not been expected to be released regardless of Wednesday's outcome, as the investigation that prompted his detention continues.

His time already served in detention would count towards his sentence, Judge Andrea Wegscheider said as she read the court's verdict.

Prosecutors have, so far, filed one other case against Benko that will go to trial, also for alleged insolvency-related fraud.

BENKO'S DRAMATIC FALL, BLUE-CHIP CREDITORS SEEK BILLIONS

The case centred on two lump sums including up-front rent and other payments of around 360,000 euros in 2023, the year major Signa units filed for insolvency, for a house in Innsbruck. Prosecutors argued the payments made no sense, because the property was in need of repair and uninhabitable at the time.

The remaining 300,000 euros were ostensibly a gift to his mother.

While much of the discussion at trial focused on the rent deal and the state of the house, the court found there was too much uncertainty to convict on that count.

Wess said there was nothing improper about the payments and that Benko moved into the house with his family sooner than prosecutors alleged.

Signa's collapse was Austria's biggest bankruptcy since World War Two.

It was also a spectacular fall from grace for Benko, who built Signa from the ground up, expanding into Germany, Switzerland and beyond on the back of low interest rates, until the company came under strain from a surge in rates after Russia's 2022 invasion of Ukraine. Signa's creditors, which include blue-chip companies Deutsche Bank, Allianz, Julius Baer and Raiffeisen Bank International, have filed billions of euros in claims against the group since its collapse. REUTERS