Austria investigates René Benko for fraud

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Austria’s anti-corruption prosecutors have opened an investigation into property mogul René Benko for allegedly defrauding a bank.

The probe is the first to personally target the 46-year-old former billionaire, whose Signa luxury property group collapsed at the end of 2023, leaving billions owed to shareholders and creditors across Europe.

It follows news on Friday of a preliminary investigation opened in the neighbouring principality of Liechtenstein — a major centre of offshore wealth — into possible “fraudulent bankruptcy” and Benko’s assets there, shielded behind two opaque Liechtenstein foundations.

A spokesperson for Austria’s state prosecutor for Economic Crime and Corruption (WKStA) confirmed a formal investigation into Benko, first reported by the country’s public broadcaster ORF, was under way.

Benko’s lawyer, Norbert Wess told the Austrian Press Agency that his client was aware of the investigation against him. Benko has denied the allegations.

The investigation relates to a loan made by an Austrian private bank to Signa, said people with knowledge of the probe.

The loan was extended in the summer of 2023, at a period when the WKStA believes it was already clear to Benko the Signa Group was financially in trouble. Prosecutors are probing whether Benko and Signa misled the bank regarding the company’s financial health. The loan was collateralised with shares in Signa Group entities.

No charges have yet been filed.

The investigation is one of several relating to Signa that the WKStA has been asked to look into.

The Financial Times reported in February that one large group of creditors to Signa has filed another complaint which raised questions over hundreds of millions of euros of alleged “improper” transfers out of key companies in the property empire before its collapse.

Banks and large institutional lenders — including the Abu Dhabi sovereign wealth fund Mubadala — have also begun legal actions against Signa to try to get some of their money back.

Last month, creditors to Signa’s two most important group entities, Signa Development and Signa Prime were told they could expect to recoup just a fraction of their investments.

At its peak the group held a property portfolio of luxury addresses — including London department store Selfridges, KaDeWe in Berlin and the Chrysler Building in New York — which Benko boasted was only rivalled by that of the British monarchy.

But high leverage, complex cross-shareholdings between a network of more than 1,000 corporate entities and the regular shifting of cash balances around the group mean more than 70 per cent of Signa’s debt is now likely to go unpaid, according to administrators.

Although Benko held no formal title at the group, he was its de facto chief executive and one of a handful of executives who understood its complex, highly leveraged financial structure, according to former senior employees.

Benko — whose personal wealth was once estimated by Forbes at $6bn — and his two family foundations in Austria have also declared themselves insolvent.