Corruption made in Austria. “The Red File”: possible sanctions of tens of millions of euros after searches at Porr and Strabag

Austrian prosecutors’ suspicions of corruptions have recently led to searches at Porr, Strabag and other companies. Now, the head of the Federal Competition Authority in Austria, Theodor Thanner, announces that first sanctions, potentially reaching tens of millions of euros for each of the companies, are expected by the end of the year.

searches at Porr

„The economic and corruption prosecutors are suspecting around 20 constructions companies of having had illegal price agreements for more than ten years. Apart from Porr and Strabag, other companies are also under suspicion of corruption, among them Swietelsky, Habau, Held&Franke, Östu-Stettin and Kostmann. There are also smaller companies, suppliers of asphalt mixtures, among which a company owned by a large German company. Held&Franke and Östu Stettin are divisions of Habau, according to Kurier Austrian journalists.

Irregularities have been found to more than 100 road construction contracts. Projects with legal issues include repair works to Pyhrn A9 Highway, Karawanken A11 Highway, B66 national road, l117 regional road (Land) in the east of Steietmark Land and L502 regional road between St. Lambrecht and Murau, in Steiermark. Important railway projects are also targeted by Austrian authorities, such as Koralm Line or the extension of the southern line.

Four searches occurred last year as resulted from the official report published by the authorities. So far, 11 companies suspected of cartel implications were searched this year.

Searches at Porr and Strabag. Investigations following anonymous report

Searches seem to be the result of an anonymous report and led, among others, to the financial office (taxes and interests) in Klagenfurt, a supply responsible of Kostmann construction company (St. Andrä/Lavantall). The engineer is nominated in the investigation, but his lawyer negotiated with the investigators a guilty plea in April 2016.

“The accusation relies mainly on the valorisation of documents contained in a red file of a supplier of Kostmann GmbH. Based on these data, we may consider that the agreements between the companies involved in the tenders can be probed using the documents in these files”, the prosecutors said, quoted by Vienna media.

Kostmann company confirmed the searches. “Our company will cooperate with the authorities to clarify the situation and will provide the required documents”, Claudia Liebert-Ganster, jurist at Kostmann, declared for Kurier.

“Searches on three sites were carried out, but based on the information so far, we cannot comment on the accusations. We too are interested in making things clear, with no omissions, and we are fully cooperating with the authorities”, declared Toril Fosen, spokesperson of Habau.

Swietelsky has also admitted the situation.  “We will be fully involved in the investigation, we will carry out an internal search and we will fully cooperate with the authorities. For now, we don’t know what the problem is”, said Karl Weidlinger, Swietelsky official.

The investigated companies risk fines of tens of millions of euros

The constructions cartel, with presumably 45 member companies, might be the target of record financial sanctions. Currently, the Federal Competition Authority (BWB) estimates that there had been non-competitive cost agreements not for 350, but for as many as 800 projects.

The head of the office, Theodor Thanner, does not want to disclose the value of the sanctions. The competent court for this cartel is Wien Land Court. Regarding the dimension of the sanctions, Thanner refers to legal provisions: “Financial sanctions of up to ten percent of the annual turnover can be applied. When calculating the sanctions, we consider the duration and dimension, the illegal advantages obtained, debts and economic potential”. Thanner expects that by the end of the year the first financial sanctions could be sent to the court, according to Austrian journalists.

The highest individual sanction for price agreements in history is that of EUR 40 million applied to Spar supermarket chain. Total sanctions of the cartel amounted to EUR 75 million ten years ago.

Ten collaborators of the Federal Competition Office were involved in the investigation of the constructions cartel. The size of the evidence is enormous, approx. 70,000 pages, as well as 57 TerraBytes of data that need processing, the equivalent of 48 billion book pages or 228 million books, according to Thanner,.

Between 2006 and 2018, the companies involved seemed to have agreed on the prices and shared customers and regions. Price agreements and the attribution of contracts have helped them increase the value of the services. Therefore, Thanner says, the lands, communities and public companies have been prejudiced.

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