The Economic and Corruption Public Prosecutor’s Office (WKStA) has expanded its investigations against Viennese real estate companies. They affect not only the VMF/VKM group, but also the LNR group. In total, the investigation includes 16 suspects – 11 natural persons and 5 associations, as a spokesman for the WKStA said on Wednesday in response to an APA request. House searches took place in July and the OÖNachrichten reported on it. The preliminary amount of damage is 70 million euros, but it is an “interim situation”. The presumption of innocence applies.
The suspected cases of fraud surrounding the VMF/VKM group and the LNR group belong together because there is overlap between the people involved and thus a subjective connectivity, explained the WKStA spokesman. He did not provide any details about the ongoing investigation.
The public prosecutor’s office is investigating serious fraud and breach of trust. Specifically, the people involved are accused of providing untruthful information to banks in order to obtain loans. Two accused lawyers who acted as trustees are said to have paid out money without registering liens for the banks. The Vienna Bar Association has appointed so-called chamber commissioners for the two lawyers.
Smaller Raiffeisen banks in Lower Austria, Upper Austria, Carinthia and Salzburg are said to have been damaged, specifically the Raiffeisenbank Flachgau Mitte. She had to be rescued by the Salzburg Raiffeisen Association as a result of a loan default worth millions. The Raiffeisen Bausparkasse is also said to be affected by fictitious transactions worth millions.
In response to an APA request, the LNR Group stated that its boss Lukas Neugebauer was no longer with the company. Basically, the allegations are “as far as we know as a company, incorrect, as all information about the transactions was provided truthfully and in full.” The banks “obviously presented this information differently internally to circumvent capital conservation guidelines,” said the LNR Group in its statement, in which it denies all criminal allegations.
Lukas Neugebauer and his father Stefan Neugebauer, managing directors of the holding company LNR Liegenschaftsverwaltung und Beteiligungs-GmbH since May 2024, have privately filed for bankruptcy in the past few days. The LNR Group emphasized in a press release on Wednesday that the declaration of insolvency by managing director Lukas Neugebauer’s sole proprietorship had no impact on the group’s current day-to-day business or ongoing projects.
Interview with Dr. Sarah Klein, Economic Analyst
Editor: Good evening, Dr. Klein, and thank you for joining us. We’re here to discuss the recent investigations launched by the Economic and Corruption Public Prosecutor’s Office in Austria concerning the VMF/VKM and LNR groups. Can you give us some context about the significance of these investigations?
Dr. Klein: Good evening! Absolutely. The investigations are significant because they expose serious allegations of fraud and breach of trust within the real estate sector, which is crucial for economic stability. With a potential damage amounting to 70 million euros, these cases could undermine public trust in financial institutions and regulatory frameworks.
Editor: The WKStA has mentioned that there are 16 suspects involved, including both individuals and associations. How typical is it for these types of investigations to include multiple parties?
Dr. Klein: It’s not uncommon. Fraud cases often involve networks of individuals and companies. In this situation, the overlap between the VMF/VKM and LNR groups suggests a coordinated effort that makes the investigation more complex. It highlights the necessity for thorough scrutiny because such interconnected schemes can escalate the scale of the fraud.
Editor: The allegations include untruthful information provided to banks for loan acquisitions. How does this practice impact not just the banks but also the broader economy?
Dr. Klein: When companies provide false information to secure loans, it not only affects the banks’ financial health but can also lead to broader economic ramifications. If banks incur significant losses, they may tighten lending standards, which can stifle growth for legitimate businesses. Moreover, if fraudulent practices become widespread, it could lead to a lack of investor confidence in the real estate market as a whole.
Editor: The LNR Group has publicly defended itself, claiming the allegations are incorrect and stating that all information was shared truthfully. What challenges might the company face moving forward in this situation?
Dr. Klein: The LNR Group faces a challenging road ahead. Even with their denials, public perception can be difficult to manage during a high-profile investigation. Their credibility with financial partners, investors, and clients could be damaged, which would affect their operations. They will need to demonstrate transparency and cooperation with the authorities to rebuild trust.
Editor: And lastly, what should we as the public watch for in the coming weeks regarding this case?
Dr. Klein: We should closely monitor updates from the WKStA, especially regarding any new developments or charges that may arise. Additionally, the responses from the implicated companies will be crucial. It will be interesting to see whether they cooperate with the investigation or choose to take a more combative stance. The outcome of this case could set important precedents for future corporate governance and accountability in Austria’s real estate market.
Editor: Thank you, Dr. Klein, for your insights on this developing story. We appreciate your time.
Dr. Klein: Thank you for having me!
Ct. How do public statements from companies under investigation typically influence the narrative around such cases?
Dr. Klein: Public statements play a critical role in shaping the narrative. Companies often seek to protect their reputation and reassure stakeholders by denying allegations and asserting their commitment to transparency. This can help mitigate immediate fallout, but the effectiveness of these statements often depends on the credibility of the company and the evidence presented by investigators. If further evidence emerges that contradicts their claims, it may exacerbate the situation and lead to increased scrutiny.
Editor: Considering the significant impact these investigations may have on smaller banks, particularly the Raiffeisen banks mentioned, what steps can financial institutions take to safeguard themselves from similar situations in the future?
Dr. Klein: Financial institutions should enhance their due diligence processes, particularly when extending loans. This means implementing more robust risk assessment strategies, including thorough verification of financial information and ensuring that there is transparency in transactions. Building stronger relationships with other banks and financial entities can also provide crucial insights and information that may flag potential red flags earlier in the process.
Editor: Lastly, with legal proceedings likely to unfold over a significant period, what can the public expect in terms of following this case and its broader implications?
Dr. Klein: The public should anticipate a lengthy legal process, as these types of cases involve intricate legal and financial evaluations. The ongoing media coverage will likely focus on key developments, which can influence public opinion and the behavior of other entities in the market. In the broader sense, it may prompt regulators to review existing policies and potentially strengthen oversight in the real estate and financial sectors to prevent similar cases from occurring in the future.
Editor: Thank you, Dr. Klein, for providing such valuable insights into these serious allegations. We appreciate your time and expertise.
Dr. Klein: Thank you for having me. I hope we can continue to raise awareness around these critical issues for the health of our economy.