The department store chain Galeria is calling on the state again because its business is not going well. The company has been in crisis for more than a decade. It belongs to the Austrian investor René Benko. A dazzling figure. Already convicted of corruption once before, the public prosecutor’s office has now searched his premises again.
The last major German department store group is in a deep crisis. Galeria Karstadt Kaufhof was formed before the 2019 pandemic from a merger of Karstadt and Kaufhof and is owned by the Signa Holding of the Austrian real estate investor René Benko. Since 2021, Galeria has already received 680 million euros in state aid from the federal government – but has still not managed to turn the tide. This and the behavior of the owner René Benko should make it difficult for the federal government to approve the renewed state aid of 238 million euros this time.
The situation is delicate. According to a report by trade experts from the University of St. Gallen, the insolvency of Galeria with its 17,000 employees would probably cost the social security funds 2.4 billion euros. If the department stores disappear completely from the inner cities, this can lead to a further decline in visitors to the inner cities, which then also affects other shops. The North Rhine-Westphalian Economics Minister Mona Neubaur is therefore in favor of persuading Galeria owner Benko to make more financial commitments before the state steps in again. “Yes, I think it’s Mr. Benko’s turn to also bring in capital,” said the Greens politician in Düsseldorf.
But the Austrian billionaire has seen better days himself. The former real estate star is sinking more and more into the swamp of bribery, tax evasion and illegal donations. The list is likely to grow even longer in the coming weeks. The public prosecutor’s office recently searched his premises.
The officials of the Austrian Economic and Corruption Prosecutor’s Office (WKStA) are investigating the 45-year-old in connection with allegations against the former Chancellor Sebastian Kurz, who apparently has expanded the already latent system of mutual favors into the Viennese principle of government. “Friendly economy” is what the neighboring country calls the finely spun network that closely connects business leaders and politicians. But now Thomas Schmid, the former head of the Austrian state holding and former general director in the Ministry of Finance at the WKStA, has unpacked. As a key witness, he wants to pull his own neck out of a noose that is tightening around more and more top Austrian names.
It will also be tight for Benko. Among other things, he is suspected of having lured Kurz-Spezl Schmid with party donations in order to withdraw his investment company Signa Holding from the clutches of the Austrian tax authorities. The “Ösigarch” – as he is called in the neighboring country – had been arguing with the authorities for a long time about the sale of real estate within his empire, for which taxes in the millions would have been due. In this context, Benko is said to have offered Schmid a well-paid top job with an annual salary of 300,000 euros plus a bonus of 300,000 euros and a company car in his company empire. At the time, the Director General of the Ministry of Finance earned 128,000 euros. “The role of a general manager in our group would certainly suit you,” the Viennese daily newspaper “Presse” quoted an SMS from Benko. Schmid later wrote: “Dear René (…) In your case everything is on track.”
In the end, Schmid did not accept the lucrative top job because the Chancellor at the time, Kurz, did not want to let him go. As the Viennese weekly newspaper “Falter” reports, Benko then moved the headquarters of his Signa to Innsbruck. There, the tax procedure was completed within a few days “with a very positive result for Benko”. Chancellor Kurz was informed about the support for Benko, Schmid is quoted from the investigation files. According to the statements, Benko is also said to have invited the top official to his 65-meter yacht RoMa, which is moored on the Sardinian Costa Smeralda in the bay of the Hotel Romazzino. Benko is also said to have taken him to a ski tour to Lech and to a “men’s evening” in Vienna.
Trouble with the judiciary is not a new experience for Benko. In 2012, the Vienna district court, together with his tax advisor, sentenced Benko to a conditional prison sentence of one year for “attempted forbidden intervention” – in English: bribery. The judge found that former Croatian Prime Minister Ivo Sanader was offered €150,000 on Benko’s behalf to influence a pending court case in Italy in his favour. Benko’s private foundation has played a role in Switzerland since 2019 in a money laundering charge of 25 million francs that went through the Zurich private bank Falcon. In Vienna, the authorities are currently also investigating cases of bribery and illegal donations in favor of the city councilor Christoph Chorherr (Greens). With so much trouble, relaxing days in his luxury residence on Lake Garda would actually be just the thing for Benko. However, it also has to think carefully, because in Bolzano, investigations are currently underway into illegal donations that Benkos Signa is said to have paid to the South Tyrolean People’s Party, which governs there.
Born in Innsbruck in 1977, Benko rose from humble circumstances to become one of the richest in Austria. The fortune of the Tyrolean real estate mogul is estimated at 5.6 billion euros, which makes him the third richest Austrian. His holdings, gathered around the umbrella company Signa, are nested in one another in a way that is difficult to understand. Benkos Holding is one of the most important players in the European real estate market with assets of 24 billion euros. In Switzerland he is a co-owner of the Globus Group, and in the USA he caused a stir in 2019 when he acquired the Chrysler skyscraper in New York, an art deco masterpiece. In Vienna he is, among other things, the owner of the extensively renovated Hotel Park Hyatt.
In Germany, however, Benko is best known as the owner of the department store chain Galeria Karstadt Kaufhof. Signa Holding had merged the two previously separate and long-ailing department store chains in 2019 – without success. To date, 680 million euros in state aid have flowed from the Economic Stabilization Fund. The aim of politics was to secure the 17,000 jobs and to avoid the desertification of many German inner cities. The creditors also had to swallow a mighty toad to save the department stores from bankruptcy. They have waived claims totaling around two billion euros. The works council and trade unions grudgingly agreed to a restructuring wage agreement.
While the state, creditors and workforce have made many sacrifices to keep the department store chain alive, the Austrian doesn’t seem to have contributed much. As soon as the last tranche of the aid was paid out last January, Benkos Signa delighted its shareholders with a dividend totaling 450 million euros.
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Now the billionaire wants money from Berlin again, because Galleria Kaufhof has a financial gap of 622 million euros. The collective agreement has now been terminated for the employees. Volker Brühl is Professor of Finance at the Center for Financial Studies in Frankfurt. He is strictly against further help and does not see a broken leg in the end for Galeria Kaufhof: “There is a lack of staff everywhere. Vacancies in the best inner-city locations will not exist for long. Resourceful investors will define tailor-made development projects for almost all locations.” Insolvency would be an opportunity.
