International Bribery Scandal Invades the ECB

Wolf Richter's picture

By Wolf Richter
The bribery scandal came at the worst possible moment for the European Central Bank. Already it’s struggling on a daily basis with the ballooning debt crisis in the Eurozone. And it’s trying to defend its independence against an onslaught of demands to print unlimited amounts of euros and buy the crappy sovereign bonds of the Eurozone's weaker members. But now, Ewald Nowotny, member of its Governing Council, is up to his neck in hot water.

A spokesperson of the state prosecutor in Vienna, Austria, announced on Monday that the criminal investigation of an international bribery scandal that has been simmering for a while has been expanded to over 20 suspects. And it has now entangled six current directors of the Austrian National Bank (OeNB), including its Governor, Ewald Nowotny (Handelsblatt).

The scandal is centered on a division of the OeNB, the Oesterreichische Banknoten- und Sicherheitsdruck GmbH, (OeBS), which is in the lucrative business of printing money, literally. And it has been active in soliciting bank-note business from foreign governments since 2000. On its website, it claims that it “excels at combining innovative security features with modern designs.” Apparently, it also excels at bribery, kickbacks, and money laundering.

According to the prosecution, OeBS paid €17 million in bribes to Syrian officials to obtain orders from the Syrian government (Wiener Zeitung). Payments were routed to offshore outfits, such as the Panamanian mailbox company Venkoy, with representatives in Switzerland. The prosecutor is further investigating €1.7 million in kickbacks that made their way back to Austria (Die Presse). Similar arrangements with Azerbaijan are also being investigated. Two weeks ago, four people—the managing director and the head of marketing of OeBS and two lawyers—were arrested. Bits and pieces of the affair began to see the light of the day last June, when questions were raised by Austrian tax authorities about the deductibility of these payments.

The OeNB confirmed on Monday that a criminal prosecution has been initiated against six of its directors, including its Governor Ewald Nowotny, Vice Governor Wolfgang Duchatczek, and Director Peter Zöllner, who were accused of having known about the bribery of foreign public officials in connection with the acquisition of bank note printing orders. Of course, it defended its directors: the accusations were based on statements by fired employees, it said—implying that it’s nothing but a vendetta. Based on the information the directors had in front of them at the time, they’d assumed that the payments were for actual and legitimate services, and that the acquisition of orders complied with all applicable rules and laws, it said.

But on November 9, the Vienna-based daily paper Kurier created a stir when it said that it had obtained a copy of the minutes of the OeNB Board of Directors meetings. According to these minutes, the directors had known for years that millions of euros in bribes were being paid to acquire bank-note business from foreign governments.

For example, on March 24, 2010, the managing director of OeBS informed the OeNB board about a possible order from Azerbaijan for 150 million bank notes that carried a “commission” of 10%. And how did the board react? “Duchatczek asked the managing director to initiate the acquisition activities so that the years 2011 and 2012 would be at capacity.”

Over the years, the minutes show, Nowotny, Duchatczek, and their colleagues asked questions about various payments but then did nothing. For example, on December 15, 2008, Nowotny asked about the amount of a commission and the recipient in Azerbaijan. The managing director then “informed that there is a representative in Switzerland,” and that the commission would amount to 20% of the order. And that was that.

The OeNB had already tried to stamp out the brush fire and protect its directors by firing the managing director and the director of marketing at the OeBS. Stated reason? An internal audit revealed “unlawful actions and withholding of information from the Supervisory Board.” At the time, the bribery of Syrian officials had already surfaced, along with €600,000 in “unusual expenses.”

Maximum penalty for bribery is ten years in prison, according to the Handelsblatt. But given the impunity with which central bankers act, I doubt that Nowotny or the other central bankers will ever face any serious risk of ending up there. He might not even lose his jobs at the OeNB and at the ECB. And his future, well, given that he is a central banker, looks bright.

Proton Bank in Greece had siphoned off $1 billion in a scheme of fraud, embezzlement, money laundering, and offshore front companies. And got bailed out. But then a bomb exploded.... European Bailout Fund Pays For Greek Money Laundering And Fraud.

Wolf Richter

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Toobigtofoil's picture

Whoever said history does not repeat obviously was not talking about the printing press. The Reserve Bank of Australia has been embroiled in a corruption bribery scandal where money (assumingly NOT their own) was paid to foreign officials to encourage them to order the RBA's fancy plastic notes, we assume ahead of their Austrian counterparts:

Could Ron Paul possibly be correct claiming central banks dont deserve the lack of accountability they love?? 

tony bonn's picture

success in big business requires criminality...and you can learn how to commit crime in business school...i witnessed it from the students first hand in a certain state university in kennesaw ga...

dcb's picture

the problem is that of they get charged they may talk, that has to be prevented. so I vote no jail

GoldBricker's picture

Syria should become a modern democracy. That way they could have, instead of bribery, campaign contributions, political action committees, post-political-career sinecures, and insider tips. And don't forget a central bank, fiat currency, and welfare state.

Peter Pan's picture

I seem to remember that some US robber was asked by the arresting police why he robbed the bank. The answer was, "because that's where the money is."  Bankers today have simply realised that an inside job is easier and more profitable than holding a gun.

Diogenes's picture

It was Willy Sutton who said "because that's where the money is". It was Al Capone who said "I'm in the wrong business" when they explained how the New York Stock Exchange worked.

Barefooted_Tramp's picture

"What's breaking into a bank compared with founding a bank?"

- Bertold Brecht,  Dreigroschenoper (Three Penny Opera)

Peter Pan's picture

Fiat currency is fraudulent so why shouldn't those printing it also be fraudulent. The two go hand in hand.


Stack Trace's picture

Is it bribery if the currency is worthless euros? :-p

El Gordo's picture

Wait until the find out that they've been bribed with worthless paper.

navy62802's picture

Imagine that. Crooked central banks. Who would have guessed?

CrazyCooter's picture

Thanks for the contributor post. You seem to have a very observant angle on the Euro mess and definately bring something to the ZH community with your content.

Thanks and keep up the good work!



Georgesblog's picture

There are crooked people involved in printing currency? Now, isn't that a surprise! I wonder what bribes it will take to keep the global Ponzi scheme going.

Aquarius's picture

"Fraud is not only the Official Policy it is also the Global Corporate Business Model"  me.


blindman's picture

this just in. g. celente says mf global stole his
gold futures contract and then offered him to renew
at a price $300 greater than the one he had. apparently
the receiver or trustee got his prosperous contract.
100 oz. at $1440 11/22/2011. i think he refused the offer
at $1776, the price on the day of the bankruptcy. hmmm.
listen here.
Gerald Celente on The Alex Jones Update on the MF Global collapse - 28 Nov 2011
The United States of America, like most countries, has been taken over by a very corrupt cabal of people. They use many tools. Fear, false flags, propaganda, threat, lies, wars etc... People need to wake up and not buy into these people. ? They believe in order out of chaos. This is not the way I choose to live.

Ahmeexnal's picture

This whole post is a lie.

Only third world countries with brown/yellow/ebony people are corrupt.

Europe is a paragon of rectitude.  Always has been, always will.

That's why the euro is a strong currency and will be the global reserve currency.

You *must* love the euro-oligarchy.


/sark offzy

Piranhanoia's picture

Poor bank,  all they could do is print the money.  We do that and more.  We offer guns and bombs and planes and money.  Pikers.

jeff montanye's picture

drones too.  we have drones.  and freedoms.

eddiebe's picture

Time for the European spring.

Bansters-in-my- feces's picture


I was first Bitchez......

What happened....?

i-dog's picture

Buffet stepped in. You're now subordinated. Charlie Munger says: "Suck it in and cope".

Piranhanoia's picture

guessing random comingling, I acknowledge your firstness.

SwingForce's picture

Nice work!  WHAT IF: Ron Paul stopped giving all counties $$$  ? 

Coldfire's picture

Ponzi operators charged for bribery in the operation of another Ponzi scheme. Meme: We've got rules, here, Mac.

bank guy in Brussels's picture

Yes, we are 'shocked to find gambling in this establishment'.

Something is indeed a little funny about such prosecutions. How does one do business in a massively corrupt country without bribery?

In other words, why isn't every other company who paid bribes to officials in 'United Republic of Sh-thole' being prosecuted?

Some bribery is indeed worse than others. What is truly 'criminal' is when bribes are paid to harm innocent people, bribes paid to police and judges to enable a murder, for example, or to subject workers to horrid conditions. In that case, sure, throw the book at them.

But in countries where bribery is just sort of a necessary routine 'licence fee' to do normal business ... then there is a good question of why company X or person X is being picked upon, while every other Western company paying bribes is not being charged.

i-dog's picture

In "our" country it is called lobbying; in "their" country it is called bribery. In both countries it is the taxpayer that foots the bill for government corruption.

In this case, the Austrian printer will increase the price to the Syrian government to cover the bribes paid to 'connected' Syrian officials ... so, the Syrian taxpayer foots the bill. The Austrian government is only pursuing it because the kickbacks from Syria back to the Austrians had avoided income tax and/or weren't split with the right people.


GoldBricker's picture


No, it's the un-dead, and it's looking for brains. It already has the folks without brains firmly tied up.

booboo's picture

Wait until the Nigerian scammers get a hold of this article, it's chocked full of good material.

GoldBricker's picture

Dear Booboo,

Your name came to my attention as one person of most high integrity and soundest financial acumen. I represent the Central Bank of Nigeria and I am writing to you to ask your help for a most unusual problem, too many US dollars and no place to keep them. Being a most financially-sophisticated individual, I am sure that you have heard about 'bail-outs' and 'quantitive easing', and you ask yourself "where did all this money go?". Now you know. Some of it came to the Central Bank of Nigeria and we need safe places to store it.

In return for allowing us to keep 10 MILLION US dollars in your bank account, we are prepared to pay you 10% of the total, or 1 MILLION dollars. In order to transfer the money, we need only the account details specified on the form below. As soon as we receive this information we will transfer the funds. Also please kindly include US$50 for the transfer tax, which we would gladly pay but must be paid by the recipient of the funds (this will be YOU, my esteemed Booboo) under Nigerian law.

We look forward to this mutually-advantageous relationship.

Most cordial regards,

Iwanna Momunni

Transfer Agent

Nigerian Central Bank

The Navigator's picture

Sorry I could only green-arrow click you once - otherwise I would have hit it 100 x.


bank guy in Brussels's picture

As the old saying goes:

In some countries the bribery is under the table

In other countries the bribery is above the table

In yet other countries the bribery includes the table.

SillySalesmanQuestion's picture

National Lampoon's Vacation: WALL ST. GOES TO EUROPE

Bansters-in-my- feces's picture

Blow Jobs all round.....

Hail the Banker........

rocker's picture

Rumors all over. What 'they say' is Lord Blankfein's Boy is now in charge of Italy. The tentacle spreads it's disease.

They say, Lloyd Demands that the ECB prints just like Hanker Paulson and on my Knee Kashkari said the Bernanke must do.

They say, if they don't Lord Blackass will take Germany down.  Do the Germans really like U.S.A. policy?  Hmmmm.

Will they eat the squid fried or be fried?    Hmmmm.