All systems fail at some point

Mattersburg Affair: The Spectacular Failure of the Oversight System


As reported in detail, the founder, main shareholder and long-time CEO of CMB is suspected of having falsified the bank books over a period of ten years (possibly even longer). With the help of at least one co-accused colleague, Pucher is said to have granted millions of euros in loans to people whose names and addresses he had obtained from publicly accessible databases. At the same time, he is said to have forged CMB balances with other banks in the amount of last 420 million euros.


Pucher has admitted the falsifications to the Corruption Prosecutor (WKStA), which has so far refrained from pre-trial detention. This is probably due to the fact that the banker and president of SV Mattersburg a. D. is cooperative and is also in poor health. It is also questionable whether he will be able to be questioned or even negotiated after two strokes (he still managed the bank until the end). Pucher does not currently answer any media inquiries himself; he is represented by lawyer Norbert Wess.


Martin Pucher leaves a heap of rubble. Mattersburger Bank, which was part of the Raiffeisen sector until 1995, is now insolvent. Measured against the size of the CBM, the over-indebtedness is a ludicrous 528 million euros; Deposit insurance (ultimately the banking sector) will fully compensate many, but by no means all, customers. In addition to the criminal investigations, civil lawsuits are rolling in: Several lawyers are already taking a position; On the one hand they want to hold the auditing firm TPA accountable, on the other hand the Republic of Austria. It is evident that the supervisory system failed miserably in the Mattersburg case and, on top of that, two public prosecutor's investigations against Pucher fizzled out in 2015/2016.


What did TPA know? The consulting company, which was founded in 1979 and now operates internationally, has been involved in the CBM's final audit since 2006 and awarded the annual financial statements with impressive regularity, most recently for the 2018 financial year distributed to customers in a "preliminary" version) shortly before completion. The auditor is said to have explained to the auditors of the Oesterreichische Nationalbank who had come for the audit that “only little things were missing”. In response to a profile request, TPA stated that the auditor's report had not been issued in 2019 simply because of the "slow or lack of handover of audit-relevant documents".


For years, TPA has certified business nonsense - there is no other way of assessing the Commerzialbank's balance sheet structure. The data sets and documents made available by Pucher may have been grossly falsified in some cases, but even the published annual financial statements do not give a consistent picture. Neither the 2008/2009 financial crisis, nor the subsequent economic upheavals, and certainly not the zero and negative interest rate phase from 2016 onwards, could affect the CMB; the results page in particular developed unreally well. For the Commerzialbank as a pure retailer, one parameter was very decisive: the so-called net interest income, i.e. the difference between the interest it paid its depositors (interest expense) and the interest it received from borrowers and other banks (interest income). Pucher's net interest income was a phenomenon: year after year, the CBM recorded only slightly fluctuating, but tending to increase in values. In 2007 the bank reported a net interest result of 10.56 million euros, in 2008 it was 11.64 million euros, in 2009 it was 10.99 million euros. As of 2012, the annual result has settled at between 15 and 17 million euros.


The auditors could / should have noticed, for example, that the bank was generating constant interest income even after the ECB introduced the zero interest rate phase in March 2016, although the reported credit volume shrank by 11.5 percent by the end of 2019, i.e. the income base was steadily decreasing ( the bank had no significant securities book, so it was dependent on this income). While the so-called claims on customers fell, the (fictitious) deposits at other banks swelled more and more. This interest income would certainly not have been obtained there.


Conversely, the TPA auditors should have noticed that the expense side was mathematically broader during this period because the deposits of customers (and other banks) swelled by 15.7 percent. That was because the CMB promised very high interest rates; Selected customers are said to have received 1.5 percent per annum on daily deposits. Nevertheless, between 2016 and 2019, CBM recorded stable, even slightly lower interest expenses. Did the TPA auditors never have any doubts about the consistency of the business model? TPA did not want to comment on this with reference to "statutory confidentiality obligations".


As already mentioned, TPA checked the bank books from 2006 onwards. But in a way, the Mattersburg advisory mandate had already been in the family before that. Before the changing TPA partners (as reported, the FMA had banned two of them from bank audits for five years each), the CBM auditor had been called Gerhard Nidetzky for ten years - and he was a founder of the TPA. "As far as I can remember, I audited the bank from the time it was founded in 1995 until I retired," said Nidetzky in response to a profile request. "However, I have been retired for twelve years and can therefore not contribute much to the matter."


This branch of history leads back to the 1990s and suggests a connection to the Burgenland provincial government chaired by SPÖ governor Karl Stix (who died in 2003).


What did the country know? Burgenland's incumbent SPÖ state chief Hans Peter Doskozil has so far rejected any responsibility for the debacle. There is also nothing to suggest that incumbent or former members of the state government are involved in the case. The country itself had no credit with the CBM, economically it was only linked to the Mattersburg football academy. But there is also a sensitive point of contact: the CBM was until recently under the influence of a cooperative, a relic from the Raiffeisen days. This legal entity, a pure shareholding administration, was subject to the revision of the Province of Burgenland from 1994 onwards, but the provincial government under Stix had initially outsourced this audit activity to the SPÖ-related tax advisor Gerhard Nidetzky. In 2007 this mandate was also transferred to TPA. So Nidetzky and TPA examined both the bank and its main shareholder over the years - in retrospect probably not the smartest constellation.


The fact that the country had to slip into the role of auditor at all is due to the circumstances that led to Pucher's independence in 1995.


In 1994, Pucher, then head of Raiffeisenbank Schattendorf, quarreled with Raiffeisenlandesbank Burgenland and denied its auditors mandatory access to his books. Today this could also be taken as an indication that something was wrong back then. Because the Raiffeisenbank could not remain unchecked, the country stepped in - and mandated Nidetzky, who from then on audited both the cooperative and the associated bank-stock corporation before TPA took over the job in 2006/2007.


On July 26, 1995, the Raiffeisenlandesbank Burgenland reported in a broadcast that the RB Schattendorf in the Mattersburg district had been excluded from the sector "for refusing legal revision", thus forfeiting the right to use the name and the gable cross logo. At the time, Pucher publicly stated that he had already prepared the exit from the sector together with his members of the cooperative. In the fall of 1995, the “Commerzbank Mattersburg” was created, although the name later had to be changed to “Commerzialbank” (the German Commerzbank is said to have disagreed with a twin name in Burgenland).


The auditing of banks was by the way not a core business of TPA, at least not in Austria. In the online “transparency reports” of the advisory group, a single reference customer from the banking sector is cited for the period from 2015 to 2019: Commerzialbank Mattersburg.


What did the OeNB know? A lack of expertise should not be denied by the National Bank's “individual institution supervision” with around 160 employees. Some carry out on-site inspections ("Onsite"), others carry out analyzes ("Offsite"). But here too: human error everywhere you look.


As it now turns out, the first indications of irregularities in Mattersburg were much more specific than previously assumed. As reported by profil last week, the Financial Market Authority and the WKStA received an anonymous tip in June 2015. The FMA informed the National Bank's experts, who were examining the Commerzialbank's books at the time. According to the whistleblower, the bank had a loan portfolio worth around 50 million euros at the time, which was managed exclusively by Pucher and two colleagues. The borrowers are said to have been recognizable in the bank's system by the fact that either their first or last name was written in capital letters. And: In contrast to conventional loans, the respective credit numbers did not start with the usual branch identifier, but consistently with the code "58".


In 2015, the OeNB auditors were unable to verify these allegations with the means at their disposal. According to profile research, these "board-managed" loans could not be found in the bank's system. Pucher and his colleague had special IT administrator rights. As a “super user”, you could create, change and delete credit files that no one else had access to. Individual loan cases are said to have only been kept in hand files.


Where are the millions? Martin Pucher collected money from bona fide private individuals, companies, communities and institutions and paid generous interest that he could not possibly recover from ongoing business. There are some indications that, in the absence of alternatives, he paid the interest from his customers' deposits - the core of every pyramid game. In fact, the CBM is seldom or never been profitable. Consequently, the fictitious profits were not distributed, they remained in the bank as fictitious reserves.


Regardless of this, another trail leads to SV Mattersburg, of which the CBM was the main sponsor. The operation of the football club must have cost a lot more money than the bank was able to generate from its own resources. Apparently, money from unsuspecting customers was also fed in here.


According to profil research, investigators assume that around 250 million euros have been diverted from the bank in the past ten years by way of conspicuous "cashier's checks".
Did Pucher also divert money? Pucher's lawyer Norbert Wess denies this. The process of coming to terms with the Mattersburg affair is just beginning.

 

We mistakenly moved Mattersburg to Mittelburgenland in the previous week's print edition. In fact, according to the consensus of our readers (thanks for that!), It is in Northern Burgenland.