(Bloomberg) -- The administrator of Rene Benko’s bankrupt luxury property unit is asking former supervisory board members to acknowledge their role in causing at least €1 billion ($1.03 billion) of alleged damages by failing to practice proper oversight.
Law firm Abel Rechtsanwälte GmbH claims board members of Signa Prime Selection AG, including former Austrian Chancellor Alfred Gusenbauer, had ignored that the group was materially insolvent by March 2022 — if not earlier, according to a letter seen by Bloomberg. They also signed off on improper loans between Signa companies, the bankruptcy advisors say.
One such transaction related to managers lending on €463 million of proceeds from a capital increase intended to fund the purchase of London’s Selfridges department store.
A legal representative for former Supervisory Board Chair Gusenbauer said the administrator’s request lacked justification. A spokesman for Abel declined to comment. The News magazine first reported the letter.
Signa Prime filed for insolvency at the end of 2023 due to a cash crunch spurred by tumbling valuations and rising interest rates. It held stakes in some of Europe’s most prominent landmarks, including Berlin’s KaDeWe and the Hotel Bauer in Venice.
Creditors, prosecutors and the insolvency administrator have sought legal options to recoup money and clarify one of the largest insolvencies in Austria’s history. Benko, who denies wrongdoing, has been interrogated by officials as part of a separate fraud probe.
There “was clearly no suitable controlling and no suitable financial planning,” the administrators wrote in the letter dated Dec. 20. The deteriorating financial condition and billions of euros of internal loans should have been a “a warning signal for any prudent Supervisory Board member.”
Abel alleges Signa’s financial planning took the form of rudimentary Excel models, which “in no way” met the requirements for a large company.
The transfer of funds between units of the sprawling real estate empire, of which Signa Prime was just one, has been a major point of contention, and may have helped mask the extent of financial difficulties.
Bondholders of another unit, Signa Development Selection, filed a complaint to the public prosecutor’s office in Vienna last year, arguing that hundreds of millions of funds transferred to other Signa units had damaged them and the company, Bloomberg previously reported.
Another transfer between Signa entities included a total of €252 million in loans by Signa Prime to a subsidiary of its largest shareholder Signa Holding in 2023, according to the letter.
Signa Holding’s insolvency administrator is reviewing several transactions and has previously disputed intercompany loans, a spokesman for that unit said by email.
Abel asked supervisory board members to respond by Jan. 20.
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