The House of Kurz scandal, explained

Last week, Austrian Chancellor Sebastian Kurz disclosed that prosecutors were investigating whether he committed perjury when giving testimony in 2020 to a parliamentary committee investigating corruption. If charged, which many legal observers believe is likely, Kurz — who denies the allegations — would be the first chancellor to face criminal prosecution.

So far, Kurz and his supporters have aggressively pushed back on suggestions that he should agree to resign if indicted. In fact, Kurz’s public defense has been practically Trumpian. According to Kurz’s narrative, his political enemies will stop at nothing to get him. 

“The goal behind it all is: ‘Kurz must go,’” the chancellor told a prime time audience on Austrian public television last week. In his vigorous defense of his actions, Kurz came about as close to characterizing the affair as a witch hunt as one can get without actually saying the words. He and his party also haven’t shied away from questioning the integrity of the prosecutors behind the investigations either, suggesting to reporters behind closed doors that the authorities were driven by political bias. 

Kurz’s handling of the affair has heightened fears, both in Austria and beyond, that the media-savvy chancellor, who came to power promising a “new style” of politics, is morphing into an Alpine version of Viktor Orbán, the liberal-turned-populist leader of Hungary who has put his country on a decidedly authoritarian path. (The two are friends and Kurz opposed expelling Orbán’s Fidesz party from the center-right European People’s Party earlier this year.)

Such a turn would be a major blow to the EU, which is already struggling to defend democratic principles across much of Central Europe. 

The events of the coming months — in particular the outcome of the criminal investigation into Kurz — should offer some clarity on the resilience of Austria’s 65-year-old democracy. 

Like most political scandals, the web of accusation and suspicion swirling around Kurz and his inner circle is complicated; distinguishing fact from supposition can be difficult. It’s not even clear whether that ultimate truism of political scandal — the cover-up is worse than the crime — applies here, in part because the alleged cover-up has been comically inept. 

Despite the plethora of unknowns, much has come to light, including a revealing series of text message exchanges between Kurz and members of his inner circle. 

To help navigate the nooks and crannies in the House of Kurz, we’ve put together a guide on the basics of the scandal, who’s involved and what’s at stake. 

How it all began

The flurry of investigations involving Kurz and his close associates (so far, nine prominent members of his Austrian People’s Party — ÖVP — face criminal investigation) began with the “Ibiza” video.

Released in 2019, the now-infamous secret footage from a finca on the Spanish island brought down Kurz’s first government, a coalition with the far-right Freedom Party (FPÖ). The video showed Austria’s then-vice chancellor, ex-FPÖ leader Heinz-Christian Strache, in 2017 (before he took office), offering to exchange political influence for financial support to a young woman he believed to be the well-heeled niece of a Russian oligarch. Only portions of the footage, taken by hidden cameras during a lengthy, alcohol-fueled evening, have been released.

Who set Strache up and why has yet to be fully clarified. In addition to bringing down the government, the video triggered criminal investigations and a parliamentary inquiry into alleged corruption involving leading politicians. 

The casino connection 

Among the many shocking statements to emerge from Strache’s mouth during his stay at the finca was a claim that Novomatic, an international casino operator based in Austria, “pays everyone.” 

Strache’s assertion, which Novomatic denies, is at the center of Austrian authorities’ investigations into Kurz’s inner circle.

Prosecutors are investigating whether senior government officials, both from the Freedom Party and Kurz’s ÖVP, conspired with Novomatic executives to trade casino licenses for jobs and other favors.  

The main accusation involves a local FPÖ official named Peter Sidlo, who was installed as the chief financial officer of Casinos Austria just weeks before the Ibiza video emerged, despite a determination by a headhunter that he lacked the requisite experience and qualifications for the position.

At the time, Novomatic was a major shareholder in Casinos Austria alongside the Austrian state. Prosecutors are investigating whether Strache, then vice-chancellor, agreed to help Novomatic win additional gaming licenses in exchange for agreeing to Sidlo’s appointment. 

Both Strache and Sidlo say they did nothing illegal.

Authorities are investigating a number of other high-ranking current and former government officials as well as corporate executives in connection with the affair, including the current and former finance ministers, the chairman of one of Austria’s largest banks and the current head of Austria’s state holding company, known as ÖBAG, which manages a portfolio of corporate holdings worth more than €26 billion. All deny wrongdoing.

Who is investigating whom?

The main authority involved is the Prosecutor of Corporate Crime and Corruption, known by its German acronym WKStA. In parallel, a special investigatory committee in parliament has been holding hearings on the affair. It was during one of the committee’s hearings last year that Kurz is accused of lying. 

As often happens in such investigations, the original probe has taken the authorities in unexpected directions, triggering new allegations of wrongdoing, much of it involving Kurz’s closest associates.

Who are the key players in Kurz’s circle involved in the scandal?

Sebastian Kurz

Job: Austrian chancellor 

Age: 34

Party: Austrian People’s Party (ÖVP)

Allegation: Perjury. Authorities are investigating whether Kurz lied to a parliamentary inquiry last June. Kurz told the inquiry he and Thomas Schmid, a close associate who in 2018 was maneuvering to become the head of ÖBAG, the state holding company, hadn’t discussed the latter’s appointment before the job was advertised. Kurz also told the committee he wasn’t directly involved in selecting members of the board of ÖBAG. Text message exchanges between members of Kurz’s inner circle tell a different story. 

Memorable moment: In the run-up to Schmid’s appointment in 2019, Kurz messaged his friend not to worry: “You’re going to get everything you want. ???” 

Gernot Blümel 

Job: Austrian finance minister, Kurz’s best friend

Age: 40

Party: ÖVP

Allegations: Prosecutors suspect Blümel of participating in a bribery scheme involving Novomatic. In 2017, the company’s then CEO, Harald Neumann, contacted Blümel regarding a tax problem the company faced in Italy and asked to speak to Kurz, then foreign minister. In their correspondence, Neumann mentions a “donation.” Prosecutors believe Neumann may have been trying to win the government’s help in Italy with a donation to the ÖVP. Blümel and Neumann deny that any money changed hands or that the meeting with Kurz even took place. Both men say they are innocent of any wrongdoing. 

Memorable moment: When police raided Blümel’s private residence, they discovered that his laptop was missing. They later discovered that Blümel’s wife had taken it when she went for a walk with their baby before the police arrived. 

Godfather moment: In a text sent in 2018 to reassure Thomas Schmid about his prospects, Blümel wrote: “Don’t worry! You’re family ???” 

Thomas Schmid

Job: CEO of ÖBAG, Austrian state holding company 

Age: 45

Party: ÖVP

Previous job: Until 2019, general secretary in finance ministry, the No. 2 position

Allegations: Schmid is suspected of helping install Sidlo as CFO of Casinos Austria (see above). He has also faced scrutiny over his own appointment as ÖBAG head after it emerged that he helped edit the job ad and spent months during his time at the finance ministry working behind the scenes to make sure he won the position. 

Memorable moment: After Kurz texted Schmid saying he would get everything he wanted at ÖBAG, he replied: “I’m so happy :-))) I love my chancellor ? ? ? ????”