The Austrian Files - Novomatic and Neumann - Part 1

The following is a Summary of media matters related to potential involvement of Novomatic AG("Novomatic") and members of its (former) corporate bodies in criminal proceedings
- This memorandum contains a summary of certain aspects in relation to reported involvement ofNovomatic and members of its (former) bodies in criminal proceedings..
- This report neither constitutes legal advice nor a legal opinion nor is it meant to beexhaustive. It is drawn from media and online sources.
- All persons referred to in this report as being suspected of criminal offenses denythe allegations, and all such persons are presumed innocent until proven otherwise.

Executive Summary
• Since the publication of the "Ibiza video" in 2019, Novomatic has been at the centre ofextensive political and legal scrutiny in Austria. In the video, former Freedom Party ofAustria ("FPÖ") leader Heinz-Christian Strache suggested that the FPÖ receivedundeclared donations from entities including Novomatic, and implied regulatory favourssuch as issuing new gambling licenses.
• Following the scandal, a parliamentary inquiry committee was established to investigatean alleged political deal between the FPÖ and Novomatic surrounding the appointmentof Peter Sidlo as CFO of the Casinos Austria Group "CASAG". Testimony highlightedthe influence of Harald Neumann (then CEO of Novomatic) and the non-cooperation ofJohann Graf (founder of Novomatic). The committee concluded that there weresubstantial efforts to influence appointments at CASAG, revealing a dependencyrelationship between Novomatic and elements of the federal government.
• The Austrian Federal Public Prosecutor’s Office for White-Collar Crime and Corruption"WKStA" opened several investigations into suspected corruption, undue influence inregulatory processes, and potential deals with both the FPÖ and the Austrian People'sParty "ÖVP". Novomatic is alleged to have supported political appointments inexchange for favourable changes to Austria’s gaming laws. Though some proceedings—especially against Neumann—were later partially dropped, some investigationsremain ongoing (including investigations in relation to Novomatic and Neumann).Separate proceedings were launched in 2023 concerning potential tax evasion, focusedon monetary gifts made by Johann Graf, including EUR 1 million allegedly paid toNeumann in both 2018 and 2019. WKStA is currently examining whether approximatelyEUR 30 million of the EUR 130 million in gifts constituted undeclared compensation.
• Further, Novomatic’s financial ties to FPÖ-affiliated consulting firms and associationswere examined. While no criminal conduct was ultimately proven, the overlap betweenpolitical networks and Novomatic business partners, such as Polimedia GmbH,reinforced concerns over corporate influence in state affairs.
• Lastly, a business associate of Novomatic was acquitted in a related witness tamperingcase due to insufficient evidence of intent.
• Despite the lack of convictions, Novomatic’s involvement with Austria’s politicallandscape—particularly under Harald Neumann and with possible involvement ofJohann Graf—continue to face public and prosecutorial scrutiny.

Following the Ibizaaffair, proceedings were initiated concerning the appointment of Peter Sidlo to theManagement Board and the premature dismissal of two members of the ManagementBoard.

The "Ibiza affair"
(a) In May 2019, excerpts from the so-called "Ibiza video" became public. The video wassecretly recorded in Ibiza in 2017. It shows scenes from a meeting between Heinz-Christian Strache, then leader of the right-winged political party FPÖ (later vice chancellorof the Republic of Austria) on the one hand, and the alleged niece of aRussian oligarch on the other hand. On this tape, Heinz-Christian Strache inter aliaindicates that the FPÖ regularly receives (undeclared) donations by major Austrianentities, including Novomatic, and hints that new licenses for online gambling should beissued (which would benefit Novomatic at the expense of Casinos Austria AGs("CASAG") monopoly).
(b) The scandal, referred to as "Ibiza-affair", led to the dismissal of the Austrian FederalGovernment and general elections in autumn 2019.
(c) A summary of the Ibiza affair can be found on - Ibiza affair - Wikipedia and many otherlocations online.

Parliamentary inquiry committee(s)
(a) In January 2020, the Ibiza Inquiry Committee was established to investigate the allegeddeal between the FPÖ and Novomatic regarding the appointment of Peter Sidlo as CFOof CASAG (see below).
(b) While initially focused on Sidlo’s appointment, the scope expanded to include otherpotentially politically motivated appointments.
(c) Among other topics, the Ibiza Committee investigated on: -
(i) political influence over CASAG and its board appointments
(ii) Novomatic’s potential role in reshaping CASAG's leadership,
(iii) amendments to the Austrian Gaming Act, andd. Austrian Holding PLC's (an Austrian Government holding company) or "ÖBAG"internal restructuring.
(iv) A total of 105 witnesses were heard in 56 sessions, including Harald Neumann (formerCEO of Novomatic). Johann Graf (founder of Novomatic) was summoned but failed toappear twice, citing health reasons.
(v) On The committee’s final report (September 2021) concluded that there were "massiveefforts" by Heinz-Christian Strache to help Peter Sidlo being appointed as a CASAGboard member. He also clearly sees a dependency relationship between Novomatic andthe federal government with the motive of a joint approach to weaken the position of acompeting entity.

The criminal investigation in relation to Novomatic
Most criminal investigations with respect to Novomatic are led by The Austrian FederalPublic Prosecutor’s Office for White-Collar Crime and Corruption (WKStA).The following information is based on media reports and press statements made by thesuspects.
The investigations have focused on the relationship between FPÖ, ÖVP and Novomaticand centred on: -
a. suspected corruption and influence peddling involving Novomatic,
b. alleged breaches of fiduciary duty during Sidlo’s appointment, and
c. the premature termination of other executives to clear a path for Sidlo (includinghigh severance payments to the former corporate bodies).WKStA suspects a quid pro quo deal: Novomatic supported Sidlo's appointment,and in return it is alleged, the FPÖ would push for regulatory benefits forNovomatic, including future gaming licenses.

On 29 September 2020, the SPÖ filed another criminal complaint against GernotBlümel, Thomas Schmid, and Harald Neumann, alleging an "ÖVP Deal", wherebychanges to the gaming laws favourable to Novomatic were linked to the appointment ofBettina Glatz-Kremsner (ÖVP) as CEO of CASAG. Harald Neumann and Novomaticwere allegedly involved in coordinating with ÖBAG to prevent a competing entity fromsecuring control of CASAG’s board.

Press reports also reveal that in 2017, Novomatic contacted then-Minister Gernot Blümeland Sebastian Kurz about two matters: a possible donation, and a tax issue in Italyinvolving EUR 70 million. It is unclear whether they intervened, but a parliamentaryinquiry has been proposed in Italy.

In April 2023, the Vienna Regional Court concluded that the suspicion surrounding theFPÖ-Novomatic deal had been further substantiated based on new data. This includedcommunications from a tax advisor close to the FPÖ who allegedly sought amendmentsto the Gaming Act and supported Novomatic’s goal of obtaining an online license.

On 14 November 2024, WKStA announced the discontinuation of investigations againstHarald Neumann, Walther Rothensteiner, and Josef Pröll with regard to the allegationsof breach of trust in connection with high severance payments made in 2019 as part ofthe restructuring of the company’s executive board. According to the WKStA, the earlytermination of executive board contracts was carried out following legal consultation andwas considered factually justified and defensible. The prosecutor did not find sufficientevidence to support the claim that the decisions were politically motivated. Although theseverance payments were substantial, they were based on existing contracts that haddisadvantaged the company — contracts which could no longer be examined due to thestatute of limitations. While this represents a partial closure of the broader investigation, proceedings relating to allegations of bribery in connectionwith the appointment of Peter Sidlo as CFO remain ongoing.

Current status of the proceedings
(a) In January 2025, WKStA dropped additional cases involving prominent political figuresdue to insufficient personal criminal liability.
(b) Proceedings against Novomatic and Harald Neumann remain ongoing, intosuspicions that the group tried to influence public decision-making through targetedboard appointments.
(c) Proceedings against Neumann relating to the receipt of two EUR 1M payments received from Johann Graf are ongoing.

Acquittal in Witness Tampering Case Involving Novomatic Business Partner
(a) A business associate of Novomatic was acquitted of charges related to alleged witnesstampering. The accusation involved attempts to influence statements made by a keywitness connected to investigations stemming from the Ibiza scandal and its fallout.
(b) The court found that no sufficient evidence of criminal intent could be established. Whilethe prosecution had argued that the defendant, known to be close to Novomatic, hadtried to coordinate witness statements, the court ruled that the conduct did not meet thelegal threshold for criminal interference.

Final notes
(a) This Memorandum relates exclusively to facts and events publicly known as of the dateof this Memorandum.
(b) No access has been granted to the criminal files and it relies on media coverage.
(c) There has been no opportunity to verify whether such media reports are correct.

A pdf version of this report including footnotes and references is attached.

Memorandum attachment.pdf