Bawag seeks € 350 mln in damages from a former banker

Analysis

Bawag PSK Bank, the Austrian bank linked to the bankruptcy of Refco Inc., is seeking € 350 million ($447 million) in damages from a former banker who allegedly lost money on bad investments six years ago. Bawag initiated claims in an Austrian court on July 28 against Wolfgang Flottl, son of the bank's former CEO, Bawag's Vienna-based spokesman Thomas Heimhofer said yesterday in an interview.
Bawag, owned by the Austrian Trade Union Federation, agreed to pay Refco creditors at least $683 million earlier this year for its role in the bankruptcy of Refco, the defunct futures broker. Refco creditors accused Bawag of aiding in the fraud that led to its collapse. The Austrian government has pledged € 900 million to keep Bawag solvent until it can find a buyer for its assets. The bank has „well documented” evidence that Flottl lost Bawag's money by betting the wrong way on Japanese interest-rate swaps in 2000, according to Bawag's current CEO, Ewald Nowotny. Flottl said in May that he has repaid „a lot” of money to Bawag even though money managers don't necessarily have to repay clients when their investments lose value. Flottl couldn't be reached immediately for comment yesterday at his office at Ross Capital in New York. (Bloomberg)

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