Nine charged for “consciously gambling away” Austrian bank

Issues

Eight former executives of Austria's BAWAG bank and a US-based investment banker were charged Monday with the misappropriation of funds through negligence and the falsification of bank balances to cover up losses of more than €1.4 million.

The charges came at the start of the trial that centers around the biggest banking scandal in the alpine republic's history, in which losses led to the near collapse of the union-owned BAWAG, Austria's fourth largest bank. Prosecutor Georg Krakow stressed that all nine defendants were responsible for the losses of more than €1.44 billion ($1.99 billion). They had “consciously gambled away” the bank in “illegal speculation deals,” he told the Vienna court. The “speculators who brought about one of the largest losses in banking deals worldwide” had repeatedly misappropriated bank funds by knowingly abusing their competencies, the prosecutor said.

In October 2005 BAWAG approved a $430 million credit to New York commodities brokerage Refco, only hours before it filed for bankruptcy. The bank was further implicated by a lawsuit demanding damages for the Refco collapse. In March 2006 reports revealed that between 1995 and 1999, BAWAG had lost €1.44 billion in speculative investment deals in the Caribbean, masterminded by Wolfgang Floettl, a US-based investment banker and the son of a former BAWAG CEO. Austria had to save the bank from collapse with a €900 million bail-out. BAWAG was sold to US private equity firm Cerberus Capital Management in December 2006 for €3.2 billion.

Main defendant is former BAWAG CEO Helmut Elsner. The 72-year-old is regarded as the key figure in case that also saw the problems experienced by BAWAG, endanger Austria's trade union federation, which had pawned its strike funds to cover the bank's losses. Elsner was the “head of a group that almost ruined BAWAG” and had instigated the speculation deals and later attempts to hide losses, Krakow told the court. All of the defendants pleaded not guilty. “The BAWAG management may have gone to the limits of the banking laws, but did not overstep the rules,” Elsner's lawyer Wolfgang Schubert said in a statement to the court. Elsner's legal counsel criticized the “manhunt” against his client, expressing fears that there would be no fair trial. Austrian media reported extensively about the case.

Court proceedings, chaired by Judge Claudia Banidon-Ortner started at 9.15 a.m. The trial is expected to last until October 31, with sessions every week, Monday to Thursday. More than 50 witnesses, among them prominent Austrian politicians and business figures will be heard. If found guilty, the defendants face sentences of up to 10 years in prison. (eux.tv)

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