Former German bank boss charged with market manipulation

5th July 2009, Comments 0 comments

Stefan Ortseifen, who ran the stricken bank from 2004 until he resigned in 2007, was accused of hiding the extent of his bank's exposure to the subprime mortgage market in the United States in a bid to bump up IKB's share price.

Berlin -- German prosecutors last week charged the former head of IKB bank, an early casualty of the financial crisis, with manipulating the market by publishing misleading statements.

Stefan Ortseifen, who ran the stricken bank from 2004 until he resigned in 2007, was accused of hiding the extent of his bank's exposure to the subprime mortgage market in the United States in a bid to bump up IKB's share price.

"The accused is charged with publishing a press release on July 20, 2007 in which the economic impact on the bank of the international financial market crisis was misleadingly portrayed too positively," prosecutors in the western city of Düsseldorf said.

The statement added: "The accused therefore induced investors to continue buying several IKB shares, thus temporarily supporting the share price."

Only a week after the falsely bullish statement, the bank was facing insolvency as its true exposure to the subprime debacle in the United States became apparent.

Ortseifen was also charged with four counts of breach of trust over a house provided for him by the bank. In addition, he charged an expensive speaker system to the bank without permission.

IKB bank was the first German casualty of the international financial meltdown and was saved from collapse by a several-billion-euro (dollar) injection of cash from the state.

The bank was sold last year to US-based investment fund Lone Star.

AFP/Expatica

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