German regional bank sues former directors

28th June 2011, Comments 0 comments

State-owned regional German bank BayernLB said Tuesday it is suing former board members for damages over its disastrous 2007 purchase of a majority stake in Austrian lender Hypo Group Alpe Adria (HGAA).

A source at the Bavarian lender told AFP that the bank would file suit against eight former directors this week, seeking damages of around 200 million euros ($285 million).

Real estate lender HGAA, Austria's sixth-largest bank, came close to collapse during the global financial crisis and had to be nationalised in late 2009 in order to prevent a potentially disastrous domino effect in the region.

The episode cost BayernLB 3.7 billion euros and was a major contributor to the bank having to be bailed out itself with billions of euros in German taxpayers' money.

German public prosecutors are already investigating former managers for alleged abuse of trust over the acquisition.

HGAA, which was hit hard after loans went bad in the Balkans, has also been plagued by scandals in recent years, with Austrian authorities probing it for conspiracy, fraud, embezzlement, money laundering and false accounting.

Flamboyant Austrian far-right leader Joerg Haider, who died in a drink-driving accident in 2008, was also suspected of having received illegal payments as part of BayernLB's takeover.

A former BayernLB director, Gerhard Gribkowsky, was also arrested in January on suspicion of pocketing tens of millions in illegal payments from a 2005 deal that shook up the ownership of Formula One.

© 2011 AFP

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