Hedge fund manager Wolfgang Flöttl and eight others are set to learn their fate tomorrow in the case of Austrian bank BAWAG, which found itself in the news after being caught up in the Refco scandal three years ago.
A court in Vienna is set to hand down verdicts on charges of breach of trust, false accounting and fraud for their role in the derivatives trades that resulted in BAWAG losing more than US$2 billion, after a trial of nearly a year. If convicted, Flöttl, former bank CEO Helmut Elsner, a former trade union finance chief, a KPMG auditor and their co-defendants face as much as 10 years in prison.
“Flöttl’s pockets were stuffed with money and he was sent to the casino,” prosecutor Georg Krakow said of the former Ross Capital Markets manager, who is also the son of a former BAWAG president. “He came back, his pockets turned inside out and said, ‘I’ve lost it all.’ Thereupon, they reached into the treasure chest, stuffed his pockets again and sent him back to the casino.”
Elsner and the other former BAWAG executives say that Flöttl was a rogue trader, ignoring the bank’s investment rules. Flöttl charges that under his deal with the bank, he was free to invest the money however he saw fit. He also says he warned Elsner about the risks involved.
BAWAG was bought by private equity firm Cerberus Capital Management in late 2006.