Ex-BayernLB executives settle Hypo Alpe Adria court case

Four former executives at BayernLB have reached a settlement over criminal charges of breach of trust relating to the German Landesbank's botched purchase of Austrian bank Hypo Alpe Adria on the eve of the financial crisis.

The men had been on trial in Munich since January over charges they paid too much for a majority stake in the Austrian lender in 2007, leading to billions in losses for the Bavarian state-backed bank. Hypo Alpe Adria was nationalised and sold to the Austrian government in 2009 for one euro.

The Munich court said on Tuesday that there had been insufficient evidence in the trial so far to prove the guilt of the four accused men, and that the agreed settlement was in the public interest.

The largest payment, of €20,000, will be paid by Michael Kemmer, now general manager of Germany's association of private banks and BayernLB's chief executive from 2008 to 2009. Theo Harnischmacher, a former board member, will pay €15,000, while Ralph Schmidt and Stefan Ropers will each pay €5,000.

Two other former board members, however, remain on trial in Munich. Werner Karl Schmidt, chief executive of BayernLB in 2007 when the bank made its decision to buy Hypo Alpe Adria and Rudolf Hanisch, a former board member, have been accused, among other charges, of bribing Austrian politician Jorg Haider, now deceased, to smooth the takeover of the Austrian bank. All six board members have denied the charges against them.

Such settlements, which do not assume the guilt or innocence of the accused and lead to no criminal record, are common in Germany. Earlier this month, Bernie Ecclestone, head of Formula One, settled with the same court in Munich for a record $100m over charges of bribery. Mr Ecclestone had denied the charges against him.

BayernLB's former chief risk officer, Gerhard Gribkowsky, was jailed for more than eight years in 2012 over charges of corruption after admitting taking bribes from Mr Ecclestone.

The court's decision was controversial in Germany, with opinion pieces in local media arguing that large cash settlements tarnished the country's legal system. An opinion piece in the Frankfurter Allgemeine newspaper said that while the settlement with Mr Ecclestone had been "dizzyingly high" the settlements with the BayernLB executives were "laughably low".

Lawyers have argued that the option of a settlement payment, which is only allowed in less serious criminal cases and must be deemed to be in the public interest, is more efficient.

The court case is not the only hangover for BayernLB relating to its Austrian purchase. The lender is still trying to claw back more than €2bn of loans and investment it made into Hypo Alpe Adria and is locked in a legal dispute with the Austrian government over the money.

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