Former chief risk officer Gerhard Gribkowsky and six other executives of Bayerische Landesbank are facing trial over a soured Hypo Alpe-Adria Bank International AG acquisition deal, said a Bloomberg report. According to the report, the executives stand trial for the €3.7 billion or $5.1 billion in losses incurred from the said deal. Trial prosecutors are claiming that BayernLB Bank overpaid the deal by €550 million when it acquired a majority stake in the Klagenfurt, Austria-based company in May 2007, the report said. Gribkowsky and others are charged with breach of trust, a recognized criminal offense in Germany for people who misuse money of other people.
In the trial, Gribkowsky reportedly said that the acquisition of Hypo Alpe-Adria was in line with the company's expansion strategy in the Euro Zone. He also added that with Hypo Alpe-Adria's operations in the eastern and southern parts of Europe would complement with MKB Bank, a Hungarian subsidiary of BayernLB. Gribkowsky stated that the breakdown of global financial markets was to blame for the soured deal.
The acquisition turned into a disaster for both parties, and for BayernLB particularly, when the losses resulted to BayernLB selling the unit to the Austrian government for a euro, Bloomberg said. Moreover, the downfall of Hypo Alpe-Adria caused €4.8 billion in taxpayer money for Austrians so far, with the European Union approving the wind-down program of the unit for another €6.4 billion.
Bloomberg noted that Gribkowsky is serving the remainder of his eight and a half-year sentence for accepting money over the auction of BayernLB's stake in Formula One from Bernie Ecclestone. Ecclestone is also awaitng trial for criminal bribery himself in April this year, of which Gribkowsky will be testifying.
The case against the former management of BayernLB Bank, said the news agency, would be the first time members of the management had been put to trial for paying more in an acquisition deal, prosecutors have said. Prosecutors stated that BayernLB Bank seemed eager to wrap the deal up, and failed to assess the risks involved nor included precautions in the acquisition agreement as they were under political pressure to acquire the Austrian lender.
