Jan. 9 (Bloomberg) -- Bank Medici AG, whose clients invested $3.2 billion in funds managed by Bernard Madoff, appointed a new management board after the Austrian regulator took control of the private bank last week.

John Holliwell will join the bank as chief executive officer, while Werner Tripolt was reappointed to the board, Medici said in a statement today. The company is 75 percent owned by Sonja Kohn, 60, who founded the firm in 1994 and will remain chairman.

Bank Medici, 25 percent owned by UniCredit SpA, is the European bank with the largest potential losses related to investments with arrested money manager Madoff, topping Spain’s Banco Santander SA, whose clients face losses of as much as $3.1 billion from the alleged fraud. Madoff, 70, was charged with running what he told his sons was a Ponzi scheme. Clients face losses that Madoff said were as high as $50 billion, according to the U.S. Securities and Exchange Commission.

Holliwell, 64, becomes CEO as the bank works on a new business model after three of its funds were hit by Madoff losses. Holliwell started his career at Barclays Plc and has 30 years of banking experience, Medici said. He is the author of “The Financial Risk Manual,” which was published in 1997. He was a business-center manager at Barclays, according to the book’s dust cover, and also was a director of merchant bankers Henry Ansbacher & Co. and the managing director of Smith & Williamson Consultancy Ltd.

Tripolt, 43, was reappointed to the management board after resigning on Jan. 2. He had been on the board for a year.

New Business Plan

“The new management will together with the supervisory board work on a new business plan and present it in the next few weeks,” Johann Farnleitner, a member of the supervisory board since 2004, said in a telephone interview from Vienna.

Investing in funds run by Madoff never had been the long- term business plan for the bank, said Farnleitner, 69, adding that “a private bank has to do more than manage funds.” Plans for broadening Medici’s business, which had been started under the previous management, would now be expanded, he said.

Austria’s Financial Markets Authority, or FMA, on Jan. 2 assigned state supervisor Gerhard Altenberger to the bank to “safeguard the interests of creditors and the company’s assets,” after the bank’s two-member board resigned. Besides Tripolt, this included Peter Scheithauer, 53, who resigned as Medici’s CEO four months after joining the bank.

The appointment of the new board weakens the need for the state supervisor, Farnleitner said. FMA spokesman Klaus Grubelnik declined to comment on the effect the appointment of the board would have on the position of the state supervisor.

Herald Funds

“Mr. Altenberger is monitoring the situation at Bank Medici and will then report to the FMA,” Grubelnik said.

Bank Medici said on Dec. 16 that its Herald USA Segregated Portfolio One and Herald (Lux) US Absolute Return funds invested all of their $2.1 billion with Madoff. The bank also took over managing a third fund, the Dublin-based Thema Fund, at the end of 2006, according to a regulatory filing. Medici still manages Thema, two people with direct knowledge of the matter said. They declined to be identified as they aren’t authorized to give the information.

The Thema Fund had $1.1 billion of assets as of Nov. 28, according to data compiled by Bloomberg. It suspended redemptions on Dec. 14 after Madoff’s assets were frozen by court order.

Bank Medici had net income of 541,000 euros ($740,000) in 2007, and said on Sept. 29 it had $4 billion of assets under management.

To contact the reporters on this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net; Matthias Wabl at mwabl@bloomberg.net.

Last Updated: January 9, 2009 11:01 EST