July 1 (Bloomberg) -- IKB Deutsche Industriebank AG’s former Chief Executive Officer Stefan Ortseifen was charged by German prosecutors with manipulating share prices before the near collapse of the lender in 2007.

Ortseifen “consciously in a misleading fashion” downplayed the likely impact of the looming international crisis on the bank in a press release on July 20, 2007, the Dusseldorf Prosecutors’ Office said in a statement distributed by OTS newswire today. It was “too positive” and caused investors to buy the stock, supporting the share price, prosecutors claim.

A week after the press release was issued, in the name of IKB’s management board, the bank was close to insolvency and the share price fell on July 30, 2007.

IKB, the first German casualty of the subprime crisis, asked prosecutors in August 2007 to review whether there may have been irregularities regarding investments in the U.S. subprime mortgage market. IKB was bailed out by KfW Group and German banking associations that year after a finance affiliate, Rhineland Funding, couldn’t sell commercial paper.

Rainer Hamm, Ortseifen’s attorney, didn’t immediately reply to an e-mail seeking comment.

Ortseifen also faces breach of trust charges relating to the construction of a house that was rented to him by the bank.

Prosecutors decided not to charge Ortseifen or other former management board managers for breach of trust concerning investments in subprime markets

“Their decision to invest in these markets was led by the high profits they made for many years here and they didn’t think the risks were fatal,” the office said. “They may have acted negligently in that respect, but that is not a crime.”

To contact the reporters on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net;

Last Updated: July 1, 2009 12:03 EDT