Ex-Hypo Alpe CEO Kulterer Faces Charges in Austria Over Misuse of Funds

Hypo Alpe-Adria Bank International AG’s former Chief Executive OfficerWolfgang Kulterer was charged by state prosecutors with misuse of funds in a case that may not be the last one against the banker.

The charge is linked to a 2 million-euro ($2.8 million) loan to Styrian Airways AG, a carrier which later went bankrupt, said Helmut Jamnig, spokesman for the Klagenfurt prosecutors’ office. It’s the result of a wider probe into Kulterer’s tenure and prosecutors are still pursuing “numerous further significant allegations”, Jamnig said in a statement. Kulterer was arrested over the charges on Aug. 13 and remains in custody.

Austria nationalized Hypo Alpe last year to avert the bank’s collapse after bad debts in the Balkans piled up. Kulterer had presided over Hypo’s expansion in the former Yugoslavia, which saw assets grow to more than 30 billion euros in 2006 when he stepped down as CEO and became a non-executive chairman. In 2008, Kulterer pleaded guilty to charges of false accounting at Hypo and was fined 140,000 euros.

Kulterer is also being charged with false testimony to an enquiry commission in Austria’s Province of Carinthia, Jamnig said in the statement. Two others are also being charged with misuse of funds, he said, declining to identify the others.

Kulterer rejects the allegations against him, his lawyer Dieter Boehmdorfer said in a phone interview today.

In his role at the bank, Kulterer had reported to the late Carinthian Governor Joerg Haider.

The province owned a majority stake in Hypo Alpe until it sold shares to Bayerische Landesbank in 2007. The investment in Hypo led to writedowns at BayernLB of about 3.7 billion euros. Prosecutors in Germany are investigating allegations that former managers at the banks including Kulterer may have duped the Bavarian bank into the purchase of its stake. Kulterer has previously denied wrongdoing concerning the BayernLB transaction.

To contact the reporter on this story: Boris Groendahl in Vienna bgroendahl@bloomberg.net Zoe Schneeweiss at zschneeweiss@bloomberg.net.

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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