Wolfgang Kulterer, a former chief of Hypo Alpe-Adria-Bank International AG, was sentenced to one more year in an Austrian jail, the third prison sentence he received for his role in the bank’s near-failure.
Kulterer, 60, was found guilty of breach of trust and false accounting by the court in southern Austrian Klagenfurt, judge Christian Liebhauser-Karl said today at the end of a three-month trial. Kulterer and two other former executives misrepresented about 100 million euros ($137 million) in preference shares as regulatory capital in 2006 and 2007 while making secret side agreements that allowed investors to return the shares at any time, the judge found.
“The jury had no doubts about the fact that those put-options were detrimental,” Liebhauser-Karl said. “They undid the capacity of the shares to be counted as own capital.”
More than four years after Hypo Alpe’s nationalization, the verdict comes at a time of rising public anger over the costs the failed lender has caused. Taxpayers have spent 4.8 billion euros, mostly to cover losses from soured loans in Austria and the former Yugoslavia, and the bank forecasts 4 billion euros more to come.
The preference shares at the center of the proceedings are also the basis for a civil lawsuit brought by Hypo Alpe’s former owner Bayerische Landesbank that is pending in Vienna’s Commercial Court. BayernLB has sued one of the previous holders, arguing it was duped into the 1.6 billion-euro purchase because the side-letters to the preference shares weren’t disclosed.
Josef Kircher, an executive at the Hypo Alpe leasing unit that had sold the preference shares, was also found guilty and sentenced to three years in jail. He had pleaded guilty and testified against the other accused. Siegfried Grigg, Kulterer’s successor as CEO, received a 3 1/2 year sentence. He had pleaded not guilty. The case against Tilo Berlin, Grigg’s successor, will continue separately because of illness.
The three didn’t immediately react to the verdict. They have three days to challenge it.
Kulterer had filed a hand-written confession sent to the judge without consulting his lawyers in January, admitting that he knew the put options were “a serious problem” and that he kept them secret because the bank urgently needed the capital, his lawyer, Ferdinand Lanker, said.
Kulterer has already been sentenced to 5 1/2 years in prison in two previous cases of breach of trust. One of them involved an earlier amount of preference shares that were also misrepresented as core capital. He hasn’t commenced the jail sentences yet.