UPDATE 1-Constantia says acquisition talks with Hauck failed

* Talks failed over legal risks at bailed-out bank

* Three new bidders will begin acquisition talks

(Adds detail, background)

By Alexandra Schwarz and Alexander Huebner

VIENNA/FRANKFURT, Oct 7 (Reuters) - Talks to sell Austria's stricken Constantia Privatbank to German private bank Hauck & Aufhaeuser have failed over potential legal risks, Constantia board member Friedrich Racher told Reuters on Wednesday.

The bank, which was bailed out by Austria's top five banks a year ago, will now begin talks with three other bidders, which were put on ice once Hauck became the exclusive bidder last month. Those three bidders are from Austria and abroad, Racher said.

"The talks (with Hauck) could not come to a conclusion because the evaluation of the legal risks was not possible in due course, and therefore the talks have been ended," Racher said over the phone from Vienna.

Formerly family-owned Constantia, which has a large business as custodian for investment funds, ran into a liquidity squeeze last year when clients became worried over problems at affiliated real estate groups Immofinanz (IMFI.VI) and Immoeast IMEA.VI.

The bank's links to Immofinanz and Immoeast are also part of the problems that scuppered the sale to Hauck.

Immofinanz' Chief Executive Eduard Zehetner has said that the previous management had done serious material damage to the company.

While the plan for the sale was to carve out a "bad bank" that would take on all the risks linked to Immofinanz and other past activities, Hauck continued to have doubts about whether this separation would leave the buyer of the "good bank" safe, Racher said.

"The issue was what how material the risks and potential lawsuits would be," he said. "The (bidder's) fundamental concern that 'there is something' prevailed in the end."

"Because of this experience we will talk with the remaining bidders about this legal issue first, before going into details and due diligence," he said.

Constantia's owners are UniCredit's (CRDI.MI) Bank Austria, Erste Group Bank (ERST.VI), Raiffeisen Zentralbank [RZB.UL], Oesterreichische Volksbanken (OTVVp.VI) and BAWAG P.S.K.

Hauck & Aufhaeuser, like Constantia, is focused on wealthy individuals and has an expanding capital markets arm. It already acquired brokerage Cazenove and a Swiss ethical investment specialist this year. (Writing by Boris Groendahl; editing by Elaine Hardcastle and Karen Foster)