VIENNA Feb 27 Three former managers of troubled Austrian lender Hypo Alpe Adria were sentenced to jail on Thursday for hiding facts about the bank's capital position.
A judge in the Carinthian provincial capital Klagenfurt found the three guilty of breach of trust for concealing the existence of put options on preference shares the bank sold to boost its capital in 2006, a court spokeswoman said.
The ruling could help Germany's BayernLB, which claims it was duped into buying the now-nationalised Hypo for 1.7 billion euros ($2.3 billion) from Carinthia and private investors in 2007.
Put options are contracts that give the right to sell securities at a specific price in the future, and had the bank's buyers known that the holders of the preference shares could get back their money on demand, they would have realised that Hypo's capital position was weaker than it looked.
Former Chief Executive Wolfgang Kulterer, who had confessed to abusing his authority by concealing the existence of the options, was sentenced to an extra year in jail on top of five-and-a-half years he has received for other crimes.
Two other former managers, Josef Kircher and Siegfried Grigg, were sentenced to three years and three-and-a-half years respectively.
More than four years after the nationalisation of loss-making Hypo, Austria is still trying to decide whether to create a "bad bank" for the lender's toxic assets, bail in creditors or allow it to go bankrupt.
Hypo has received 4.8 billion euros in state aid since 2008 and it is estimated that the winding-down of the bank will cost taxpayers almost as much again in the best-case scenario.
Judge Christian Liebhauser-Karl praised Kulterer and Kircher for having confessed. He made two years of Kircher's sentence conditional and said he had not given Kulterer the maximum term.
To Kircher, who confessed early in the process, the Austria Press Agency quoted the judge as saying: "We would like to send a signal, despite the enormous damage that cannot be reduced."
"It is an extremely substantial ground for mitigation that a hole has broken out in the wall of silence and a light has been shone through."
Grigg's lawyer said his client would appeal against the verdict. Kircher and Kulterer reserved the right to appeal.
A fourth former Hypo manager, Tilo Berlin, has had his case separated from the others because poor health meant he was unable to appear in court. ($1 = 0.7317 euros) (Reporting by Georgina Prodhan; Editing by David Goodman)