VIENNA Jan 21 The former head of Austrian
lender Hypo Alpe Adria has confessed to abusing his
authority by concealing the existence of put options that
investors received in 2006 with preference shares the troubled
bank sold to boost its capital.
Ex-Chief Executive Wolfgang Kulterer passed a note to the
judge in a breach of trust trial against him and three other
former Hypo executives saying that he erred by hiding the put
options, his lawyer, Ferdinand Lanker, said on Tuesday.
The admission could help Germany's BayernLB,
which is alleging in a separate court case it was duped into
buying Hypo for 1.7 billion euros ($2.3 billion) in 2007 from
the Austrian province of Carinthia and private investors.
Hiding the put options from other investors and supervisors
made Hypo's capital position appear stronger than it actually
was because it obscured the fact that investors who bought the
preference shares could get their money back on demand.
The covert puts made it easier for Hypo to raise money it
urgently needed to strengthen its weak balance sheet by making
the share sale more attractive to buyers.
The admission marked a surprise turn in the trial against
the four former Hypo executives accused of cloaking the true
state of the nationalised lender. Kulterer had earlier denied
Austria, which had to nationalise the bank in 2009 to avoid
a collapse with regional implications, has in turn threatened to
sue BayernLB to have that ill-starred purchase overturned.
The parallel cases all revolve around just when
Klagenfurt-based Hypo started to slide into terminal decline,
nearly imploding in 2009 after a decade of breakneck expansion
fueled by generous Carinthian state subsidies.
The bank's chronic need for more capital has complicated
Austria's efforts to cut its debt and deficits.
Kulterer regrets overstepping his authority by going ahead
with the put option plan, Lanker said, adding: "He is sorry. He
also stressed that he never enriched himself personally and did
not consciously want to harm the bank."
Lanker said the confession would be irrelevant if the court
finds the plan to issue preference shares with put options was
The court confirmed Kulterer had submitted the letter.
The trial resumes on Feb. 26.
($1 = 0.7373 euros)
(Reporting by Michael Shields and Angelika Gruber; Editing by