MUNICH (Reuters) - German prosecutors have dropped the prosecution of two former bosses of Hypo Real Estate who were suspected of covering up liquidity problems weeks before the lender collapsed during the global financial crisis, citing a lack of evidence.
Germany bailed out HRE in 2008 and nationalised it in 2009 after the bank was forced to make massive writedowns on its holdings of mortgage-backed securities, which slumped in value after the failure of U.S. investment bank Lehman Bros.
The government injected capital of 10 billion euros ($12 billion) into the stricken lender and offered 145 billion euros in liquidity guarantees, of which HRE used 124 billion.
The case against former Chief Executive Georg Funke and ex-Chief Financial Officer Markus Fell is being closed provided the two make charitable donations, a Munich court said on Friday after hearing arguments by state prosecutors.
The court ordered Funke to donate 18,000 euros and Fell 25,000 euros to charity. Once they have made those payments the case will be finally closed.
“A bird in the hand is better than two in the bush,” said Wolfgang Kreuzer, Funke’s lawyer, after the hearing.
“We don’t have a genuine acquittal. But we do have the certainty that the case has been finally closed.”
In his ruling, Judge Florian Gliwitzky said the charges levelled by state prosecutors against Funke and Fell could not be sufficiently substantiated.
It was unlikely that this would be possible before a 10-year deadline for prosecuting the suspected offences lapses under Germany’s statute of limitations next year, he wrote.
“This is a sensible solution,” said Fell’s lawyer, Christian Sering. “The case put a massive burden on my client. It would have made no sense to wait for months for an acquittal.”
Reporting by Joern Poltz; Writing by Douglas Busvine; Editing by Georgina Prodhan/Keith Weir