Bawag former chief arrested

15 September 2006

The former head of Bank Fuer Arbeit und Wirtschaft (Bawag) has been arrested in France on fraud charges connected with the collapsed US brokerage Refco.

Helmut Elsner was arrested at his French home as the result of an investigation into how he lent former Refco chief executive Phillip Bennett hundreds of millions of dollars immediately before the brokerage filed for bankruptcy.

The Securities and Exchange Commission (SEC) alleged that the loan allowed Mr Bennett to hide $430 million in Refco debts using an offshore investment fund, after investments in hedge funds and casino businesses failed.

Following the exposure of the scheme, Bawag was forced to pay more than $683 million in order to avoid prosecution in the US over its role.

Mr Elsner has also been under investigation by Austrian authorities who were recently forced to bail out Bawag after it lost over $1 billion on currency speculation.

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