9 convicted in Austria fraud case
The Associated Press
By WILLIAM J. KOLE
VIENNA, Austria
Fri, 04 Jul 2008 03:17 MST

Nine people were convicted Friday of criminal charges in a major Austrian bank fraud case linked to the collapse of U.S.-based commodities brokerage Refco Inc.

Vienna Federal Judge Claudia Bandion-Ortner found the defendants responsible for 1.4 billion euros ($1.9 billion) in losses at BAWAG, Austria's No. 4 bank.

The defendants include two former BAWAG executives, Helmut Elsner and Johann Zwettler, and U.S.-based investment banker Wolfgang Floettl.

All nine had proclaimed their innocence. They face up to 10 years in prison at their sentencing later Friday on charges of breach of trust, aiding breach of trust, false accounting and fraud.

BAWAG, or Bank Fuer Arbeit und Wirtschaft AG, loaned former Refco CEO Phillip Bennett several hundred million dollars (euros) just before the brokerage filed for bankruptcy protection in October 2005.

Bennett was sentenced to 16 years in prison Thursday in the U.S. by a judge who denounced what he called the "staggeringly arrogant" greed of the white-collar criminals implicated in the case.

Refco was one of the world's largest commodities brokerages, and prosecutors said BAWAG played a pivotal role in its collapse.

Friday's verdicts in Vienna came almost exactly a year after the trial began in an effort to bring to justice those responsible for BAWAG's staggering losses in soured currency speculation deals in the Caribbean. The losses first came to light in March 2006.

Floettl was found guilty despite an emotional plea by his wife, Anne Eisenhower, who had offered to pay euro5 million ($3.15 million) in court costs if the judge would spare her husband prison time.

Austria's trade union federation owned BAWAG at the time it incurred the losses. In 2006, it sold the embattled bank to a consortium headed by U.S. private equity fund Cerberus Capital Management.

Elsner was the key defendant in the case, and had fled to France after BAWAG's troubles became publicly known.

Elsner, who served as bank director from 1995-2003, was extradited back to Austria in February 2007. He has been hospitalized with heart ailments since his return, and was given oxygen early in the trial after collapsing during the proceedings.

Austrian media dubbed him a "Rockefeller-like figure" for his lavish lifestyle, passion for sports cars and penchant for smoking large, expensive cigars while walking his dog in a swanky Vienna neighborhood.