Bawag faces class action on Refco

By THIS IS MONEY
Updated:

 

AUSTRIAN bank Bawag, already under investigation for its role in the collapse of futures and commodities trader Refco, may now face millions of pounds in penalties from a class action being brought against the failed group.

US lawyers Shalov Stone and Bonner, which is already suing Refco on behalf of investors, announced that it now has Bawag in its sights.

Refco collapsed into bankruptcy after its British-born chief Phillip Bennett was charged with fraud over $430m (£242.9m) he allegedly hid from investors.

According to Bawag, Bennett borrowed €350m (£236.9m) and is said to have used the money to pay down the $430m.

The Austrian government has ordered an inquiry into the matter and Deputy Chancellor Hubert Gorbach promises 'consequences for the management'. The probe by Austria's financial watchdog FMA got under way over the weekend and will focus on whether Bawag followed proper rules in lending Bennett the money.

The head of the FMA, Kurt Pribil, said the bank's statement was not sufficient for the watchdog and summoned Bawag chief executive Johann Zwettler and other senior executives involved in the loan.

'The supervisory board's statement has raised more questions than it answered,'. Pribil said on Austrian state radio.

Refco listed on the New York Stock Exchange in August amid great fanfare that drove its share price up to $30 a month later. The shares are now virtually worthless.

The class action by Shalov Stone and Bonner is one of several being taken against the company, and the firm is calling for anyone who purchased Refco stock or bonds to join the action.

Meanwhile, calls continue for a fast resolution of the bid for Refco's futures trading arm by JC Flowers, a New York private-equity firm. But that $768m offer has been trumped by one from Thomas Peterffy's privately held Interactive Brokers Group of $790m.

With the Refco parent having filed for bankruptcy, any deal must be court-approved. A hearing into the matter has been brought forward to today in Manhattan.

Former George Soros partner Jim Rogers, a New York money manager, has added his voice to demands for a fast takeover.

'If someone nimble and quick comes in and buys the whole thing, that would be a great thing,' Rogers said.

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