By: GZ on Venerdì 26 Gennaio 2007 01:40
la storia di una banca austriaca che perse 1.6 miliardi perchè il figlio del capo scommetteva sullo Yen con il suo hedge fund da NY dove faceva la bella vita con i soldi a prestito della banca che per 7 anni ha nascosto le perdite con lo stesso sistema di Parmalat e alla fine è stata scoperta solo perchè usava come broker Refco che a sua volta simultaneamente nascondeva le perdite di altri clienti
della serie questo era convinto che lo Yen salisse e ha fatto saltare una banca austriaca
..........Mr. Flöttl, whose father, Walter, became chief executive of Bawag in 1972, attended law school in Vienna, graduated from Harvard Business School in 1981, then moved to New York to work for now-defunct Kidder Peabody & Co. By 1988, well in advance of the boom in hedge funds, he had set up his own fund, Belforte Group, in Greenwich, Conn. Like many hedge-fund managers, he valued secrecy. He traded through a string of companies he established with different names, according to a 1994 audit of Bawag by the Austrian National Bank, the central bank. His trading account at one brokerage firm was known simply as account "X," according to one person familiar with the account.
He never revealed to employees where the money he invested had come from, except to say it originated in Europe, another person familiar with the operation says. Austrian investigators now say that although Mr. Flöttl had some outside investors, most of the money was borrowed from Bawag. In its initial years, Belforte's annual returns exceeded 35%, this person says.
Mr. Flöttl hired publicists, including Stephan Bullard, to help him navigate New York's social and philanthropic circles, and his name began popping up in newspaper society columns. "The gals really liked him," Mr. Bullard recalls.
Mr. Elsner helped make Bawag into a patron of Austrian arts. The group's supervisory board met here to discuss Wolfgang Flõttl's investments.
Soon, Anne Eisenhower began appearing on his arm. "It's too trendy for words. I met him at Mortimer's through a mutual friend," she later told Women's Wear Daily, referring to a one-time New York restaurant fashionable among the wealthy. They married in 1988. (They divorced the following year, but later remarried, Mr. Flöttl told Austrian authorities.)
By 1989, Mr. Flöttl had sufficient social stature, says Mr. Bullard, that he underwrote the Metropolitan Museum of Art's annual benefit for its Costume Institute -- and a s****y pre-event dinner for society doyenne Pat Buckley. According to Mr. Bullard, few society types knew precisely what Mr. Flöttl did. "Investment banker was the standard line," he says.
Mr. Flöttl began accumulating expensive art. During the 1990s, he purchased at least 79 paintings, including works by French masters Cézanne, Degas and Renoir. He bought Van Gogh's "Portrait of Dr. Gachet" and Picasso's "Le Reve." Sotheby's Holdings Inc. of New York helped him finance the purchases with a $244 million line of credit, according to an audit last year by the Austrian National Bank. Sotheby's said in a statement that it made a loan of about $240 million in 1998 to a borrower it declined to identify, and that it was repaid that same year.
His investment firm traded heavily in stocks and in emerging-market debt known as Brady bonds, according to the person familiar with the operation. Firms such as Morgan Stanley and Nomura Securities Co. vied for his securities-processing business, according to Bawag.
Mr. Flöttl did a lot of commodities trading through Refco, then one of the largest players in that sector, and got to know Thomas Dittmer, Refco's chairman. Mr. Flöttl's Refco connection helped cement the relationship between Refco and Bawag, according to a senior Austrian investigator.
In 1994, auditors from Austria's central bank discovered that, over the years, Bawag had lent as much as $2 billion to various Caribbean entities about which it knew little. The auditors' report noted that Mr. Flöttl's name appeared in those entities' records "whenever the name of the 'director' is specified." The auditors concluded that banking regulations had been violated and ordered Bawag to tighten its auditing procedures.
Mr. Flöttl paid back the loans. Nevertheless, after a raft of press coverage of lax Bawag auditing connected to Mr. Flöttl, his father resigned as the bank's CEO. His replacement, Helmut Elsner, pledged that the bank's future dealings with the younger Mr. Flöttl would comply with banking standards.
Mr. Elsner, who moved into a penthouse above Bawag's headquarters, had grand ambitions for the bank. In 1995, a year in which Bawag's earnings dropped 12.5%, Mr. Elsner "phoned Mr. Flöttl and asked him to resume the trades to improve our profit margin," Mr. Elsner told Austrian prosecutors investigating the matter last year, according to a transcript of his statement. Mr. Elsner told Bawag's supervisory board that the bank needed Mr. Flöttl's business because the higher interest rates he paid would generate additional income, according to prosecutors.
Mr. Elsner assured the board the bank's money was safe, says a senior investigator in the case. Mr. Elsner said he checked out Mr. Flöttl's bona fides himself. "He showed me a bank statement from a Bermuda bank revealing $250 million in holdings," Mr. Elsner told prosecutors, according to the transcript. "He also showed me photos of paintings he held at a storage site near Zurich." Mr. Flöttl's lawyer denies this encounter took place.
Bawag agreed to lend Mr. Flöttl money to invest through his hedge fund, according to a prosecutor. The loans would be unsecured: If his investments went bad and he couldn't repay the loans, Bawag had no right to go after his other assets, the prosecutor says. What made the arrangement attractive to Bawag is that he would pay higher interest rates than customers in Austria, Mr. Elsner later told police and prosecutors.
Beginning in late 1995, Bawag lent hundreds of millions of dollars to entities Mr. Flöttl controlled, according to Bawag records. In the summer of 1998, with markets volatile, Mr. Flöttl placed a big bet that the yen would fall against the dollar. "But that didn't happen," Mr. Flöttl told Austrian prosecutors early last year, according to a transcript. "The dollar weakened because of a crisis in the American financial market."
As his trading positions deteriorated, Wall Street firms issued margin calls, demanding cash to cover his positions, Mr. Flöttl later told police. Selling off the positions to meet the calls would have left him broke, Mr. Flöttl said. He met the margin calls primarily with money he had borrowed from Bawag, according to an Austrian National Bank audit conducted during the investigation last year.
"The margin calls over a period of six business days reduced our investment to almost nothing," Mr. Flöttl said in his statement to prosecutors and police. He lost about $759 million over a short period in 1998, including about $640 million borrowed from Bawag, according to an Arthur Andersen audit of Mr. Flöttl's trading records ordered by the bank's board.
Mr. Elsner later told police investigators that he began to worry that Bawag's losses would be revealed. That October, Bawag lent Mr. Flöttl another $90 million, according to a written statement by Mr. Elsner to other bank executives.
"Mr. Flöttl has very prominent friends," Mr. Elsner told prosecutors. "We had a lively discussion in the management board meeting and decided to prevent the situation from becoming public. That required Bawag to ensure Mr. Flöttl's economic survival."
One of the first debuts for Mr. Flõttl in New York social circles was this 1988 cocktail party at the Upper East side restaurant Mortimer's.
Bawag lent Mr. Flöttl an additional $18 million to keep his Gulfstream jet aloft, according to the central bank audit last year. Mr. Elsner told the bank's management board the loan was to ensure no one noticed Mr. Flöttl's financial troubles, according to a transcript of the board meeting cited in the audit. (The plane was later sold.)
Mr. Flöttl sold Van Gogh's "Portrait of Dr. Gachet" for $100 million to pay down part of what he owed Sotheby's. In an effort to repay his Bawag loans, Mr. Flöttl transferred to the bank the title to tens of millions of dollars of art, including works by Cézanne, Renoir and Manet, and helped the bank sell the work.
Mr. Flöttl later told prosecutors he "felt awful" about the trading losses. "That's why I was willing to sign a major part of my private wealth to Bawag, even though I didn't need to do so."
While Mr. Elsner was trying to contain the fallout from Mr. Flöttl's losses, he also was finalizing an agreement with Refco for a joint venture. Bawag wanted a larger presence in the securities business; Refco wanted one in Europe. In 1999, Bawag took a 10% stake in Refco. (It sold that stake in 2004.)
Mr. Elsner was determined to try to recoup the loan losses stemming from Mr. Flöttl's trading. Once again, he decided that Mr. Flöttl could help out. In 2000, Bawag lent him an additional €350 million, on the condition that Mr. Flöttl shared his trading profits with the bank, according to the Austrian National Bank audit. Mr. Flöttl later told prosecutors that Bawag wanted to earn about $600 million over five to six years.
Trading through a brokerage account at Lehman Brothers, Mr. Flöttl made another bet on the yen, Austrian prosecutors say. By December 2000, Mr. Flöttl had lost "substantially all" of the money, according to Bawag's later settlement with U.S. regulators. Soon thereafter, Messrs. Elsner and Flöttl met in London. "Mr. Elsner terminated our business relations," Mr. Flöttl told prosecutors. "He said he doesn't want to have anything more to do with me."
Bawag wanted to find a way to permanently hide its losses, Austrian National Bank auditors later concluded. The result, they say, was a complex series of transactions beginning in 2000 that had the effect of converting the bad loans to Mr. Flöttl into an asset that appeared on Bawag's balance sheet to be worth far more.
Striking a Settlement
A settlement agreement struck last year by Bawag with the U.S. Justice Department and Securities and Exchange Commission described the scheme as follows: Bawag sold bonds to a Virgin Islands fund for €364 million, which roughly equaled what the bank had lost in its most recent transaction with Mr. Flöttl. But the deal was a sham: Bawag simultaneously wired the same amount to the fund and took a controlling stake in it. Bawag's shares in the fund -- which also contained other assets that were allegedly misvalued -- were held in an account at Refco. Bawag valued that account on its balance sheet at between €495 million and €514 million.
Wolfgang Flöttl leaving the district court in Vienna.
Details of Mr. Flöttl's losses didn't leak out for five more years. Mr. Flöttl continued to sell art: in 2001, a Van Gogh for $22.5 million; in 2003, a dozen or so paintings for about $30,000 each.
It was the unraveling of a separate coverup at Refco that threw light on Bawag's scheme to conceal Mr. Flöttl's losses. By the late 1990s, Refco was also facing losses stemming from customer trading. Refco's chief executive at the time, Phillip R. Bennett, tried to hide them using a complex scheme in which debt and expenses were shifted temporarily off Refco's financial statements, according to court claims by Refco investors and charges filed against Mr. Bennett by the Justice Department. (Mr. Bennett denies the charges.) Bawag participated in some of the transactions, U.S. prosecutors say.
On Oct. 10, 2005, Refco said an internal review had uncovered Mr. Bennett's scheme, sending the brokerage into a tailspin that led to a bankruptcy filing. Investigators and creditors delving into Refco's collapse began unearthing details of the Bawag's coverup of Mr. Flöttl's losses. In March 2006, Bawag said bank executives had failed to disclose losses totaling more than €1 billion on the loans to Mr. Flöttl.