Hypo Real Estate and insider trading scandal about to blow in Berlin tomorrw

The ordure is due to enter the air conditioning in Berlin , Monday am. Der Spiegel have the goods on an investigation into insider trading in multiple rescue, German property lender Hypo Real Estate. (211 Mn. shares in issue closed at Euro 2.86)

Their snooping has revealed that prosecutors in Munich started an investigation as long ago as February when big selling preceded an announcement about a 35% asset write down.

Then later in the year there were some "suspicious movements" when a major "liquidity crisis" hit the bank in autumn at the time Lehman bros were thrown to the wolves. This resolved by a rescue plan worked out by the German government and the country's central bank in October - followed by complaint filed by small shareholders that HRE directors provided insufficient information on the bank's situation before it required an emergency bailout.

The Munich-based bank, Germany's biggest victim of the global banking crisis, and its Irish subsidiary Depfa were caught up in a liquidity crunch that worsened after the US investment bank Lehman Brothers declared bankruptcy in September.

It was saved from collapse by a rescue plan worked out by the German government and the country's central bank in October.This involved a credit line is for up to 35 billion euros ($51 billion) and was said to provide adequate financing through to the end of 2009.On Monday September 29th HRE shares fell 70%. (on the same day Commerzbank fell 22% and Deutsche Bank fell 10%)

Finance Minister Peer Steinbrueck (SPD) made it clear at the time he considered it "inconceivable" that the management of Hypo Real Estate (HRE) should continue in office.

The new rescue package included help from Deutsche Bank , der Commerzbank , Commerzbank , der Postbank , Postbank und der HypoVereinsbank and HypoVereinsbank auch Landesbanken, Genossenschaftsbanken und Versicherer wie die Allianz also regional banks, cooperative banks and insurers such as Allianz und die Münchener Rück and Munich Re .

After this massive fall, a German association of small shareholders filed a complaint. State prosecutors in Munich opened an investigation into accusations that HRE directors provided insufficient information on the bank's situation before it required an emergency bailout.

The Bank's problems are said to mainly relate to their acquisition of Dublin-based Depfa Bank last year.

Depfa specialized in lending to public-sector borrowers worldwide, using money in wholesale markets to fund its lending which struggled and then collapsed after Lehman's collapse and the very expensive rescue of other firms including U.S. insurance giant American International Group.

At the time HRE boss Georg Funke said in a statement. "We are very thankful for the backing of all those involved, the solution guarantees the stability of the Hypo Real Estate Group, which will have enough liqudity and will be able to continue functioning even as the financial crisis continues,"

Hypo Real Estate posted a net loss of 3.1 billion euros in the third quarter, and said a week ago that it expects to report new losses in its fourth quarter and annual results.They also announced on December 9th that German Financial Markets Stabilisation Fund (“SoFFin”) had at unchanged terms and maturity, increased the EUR 20 billion framework guarantee granted to Hypo Real Estate Group on 21 November 2008 by an additional amount of EUR 10 billion, bringing the total amount to EUR 30 billion.

In a statement issued on December 20, as the German financiers were settling down to their rumtopf , HRE said the changes to the business model will be accompanied by reductions in
annual costs of approx. EUR 200 million by 2011, and approx. EUR 250 million by 2013.by almost half in three years to 600 million euros (835 million dollars) over the period and another 500 million euros to 2013.

They have also decided to slash staff numbers from the current level of close to 1,800 to around 1,000. Two-thirds of the affected positions are located outside Germany. An additional 200 redundancies will occur until 2013 after installation of a whizz bang new IT system.

Separately, Hypo Real Estate said its recently re-vamped supervisory board decided to terminate the contracts of former CEO Funke (he stepped down as CEO earlier that month) and another former managing board member, Bo Heide-Ottosen, with immediate effect. It said it also was parting company with current board members Markus Fell and Frank Lamby. WAPO

The company did not give reasons for these decisions.

Munich prosecutors searched Hypo Real Estate's offices and the homes of unidentified people who were on the board in 2007-2008 as they investigated suspicions that the company's situation was misrepresented and possible market manipulation.

UPDATE Tuesday 30-12-08 : Der SPIEGEL were a day late with their report - A Black Hole in the Banking Bailout By Beat Balzli, Dinah Deckstein and Jörg Schmitt

The Munich mortgage lender, together with the Irish subsidiary Depfa that it acquired in 2007, had burned massive amounts of money through risky US real estate securities and other reckless business dealings. The company also appears to have covered up the scope of its misdealings. That, at least, is the assumption of public prosecutors who are now investigating HRE executives. According to the search warrant issued, prosecutors are investigating alleged "false statements," "market manipulation," and "breach of trust" by current and former members of HRE's board. In a six-page paper, prosecutors take a tough stance on managers. They claim they made "deliberately false statements" about the company's dramatic situation and that they were guilty of "deliberately concealing" important information and that they had violated their obligation to safeguard company assets.

It was their newly acquired Irish subsidiary where most of the problems arose through fraud...

Gerhard Bruckermann CEO of Depfa showed "Recklessness, bravado and greed" as did his "troop of executives surrounding him". Five years before acqusition from the German Government in 2007 he had moved important parts of the company, which was supposedly rock solid but whose management took too many risks, to tax havens, "in order to save on taxes".

He opened offices all over Europe and Asia, including Turkey and India, as well as Brazil.

"We went from not being a player to being one of the top five" banks in a particular municipal-finance specialty, recalls Herb Jacobs, (he retired February) who ran Depfa's U.S. operation. "It was a wonderful moment."

Bruckermann rewarded himself and his management board for such creativity by raising the board's salary by 100 percent in 2003 -- to €20 million. He went on amass an even greater personal fortune: he is believed to have earned €100 million through the HRE deal.

see npr report here more corrupt, geedy fucking bankers