Austria's fourth largest lender Bawag has agreed to pay at least $683 million to avoid US prosecution over its involvement in the collapse of the brokerage Refco.
Half of the settlement will go to shareholders in the former futures broker, which went bankrupt amid allegations of accounting fraud. Vienna-based Bawag is accused of helping Refco to hide $1.3 billion of losses. The firm went bankrupt two months after its IPO.
US prosecutors have said that $84 million of the settlement will go to Thomas H Lee Partners, the Boston-based buy-out firm that once controlled Refco, while $100 million will be distributed among shareholders. Creditors will receive the remainder of that amount plus $337.5 million.
Bawag had dealings with Refco dating back to 1998, when the two companies formed a joint venture to clear futures and options traded on the European exchanges. A week before Refco filed for bankruptcy protection, its CEO Philip Bennet borrowed E350 million from Bawag. Mr Bennet was subsequently arrested and accused of hiding debts.
The Austrian government on May 1 rescued Bawag with E900 million of guarantees. The bank also received E450 million in loans from rival Austrian banks.