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HSH Nordbank execs acquitted

July 9, 2014

The former directors of German lender HSH Nordbank have been acquitted of charges linked to financial crisis wrongdoings. It was the first time a German bank's entire board was on trial for its actions.

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Former HSH Nordbank head Dirk Jens Nonnenmacher leaves a courtroom in Hamburg
Image: picture-alliance/dpa

Former HSH Nordbank Chief Executive Dirk Jens Nonnenmacher, his predecessor Hans Berger as well as four other former members of the bank's executive board were cleared of charges of breach of trust and accounting fraud by a Hamburg court said Wednesday.

The prosecution could not prove the bank's managers had violated their oversight duties in financial transactions and investments during their terms in office, the presiding judge, Marc Tully, said.

The acquittal came as a surprise to the general public and prosecution alike. Prosecutor Karsten Wegerich had called for suspended sentences of a maximum three years for the main defendants as well as fines of up to 150,000 euros ($204,000).

Judge Tully said the verdict could be appealed in a higher court.

Shady deals

The case marked the first time a bank's entire board had been charged over alleged wrongdoings in connection with the 2008 financial crisis in Germany.

HSH Nordbank, one of four German lenders owned by the country's regional states, lost billions of euros on risky investments in the 2008 financial crisis.

It had to be bailed out by taxpayer money in the form of a 3-billion-euro capital injection and an additional 10 billion euros in loan guarantees.

Prosecutors accused the bank's managers of improperly accounting for a deal dubbed "Omega 55," which was aimed at making the HSH balance sheet appear stronger ahead of a planned listing on the Frankfurt stock exchange.

It was preceded by a loan worth 2 billion euros granted to Paris-based bank BNP Paribas for which HSH received securities from the French lender. Those securities, however, were linked to US bank Lehmann Brothers, which later collapsed, and to bonds from Iceland, which was engulfed by a banking crisis.

The deal forced HSH to take huge writedowns and eventually seek a bailout in 2008.

In a similar case, the former CEO of corporate German lender IKB was convicted of wrongdoing in connection with the financial crisis. He received a 10-month suspended sentence after being found guilty of market manipulation.

A criminal case against former managers of bailed-out regional bank LBBW for accounting fraud ended with a settlement in which the court ordered them to make payments to charities.

uhe/cjc (Reuters, dpa, AFP)