Ex-manager sued: The bankrupt bank settles

Image result for Georg FunkeAs a “gambler” has denounced Georg Funke, as the “worst greed banker”. The Gelsenkirchener was until 2008 head of the real estate financier Hypo Real Estate (HRE), which had to save the state in the financial crisis with 100 billion euros. Many say today that it was Funke’s mismanagement that led the institution into crisis. What proportion of former boss spark actually had at the near bankruptcy of the HRE bank, is still not clarified. The institute itself wants to change that now.

HRE has sued Spark and two of its former fellow members for damages of 220 million euros. That confirmed on Wednesday a spokeswoman for the district court of Munich. As it turned out, HRE filed a lawsuit last October against the three ex-managers. It involves several loans, which the bank has awarded and should not have kept to the necessary specifications. That is, under Funke’s leadership, HRE may have granted credits that it should not have been enough.

The lawsuit is the first result of an internal investigation, said a spokesman for the Bank of the Tagesspiegel. One operates “in the interest of the taxpayer the processing of the existence-threatening crisis in the year 2008”. It would also “under all conceivable aspects compensation claims against former board members” examined.

Hypo Real Estate fell into crisis in 2008 after its subsidiary Depfa could no longer lend itself to the capital market. She had long-term loans, but she only refinanced short-term. As long as the bank was able to borrow money from other institutions at any time, that was no problem. But after the bankruptcy of the US investment bank Lehman Brothers, the banks did not trust each other anymore.

This brought the Depfa and thus also its parent bank, the HRE, in considerable difficulties. Because the Federal Government feared that the financial system could finally collapse after a bankruptcy of the real estate financier, she intervened: first she gave guarantees, later she nationalized the institute completely.

Spark accuses since then that he had ignored the problems of his house for too long and also set up an emergency plan. He was accused of megalomania. He had looked too long purely for growth and bought only for this reason, the Depfa.

Under Funke’s leadership, Hypo Real Estate had become Germany’s third-largest bank. The institute even pulled into the Dax, the leading index of the 30 largest German stock corporations, and reached a gigantic market value of 7.7 billion euros in the meantime.

After Funke had to give his top posts at the HRE, he retired to the holiday island of Mallorca and entered there in the trade in villas. A misconduct could not be proven until today. He sees himself as a bogeyman, to which now all the blame is passed. His termination at that time he considers unlawful. He also still fights in court for getting a settlement in the millions.

Only a part of the HRE is left today. The good business will be continued under the new name Deutsche Pfandbriefbank, which is to be privatized by 2015. The bad loans of the HRE have been outsourced to a bad bank called FMS Wertmanagement, which is to process the papers gradually.

Funke defends itself against the new allegations. His lawyers are said to have objected to the claim for damages. Now the HRE has to react to that. If the ex-manager can not agree with his former employer, the case is likely to go to court next year. But even if Spark and his two board colleagues were to be convicted in the end, they will hardly have to pay the full amount of compensation from their own pockets. Because the bank has a manager liability insurance for such a case. She jumps for the entire board with a sum of a maximum of 150 million euros. Only when there is a damage that goes beyond, the managers are liable with their private assets. In the current case that would be for all three together after all 70 million euro.