Former IKB boss avoids prison
Stefan Ortseifen, the former chief executive of German bank IKB, was yesterday convicted of market manipulation but avoided going to jail in one of the few criminal cases to be prosecuted in the aftermath of the global banking crisis.
IKB, one of the highest-profile casualties of the collapse in the US subprime mortgage market, required billions of euros in bailout money and is involved in a current case in the US brought against Goldman Sachs over a complicated subprime-related financial product which it sold to IKB in 2007.
Ortseifen was fined €100,000 (£83,500) and received a 10-month suspended jail sentence for market manipulation, with the court ruling that investors were misled about the parlous state of IKB’s finances two years ago. At the time Ortseifen was earning around €1.6m a year, according to IKB’s annual report for 2006/07.
On 20 July, 2007, only days before its near implosion, IKB sent out a release to investors saying the bank saw “limited” impact from the subprime lending crisis – which was ballooning on worries that US borrowers would default on risky mortgages.
Duesseldorf prosecutors said the statement constituted a wilful misleading of the markets as it encouraged investors to continue buying shares. “Rather than facing the force of the market, the accused decided on a calming press statement,” Judge Brigitte Koppenhoefer told the court.
Ortseifen plans to appeal, his lawyer said. “This verdict is crassly wrong,” he said.
A number of bankers in Europe and the US have been brought to court in the aftermath of the credit crisis as investors seek to recoup billions in losses.