Monday, June 5, 2006

Non-Prosecution Agreement in Case Related to Refco

The United States Attorney for the Southern District of New York (Michael Garcia), announced today that there will be no prosecution of BAWAG or the ÖGB. This comes from an agreement of the parent company and government that includes a forfeiture of $337.5 million.  The agreement calls for the funds to be distributed to victims of the alleged fraud. 

This appears to be a win-win situation.  Victims will recover funds, the government will not incur extraordinary additional expenses for a prosecution, and although the defense will be paying many dollars, the result beats a criminal prosecution.   

The SEC release on this settlement here states that the US Attorney's "Office also announced that BAWAG would pay at least $675 million (including the forfeited $337.5 million) to settle its non-prosecution agreement and related claims against it by the Refco bankruptcy estate."

In the government press release here (Download bawag20nonprosecution20agreement20pr.pdf) it states:

"The decision to enter into the non-prosecution agreement was based on, among other things, the following factors: BAWAG’s full cooperation with this Office’s investigation; the commitment by BAWAG and the ÖGB to continue that cooperation in the future; BAWAG’s and the ÖGB’s commitment to pay substantial restitution to the victims of the Refco fraud harmed by their conduct; BAWAG’s and the ÖGB’s agreement to settle related claims brought by the Refco bankruptcy estate, providing further restitution to victims of the Refco fraud; and the potential harm to BAWAG’s depositors and innocent employees that would likely result from a criminal prosecution. After new management took over control of BAWAG’s affairs in January 2006, the Bank took steps to investigate its involvement with the Refco fraud and disclosed to the public in Austria the deficiencies in its own balance sheet that prior management and the ÖGB had been hiding for years; these steps by the Bank were relevant to this Office’s decision not to prosecute BAWAG for its conduct in the Refco fraud. In view of these factors, Mr. GARCIA stated that a criminal prosecution of BAWAG and the ÖGB is not necessary to serve the public interest."

(esp)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2006/06/nonprosecution_.html

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