Austrian authorities have arrested the former
chief executive of troubled bank Hypo Group Alpe Adria (HGAA).
Wolfgang Kulterer was stopped by police in Klagenfurt in southern
Austria on the morning of 13 August in connection with a lengthy
investigation into HGAA’s business activities.

Authorities have confirmed the arrest and said
that, as of 17 August, Kulterer was in pre-trial detention. A
hearing is due to take place within a fortnight of his arrest to
decide whether he will remain in custody.

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Kulterer, who is accused of embezzlement,
accounting fraud, and lending without sufficient collateral, could
face up to 10 years in prison, Austrian newspapers have
reported.

HGAA was nationalised in December last year as
a result of major losses in the Balkans, following rapid expansion
in the region, over which Kulterer presided.

A special taskforce, nicknamed CSI Hypo, was
brought in by the Austrian finance ministry to find out how the
bank came to the point of collapse.

The investigation was launched in February and
was in part aimed at determining whether criminal activity was to
blame. Loss-making leasing businesses in Croatia, Bulgaria and
Ukraine are believed to have been part of the cause of HGAA’s
troubles.

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Kulterer has denied various allegations
against him in relation to the bank’s problems.

He stepped down as chief executive in 2006
after separate allegations were made, accusing HGAA of covering up
significant losses from derivative trading in its books. Kulterer
admitted false accounting and was made to pay a fine.

Authorities in Austria and Germany are also
investigating HGAA’s €1.6bn sale, completed in 2007, to BayernLB,
and especially the actions of a private investor group, which
bought into the bank at a lower price, months earlier. Kulterer has
denied investing in this group.

claire.hack@vrlfinancialnews.com