Refco Lender Had Its Own Dark Places

Bawag claims it was duped by Bennett into making the loan, which was backed by Refco shares that Bennett pledged as collateral. The stock became worthless when the commodities and derivatives brokerage filed for bankruptcy a week after the scandal erupted. Refco imploded just months after its $585 million IPO in August 2005.

That Bawag was hiding losses in Refco accounts could provide new point of inquiry for federal prosecutors, regulators and Refco creditors, all of whom are trying to determine just how widespread the fraud at Refco extended.

Speaking at a press conference in Vienna, Bawag CEO Ewald Nowotny says the bank might sue Wolfgang Flottl, the former hedge fund manage allegedly responsible for the $1 billion in losses. Nowotny, according to Bloomberg, says, "Flottl influenced these investments and he is to be held accountable."

Flottl is the son of former Bawag CEO Walter Flottl and the former manager of Ross Capital Markets, a Bermuda hedge fund. Flottl, who could not be reached for comment, is something of a New York socialite. He's married to a granddaughter of former President Dwight D. Eisenhower.

TheStreet.com has found another wrinkle in the increasingly complicated relationship between Bawag and Refco, which suggests the Austrian bank's financial stake in the scandal-tarred broker may have been greater than previously thought.

Bawag always has said it owned 10% of Refco from 1999 to August 2004, when the brokerage was acquired by the private equity firm Thomas H. Lee Partners in a $1.4 billion leveraged buyout. Neither Bawag nor Refco has ever said how much Bawag received in the buyout, a transaction that set the stage for Refco's initial public offering last August.

But TheStreet.com has obtained a copy of a November 2003 financing statement that suggests Bawag may have had rights to payments made by Refco to a company called DF Capital, a small Delaware corporation that had ties to Bennett. TheStreet.com previously reported that in December 2004, DF Capital was merged into Refco Group Holdings Inc., the Bennett-controlled company he allegedly used to hide millions of dollars in debt.