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Tracking the Bawag Scavenger Hunt

Creditors of Refco (RFXCQ) cast a wide net hunting down the U.S. assets of Bawag, the Austrian bank tied to the fraud that brought down the commodities brokerage.

In late April, more than three dozen financial firms received court orders directing them to put an immediate freeze on any assets the Bank fuer Arbeit und Wirtschaft may have had either invested or deposited with them. Most of the so-called attachment orders were served on the various firms on April 26 by lawyers for Refco's creditors.

To date, the names of the financial institutions holding roughly $1 billion of Bawag's U.S. assets have remained a secret, even though the Austrian bank has since agreed to pay nearly $700 million in restitution to federal prosecutors, Refco's creditors and the defunct brokerage's shareholders. The bankruptcy judge overseeing the liquidation of Refco directed the creditors to file the names under seal.

But other court records in the bankruptcy case provide a road map as to how the creditors tracked down Bawag's loot, much of which the bank contends is actually money and securities that belong to its Austrian customers. Unsealed copies of affidavits for the three dozen attachment orders reveal that the creditors went looking for Bawag's assets at Wall Street firms both big and small.

Some of the big banks asked to put a hold on Bawag's assets were ABN Amro (ABN), Bank of New York (BK - Get Report), Bear Stearns (BSC), Citigroup (C - Get Report), Deutsche Bank (DB - Get Report), J.P. Morgan Chase (JPM - Get Report), Merrill Lynch (MER) and Wachovia (WB - Get Report). Lesser-known financial institutions that received freeze notices included the New York branch of Europe's Erste Bank, LH Financial Services, Merriman Curhan Ford, Westminster Securities, hedge fund administrator DPM Mellon and Ivy Maplewood Associates II, a hedge fund run by Ivy Asset Management.

Of the smaller firms, LH Financial Services, a 10-person investment firm located on the 27th floor of New York's Essex House hotel, may be the most interesting. The firm once advised a group of Bawag-backed hedge funds about investment opportunities in the $20 billion-a-year market for private stock placements known as PIPEs, or private investments in public equities.
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