Bawag Gets Extension in Asset Suit

It has until Monday to present evidence refuting allegations it was complicit in Refco's demise.
Author:
Publish date:

Austria's Bank fuer Arbeit und Wirtschaft is getting a few more days to challenge a judicial order freezing its assets that was issued in the

Refco

(RFXCQ)

bankruptcy case.

Bankruptcy Judge Robert Drain gave Bawag until Monday to present evidence showing why he should lift the freeze. Drain imposed the freeze Tuesday, after lawyers for Refco's creditors filed a lawsuit claiming Austria's fourth-largest lender aided and abetted the alleged fraud that led to the collapse of Refco last October.

Refco's creditors contend Bawag had a secret agreement with former Refco CEO Phillip Bennett that led to the improper transfer of $1.3 billion to the Austrian bank. The creditors allege the secret agreement provided Bawag with a much bigger payout than it should have been entitled to in the $1.9 billion leveraged buyout of Refco in August 2004.

Luc Despins, an attorney for the creditors, says Bawag's lawyer requested the extension.

The bank was scheduled to make its case for lifting the asset freeze during a Thursday afternoon court hearing. The bank now has until a Monday afternoon hearing before Judge Drain to present its case.

In advance of the Monday hearing, Bawag has agreed to begin providing the creditors with a list of all its assets in the U.S.

Bawag, in a statement posted on its Web site, says it "is convinced that it will be successful in proving to the court that the bank itself was a victim of fraud.''

Shortly after Refco imploded, Bawag filed a lawsuit alleging it was duped by Bennett into lending him $410 million. Bennett used the proceeds from the loan to pay down $430 million in bad debt owed to Refco, which Bennett allegedly was hiding from investors.

Federal prosecutors have charged Bennett with securities fraud.