IKB trial
March 16, 2010
"I have reached the conclusion that I am not to blame in a legal sense," Stefan Ortseifen, 59, told the Duesseldorf court at the outset of the trial on Tuesday.
More than two and a half years after the IKB (Deutsche Industrie Bank) bank stood at the brink of collapse, Ortseifen is charged with breach of trust and manipulating share prices in a trial expected to run until the end of May.
At the center of the charges is an IKB press release dated July 20th, 2007, which portrayed the economic impact the financial crisis had on the bank in an overly positive way, the prosecution said.
"In the press release, Mr. Ortseifen is believed to have made misleading allegations," prosecutor Nils Bussee said. "We believe that his statements led to a temporary increase of IKB's share prices."
But Ortseifen told the court that the contents of the press release wre correct at the time it was issued. The former IKB head said that Deutsche Bank triggered the crisis a week later when it froze its line of credit for the lender.
Risk was foreseeable
Bussee said the press statement did not mention a $171 million (124 million euros) risk that was already foreseeable, but gave the impression that the impact the US subprime crisis had on the bank was much less severe.
Ulrich Hartmann, a former head of IKB's board of directors, said the crisis for the bank was not foreseeable.
"We did not stand a chance to recognize the risks and avert the threat to the bank," he said. "Risk management systems all over the world failed, and supervisory boards did not notice."
Just days later, the real extent of the bank's exposure to the crisis in the subprime mortgage market in the US became evident. A ten-billion euro cash injection from the German government and private banks saved the bank from insolvency. A year later, IKB was sold to Lone Star, a US-based investment fund.
Ortseifen is also charged with an unauthorized lavish renovation of the bank-owned villa he lives in. The bank has taken action for repossession, but Ortseifen has so far refused to move out.
db/AP/dpa/AFP
Editor: Susan Houlton