Austrian bank Bawag continues to have reason to rue the day it helped out former Refco Chairman Phillip Bennett. Austria’s fourth-largest bank – which is now up for sale, thanks to a number of problems, not the least of which was lending the since-indicted Bennett more than US$400 million – has just had its U.S. assets temporarily frozen, after hungry Refco creditors slapped Bawag with a US$1.325 billion lawsuit. In the action filed in U.S. Bankruptcy Court for the Southern District of New York, the plaintiffs charge that Bawag helped the former chairman conceal the hundreds of millions, stating, “Bennett needed willing co-conspirators who would enter into financial transactions.” Bawag itself sued Refco and Bennett last November, charging they tricked the bank into lending the money. Not that that’s going to help Bawag now. Even the judge in the case, Robert Drain, suggested the creditors’ committee – which includes hedge fund D.E. Shaw & Co. and Everest Asset Management – is likely to “succeed on the merits of one or more of its causes of action to recover” the billion-plus.
Meanwhile, the Securities and Exchange Commission has filed an action against hedge fund manager Nelson Obus, along with Peter Black and Thomas Bradley Strickland, claiming three funds managed by Obus – Wynnefield Partners Small Cap Value, Wynnefield Partners Small Cap Value and Wynnefield Partners Small Cap Value Offshore Fund – illegally gained more than $1.335 million when Obus allegedly purchased more than 287,000 shares of Sun Source back in 2001 before the company announced merger plans with Allied Capital Corp., based on a tip from Black, who had allegedly been tipped off by Strickland, who, the complaint alleges, came into the confidential info while working at GE Capital.