Austrian banker bails himself out

Dubai: Jailed Austrian banker Julius Meinl V, member of one of the richest and most influential family clans in the alpine country, was released on bail on Friday afternoon after paying a record 100 million euros (Dh495.3 million) to the court.

The Austrian public was stunned by how fast Meinl, 49, was able to transfer the huge amount from a bank in the tax haven of Liechtenstein to the court in Vienna from undisclosed sources.

The banker, who was arrested on Thursday on suspicion of embezzlement, fraud, insider trading and falsifying the balance sheets of his investment companies, is facing a jail term of five to ten years if found guilty, prosecutors said.

Born into a rich trader's family that made a fortune with delicacy stores in Austria and neighbouring countries, Meinl was the first in the family line to discontinue the more than 100-year-old retail business tradition.

He sold the delicacy chain - despite strong resistance from the rest of the family - a few years ago and turned towards banking and investment businesses.

His extraordinarily close connections to the political and financial elite in Austria made it easy for him to establish a network of investment firms.

The then well established and trusted name of the Meinl family allowed him to collect millions of euros from small investors by listing his companies on the Vienna stock exchange and offering trust investments with promises of high returns. One of his closest private friends was former finance minister Karlheinz Grasser, who joined Meinl as a board member of his investment companies and is now suspected of involvement in the dealings, the Austrian weekly Profil said.

Meinl's fortunes took a turn for the worse after insider trading deals in his companies became public. Many investors did not support the fact he was using their money to pay himself for the favour of letting his subsidiaries use the name Meinl - through set provisions - which accounted for a profit of at least 320 million euros for the smart banker over the last five years.

Investors turned away, and when the credit crunch started to bite, Meinl's investment firms quickly lost their value and now are being liquidated or sold.

Meinl's lawyers are facing claims from thousands of small investors to recover their money. Nevertheless, the family's bank, Meinl Bank International - the centre of Meinl's investment business - is continuing to operate.

When Meinl finally was arrested, he was "totally stunned", Austrian news agency APA reported.

The banker, who used to be very publicity-shy and always kept his countenance when asked about irregularities in his businesses, was said to have had a nervous breakdown at court.

After paying the record bail, Meinl had to deliver his passport to the authorities - he holds dual Austrian-British citizenship, and some of his investment firms were registered in the British Channel island of Jersey for tax reasons.

He is now expected to report to police regularly and not to leave the country, which may be hard for a banker who was used to jetting to business meetings across the world on his private jet.

According to Austrian TV station ORF, the 100 million euros Meinl paid for his release would still not be sufficient to reimburse investors.

Even if the exact loss suffered by investors is still a matter of public speculation, "it is certainly much more than the money provided for the release on bail," said Gerhard Jarosch, a spokesman for the Austrian public prosecution department.

However, Meinl would be able to get over the loss of 100 million, Austrian newspaper comments suggested.

The family fortune is estimated at some two billion euros while the annual dividend payment for the family from the family-owned Meinl Bank accounted for 70 million euros in 2008 alone.