Hypo

Hypo Real Estate hires firm to probe ex-board members

Hypo Real Estate Holding AG, the commercial-property lender that got a 50 billion-euro ($68.3 billion) bailout, hired law firm Milbank Tweed Hadley & McCloy LLP to investigate possible breach of duties by former company board members Georg Funke and Bo Heide-Ottosen.

“In the interest of the company and all concerned, the supervisory board has decided on an inquiry,” Klaus Pohle, chairman of the lender's supervisory board, said in an e-mailed statement today.

The bailout of Hypo Real Estate was Germany's biggest since World War II. The government and the Bundesbank said Hypo Real Estate, the country's second-biggest property lender, is too big to fail.

Funke, the lender's former chief executive officer, stepped down Oct. 7. Heide-Ottosen, a former management board member and finance executive of Depfa Bank Plc, resigned on Sept. 29.

Bloomberg New was unable to immediately contact both men for comment. They aren't listed in a telephone directory on the Internet and a company spokesman declined to provide contact information.

The bank also faces a criminal complaint filed with Munich prosecutors by a shareholder interest group.

Individuals at Hypo Real Estate may have misled investors about the bank's situation, may have manipulated its share price and may have committed fraud and insider trading, the group, DSW Deutsche Schutzvereinigung fuer Wertpapierbesitz, said in an e- mailed statement today.

Hypo Real Estate spokesman Hans Obermeier declined to comment immediately on the complaint by DSW. He said the lender may issue a statement later today.

(Published by Bloomberg- October 14, 2008)