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Investors versus HRE bank

February 3, 2014

A bitter row between former shareholders and former managers of Germany's Hypo Real Estate bank has entered a new round. A Munich court has begun dealing with a class action suit over misinformation charges.

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Logo of Hypo Real Estate (HRE)
Image: Lennart Preiss/AFP/Getty Images

On Monday, Munich's Higher Regional Court began looking into claims by shareholders of HRE, once Germany's largest real estate bank and an institution that barely escaped bankruptcy at the height of the global financial crisis before being nationalized in 2009.

Investors argued they'd been gravely misinformed about the state of the lender shortly before the then DAX-listed stock went into freefall in 2008.

Much of the anger had been directed at former CEO Georg Funke, who was to testify before the court on Thursday.

Irate shareholders

To avoid more turbulence on already battered financial markets, the German government shelled out over 100 billion euros ($135 billion) in loans and guarantees to save HRE from sudden death some six years ago.

Shareholders had already tried to get some of their lost money back by contesting the forced nationalization of the lender, but their efforts had been to no avail.

Hilfe für HRE - Bundesregierung muss Pleite-Bank mit weiteren Milliarden stützen

The trial in Munich has a different thrust, though. Investors argue that they could have avoided a good deal of their losses had the bank's management informed them properly about any problems early on.

"Shareholders have clearly been misinformed by HRE," Andreas Tilp, the investors' lawyer in the class action suit, said in a statement.

In trying to protect taxpayers from an even bigger burden, the German state has now slipped into the role of a defender of HRE's former information policy.

hg/mkg (dpa, Reuters)