A Czech court has acquitted nine former executives of Komercni Bank (KB) charged with violating banking obligations in connection with suspicious deals that may have cost the bank the equivalent of around US$250 million.

The former bankers were accused of involvement in a series of alleged frauds in which the value of letters of credit (L/Cs) exceeded the value of goods shipped, thus enabling the fraudsters to siphon off cash.

Ghost grain

The court in Prague had heard that the nine former members of KB's board violated their responsibility to manage the bank's assets for the bank's commercial benefit when trading with BCL, an Austrian business owned by Barak Alon, between 1997 and 1999.

Alon is alleged to have arranged 'ghost' wheat deals with a Ukrainian firm. KB opened the L/Cs for these transactions. There was no grain delivered under the deals but Alon and his accomplices ultimately received the proceeds from the L/Cs, to the value of up to US$250 million. (DC World News, 15 August 2005).

Management failure

In this court case, the former KB board members denied any responsibility for the bank's losses. They claimed they only made strategic decisions and that control mechanisms lower in the bank's management should secure the bank against fraud.

The court said KB could seek damages against the former executives in a civil lawsuit.

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