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Banker Meinl released on record bail of €100 million

Austrian public prosecutors approved the release yesterday of Julius Meinl in return for surrender of his passport and record bail of €100m because of the risk he might try to abscond.

Vienna public-prosecution office spokesman Gerhard Jarosch said today (Fri): "Julius Meinl is a British citizen, and it was feared, on the basis of previous investigations and new evidence, that he might try to flee from justice."

The move followed Meinl’s detention on Wednesday night after questioning by prosecutors investigating allegations of fraud at Meinl European Land (MEL), a quoted property group formerly managed by Meinl Bank, which is closely held by the Meinl family.

Meinl was chief executive of Meinl Bank until the end of 2007, when he stepped down to become chairman. The bank said yesterday its operations had been unaffected by his arrest.

The arrest followed raids on Meinl's home and offices in February and came amid deepening anger among retail investors about the performance of investment funds associated with the millionaire banker.

Meinl was charged with breach of trust, the charging of excessive fees and fraud in relation to MEL.

MEL shares soared after flotation in Vienna in 2002, and the company undertook several secondary offerings marketed aggressively to retail investors. MEL's advertising campaign suggested its investment certificates (MEL shares were actually listed in Jersey) were as safe as savings accounts.

However, in summer 2007 it emerged that MEL had just completed a massive share buy-back to support its share price amid tumbling property values and falling shares for quoted real-estate groups. The transaction had not been disclosed until after its completion.

MEL was the first in a family of three investment funds launched by the bank, including Meinl Airports International and Meinl International Power. The support operation for MEL coincided roughly with the flotation of MIP - a fund created to invest in utilities in Central and Eastern Europe.

The news of the support scheme triggered a precipitous fall in MEL shares and closer scrutiny in the media of Meinl's businesses. It emerged MEL had placed partly-paid shares with unknown institutional investors, diluting the stakes of shareholders who had paid fully, and had authorised very high management fees at Meinl Bank.

The investigations also revealed the share buy-backs had not been publicised in Austria, breaching domestic stock-exchange rules.

Meinl said at the time all the steps had been legal and the support operation had not breached local regulations because MEL's stock was listed in Jersey. However, angry investors argued the support operation had been tantamount to price manipulation.

Meinl also said Meinl Bank and MEL, in which the bank had no stake, had not been linked to one another except for management contracts. The prosecutor, however, argued that Meinl Bank controlled MEL. According to the Austrian financial market regulator, Meinl Bank earned €322m through the buy-backs.

The buy-backs were at about €20 a share, and the stock subsequently dropped to less than €10, below the €11.10 issue price at the initial public offering.

MEL was sold last year to a group controlled by Citigroup and Gazit Globe, an Israeli company, and was renamed Atrium Real Estate. The other two Meinl ventures are set to be dissolved and the money returned to shareholders.

Julius Meinl V, as he is customarily identified in Austria, is one of his country's best-known business people and scion of a trading dynasty.

His great-great grandfather, Julius Meinl I, opened a coffee store in Vienna in 1862 before expanding into food retailing across the Hapsburg empire.

In 1938, the family, which is partly Jewish, fled to England, where Julius Meinl V was born in 1959. After the war, the Meinls regained control of their Austrian operations but lost those in Central and Eastern Europe to the Communists.

In 1989, the group returned to Eastern Europe, starting with Hungary and the Czech Republic. However, in the 1990s, Julius Meinl V sold the retail operations, amid declining profit, to focus on investment and private banking under the Meinl Bank name.

The family retained one flagship store - Meinl am Graben - a food emporium in Vienna. The Meinls also held on to their property portfolio in Central and Eastern Europe, forming the basis for MEL, which focused on retail real estate in the region. After going public in 2002, MEL expanded aggressively in Russia and Ukraine.

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