Austria to Run Bank after Madoff Damage: Report

Austria will soon step in to run Vienna-based Bank Medici and decide its future after the Bernard Madoff scandal hurt the private bank, an Austrian newspaper said on Wednesday.

The bank -- founded and largely owned by high-profile banker Sonja Kohn, who media say has close ties to Madoff -- would welcome the move if it were to happen, and would cooperate with authorities, a spokeswoman said.

But the spokeswoman declined to comment further, as Bank Medici had not officially been informed of the matter. Kohn was not available to talk to the news media, she also said.

This would be the first known case where a government has had to step in to help a bank cope with the alleged $50 billion Madoff fraud.

The spokeswoman also declined to say more on the damage from the alleged $50 billion fraud to the bank, which is 25 percent owned by UniCredit's Bank Austria.

Confessed swindler Bernard Madoff faces a Wednesday deadline to tell regulators in New York how much he is worth and where his money and other assets are, although it is expected to be some time before his investors learn the tallies.

Bank Medici earlier this month said it held products affected by the alleged fraud, but that it was not at risk because of its solid capital base.

However, the damage turned out to be bigger than first thought, Austria's Der Standard reported on its website. The Financial Times also carried the story, from its own sources.

Austria will appoint a representative to the bank's management in the coming days, Standard said, citing "well-informed sources." That means the bank cannot take important decisions without government consent.

According to media reports, Kohn was born into a Jewish family in Vienna in 1948 and moved to New York in 1985, where she met Madoff. Returning to Vienna in the 1990s, she founded a precursor of Bank Medici in 1994. She is a well-known figure in Vienna's financial circles and received a high national award in 1999.

Bank Medici said earlier this month two of its funds -- Herald USA Fund and Herald Luxemburg Fund, with a total volume of $2.1 billion -- were exposed to the alleged fraud, though it could not say by how much.

Banks across the globe have unveiled billions of dollars in damage from the scandal, with a number of private banks catering to rich clients and fund-of-fund businesses particularly prominent victims.

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