SachsenLB offices raided in police probe

BERLIN (Reuters) - Police probing multi-billion euro losses at German bank SachsenLB raided offices and apartments across Germany and in Dublin on Tuesday, prosecutors said.

SachsenLB, a state-owned regional bank from eastern Germany, was one of Europe's biggest casualties of the U.S. subprime mortgage crisis. Its peer Landesbank Baden-Wuerttemberg (LBBW) took it over late last year after it needed a 17 billion euro (13.3 billion pound) bail-out.

Five former SachsenLB board members, active at various points between 2006 and 2007, have been under investigation since October for acting in bad faith and misrepresentation of annual accounts, said Ricardo Schulz, a spokesman for prosecutors in SachsenLB's home town of Leipzig.

"There is a suspicion that the former board members put the existence of the bank at risk through expanding business, for which the bank was ultimately jointly liable, with only limited equity," Leipzig prosecutors said in a joint statement with Germany's federal criminal investigation bureau.

"The debt financing that the managers used in their deals stood out of all proportion to the risks they assumed and the profits they expected to make," the statement continued.

Prosecutors added that the managers' lack of transparency about their activities and failure to publish them in SachsenLB's annual accounts stopped other executives taking timely measures to mitigate the risks.

Schulz declined to name the individual board members being investigated.

Police raided 28 offices and flats across Germany and in Dublin, including some belonging to the suspects, and seized documents, correspondence, computers and electronic data as evidence, prosecutors said.

Much of SachsenLB's losses came from two Irish special- purpose vehicles with investments in U.S. mortgage-backed securities, Ormond Quay Funding plc and Georges Quay Funding I Ltd, which were worth 23 billion euros in the second half of 2007, prosecutors added.

(Reporting by David Milliken; Additional reporting by Paul Hoskins in Dublin; Editing by Erica Billingham)