Bail plea failure keeps K1 founder in jail

By Edward Taylor and Alexander Huebner

FRANKFURT (Reuters) - The founder of Germany's K1 hedge fund group remained behind bars on Monday after his lawyers failed to convince a judge he was the victim of a witch hunt and had immunity as a diplomat for an African country.

Lawyers for Helmut Kiener denied he committed fraud and sought his release on bail, arguing he was a diplomat for the West African nation of Guinea-Bissau, documents appealing against his arrest showed.

Kiener is suspected of fraud and breach of trust in a case in which Barclays (BARC.L) and BNP Paribas (BNPP.PA) may have lost millions of dollars and which prosecutors say featured lavish personal spending on planes, a helicopter and luxury properties.

"The appeal for release was rejected," said Dietrich Geuder, a spokesman for the prosecutor's office in Wuerzburg, Germany. After a judge at the district court rejected the appeal, the case moves to a state court, the spokesman said.

A court filing dated November 5 said Kiener argued it was inappropriate to accuse him of fraud or breach of trust.

"Mr Kiener is of the view that funds were invested, objects were rented out or chartered, and that the funds are still there," an appeal against his arrest filed by his lawyers showed.

The filing said Kiener had no need to commit a crime because he had a secure financial position. Every year since 1996, he had an annual income in seven figures.

Some of the accusations were based on "misunderstandings," not facts, the filing said, adding accusations against Kiener were possibly the product of a "witch hunt" by banks.