July 7, 2009 / 3:31 PM / 11 years ago

UPDATE 1-Bank Austria branches searched in fraud probe

(Adds details, prosecutor, source)

VIENNA, July 7 (Reuters) - Branches of UniCredit’s (CRDI.MI) Bank Austria have been searched as part of an investigation into possible fraud, the bank said on Tuesday, but it rejected allegations made against two of its employees.

Bank Austria spokesman Martin Halama said the company was cooperating with the authorities, who have accused the workers of “severe professional fraud” at the bank.

“We absolutely reject all accusations in the strongest manner,” Halama said.

“We didn’t even know officially until today that criminal proceedings against our company, our employees, was being carried out,” he said, adding that the two employees were still in their jobs.

Halama did not say in which department of the bank the employees worked, but Austrian magazine Format said they worked in Bank Austria’s Treasury department.

The prosecutors’ office handling the investigation confirmed the allegations but would not give further details on the employees or the size of the possible transactions.

“The investigation is ongoing ... It concerns at least two people so far,” said Petra Schweifer, spokeswoman at the prosecution office in Eisenstadt, southeast of Vienna.

A source familiar with the investigation said the accusations were linked to a long-running dispute with municipal utilities in the Burgenland province who say the bank gave them bad investment advice.

The utilities, such as water and sewage authorities, invested heavily in markets last year using foreign currency options and lost money, said the source. They have previously started a civil suit against the bank, the source added.

The prosecutors’ criminal probe was prompted by accusations made in the context of this dispute, it said. (Reporting by Alexandra Schwarz and Eva Komarek, Writing by Sylvia Westall; Editing by Greg Mahlich/Will Waterman)

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