NEW YORK (Bloomberg) ? Bawag PSK Bank agreed to pay at least $675 million to avoid prosecution in the Refco Inc. fraud case, the US government said.

The Securities and Exchange Commission said yesterday in New York it sued Bawag and immediately settled the securities fraud suit. The US attorney in New York agreed not to prosecute Bawag for fraud in the Refco case, the SEC said. The Vienna-based lender was accused of helping Refco, the New York-based bankrupt futures broker, hide losses of almost $1.3 billion.

The agreement will facilitate the Austria Trade Union Federation?s planned sale of Bawag, the country?s fourth-largest bank. Bawag didn?t admit or deny the claims in the suit.

The SEC said in a statement the bank ?helped Refco Group Ltd. conceal hundreds of millions of dollars in debt owed to Refco? by an entity controlled by Refco?s chief executive officer, Phillip Bennett.

Sean Coffey, a lawyer for Refco stock and bond buyers suing Bawag, said they reached a separate agreement with Bawag for $108 million and agreed to apply to the government for part of the $675 million. Coffey said he expects his clients to get $100 million from the government settlement.

Bawag would have to pay the difference, probably $8 million, directly to the investors.

Coffey is a partner at Bernstein Litowitz Berger & Grossmann in New York.

Refco, once the biggest independent US futures firm, with a market value of $3.6 billion, filed for bankruptcy October 17 after disclosing that Bennett, 57, had concealed $430 million in uncollectible debt. The bankruptcy is the 15th largest in US history.

Amongst the Refco units affected in the bankruptcy are two of its Bermuda companies: Refco Capital Markets and Refco Global Finance Ltd.

The group?s ex-chief, Bennett, is charged with conspiracy, securities fraud, wire fraud and making false filings with the SEC. He faces an October 30 trial date in the US.

The SEC said that from 2000 to last year, Bawag engaged in transactions with Refco and Refco Group Holdings Inc., an entity controlled and eventually owned by Bennett.

The transactions ?aided a scheme by Refco and Bennett to move the related party receivables off Refco?s books at the end of each fiscal year,? the SEC statement said.

Bennett and the bank used short-term loans to shift the receivables temporarily to Bawag just before the end of February, when Refco?s fiscal year ended, the agency said.

The loans allowed Refco Group Holdings to ostensibly pay off part of its debt to Refco, the SEC said, meaning Bennett?s unit owed a debt to the bank partly secured by a deposit from Refco to an account at Bawag.

?A few days after the Refco fiscal year-ends, the transactions were reversed so that the debt once again resided with the Bennett-controlled entity,? the SEC said.

Refco statements to investors and the SEC didn?t disclose the Refco Group Holdings receivables, the agency said.

The SEC suit also claimed Bawag had connections with Refco, including an equity interest, resulting in the bank?s executives? knowing Refco had misstated its balance sheet. The bank ?knowingly aided and abetted Refco in its deception of investors who purchased Refco securities,? the agency?s statement said.

Bawag?s ties to Refco date back to at least 1998. That year, the two companies formed a joint venture to clear futures and options traded on European exchanges. The bank bought ten percent of Refco in 1999. It sold the stake five years later.

A week before Refco filed for bankruptcy protection, then-chief executive officer Phillip Bennett borrowed 350 million euros, then about $425 million, from Bawag. Bennett was subsequently arrested by US authorities and accused of concealing $430 million in uncollectible debts to Refco.

Bawag?s CEO, Johann Zwettler, was forced out over the scandal in November. In March, his successor, Ewald Nowotny, said Bawag used accounts at Refco and offshore companies, allegedly set up by former Bermuda resident Wolfgang Flottl, to hide almost 1 billion euros in hedge fund losses. Last month, the Austrian Trade Union Federation said it controlled at least 27 percent more of Refco?s equity through loans.

?This settlement is a good deal because it draws a line under the past,? Nowotny said. ?The way is now open for a positive future development of Bawag PSK.?

The Austrian government on May 1 bailed out Bawag with 900 million euros of guarantees. The bank also received 450 million euros in loans from rival Austrian banks.