BAWAG bank chairman, Mr. Walter Flottl, and how bank funds were loaned out to his son, Bermuda resident, Dr. Wolfgang Flottl, who used letterbox companies to invest the money around the world.

Mr. Flottl has had to put up with the daily intrusion into his banking offices, as regulators have remained camped there for a week and continue to pore through bank files.

Last Wednesday, he said during an interview on Vienna's evening news that he only participated in the deal because it was brought to him by his son.

Vienna-based news magazine News also reported this week that Dr. Flottl's US companies were being investigated by the Security and Exchange Commission and other regulators there in the US.

One anonymous investigator privately told the news magazine: "We have leads that Wolfgang Flottl only acted as a front. Behind him there are bigger people.'' A spokesman for the the SEC said it was not the policy of the agency to confirm or deny the existence of any investigation.

But the spokesman said The Royal Gazette's enquiry was the first his office had received on the story.

News also alleges that Dr. Flottl's companies' dealings led to the collapse of the Swedish bond market. It claims Merrill Lynch, Goldman Sachs, Warburg and Salomon brothers, all huge financial players, have refused to do business with him as a result of inquiries made into his affairs, the article said.

A stry in US magazine International Business Week published yesterday has reported that major financial services companies Nomura Securities International, Bear Sterns and Morgan Stanley & Company continue to back Dr.

Flottl.

Meanwhile, Business Weekly, also out of Vienna, reflected concern about how the inquiries might affect the labour union that is a 70 percent shareholder in the Bawag bank.

President of the labour union, Mr. Fritz Verzetnitsch, is said to have taken an enormous political risk and defended the senior Flottl's business dealings with his son, saying that there was no question of the bank dealing with the Mafia, money laundering or drug money.

But Business Week has reported that Dr. Flottl's capital is clean and rumours about Mafia connections stem from an abortive shakedown attempt in the 1980s.

A director of Dr. Flottl's Bermuda holding company, Belforte Group Holdings Ltd., former Hamburg Mayor Mr. Klaus Von Dohnanyi, who travels to Bermuda twice a year for directors meetings, is quoted as saying: "Wolfgang Flottl is a very impressive man.'' Mr. Flottl's secretary at Ross Capital Markets Ltd. said yesterday that Mr.

Flottl was still off the Island and unavailable for comment.