This was alleged in the final report of the special commission by the police on Hypo Alpe Adria in May 2014, which was published this week in the Austrian weekly business magazine Format.
According to Format, it was not only due to bad luck that the Hypo Alpe Adria had to be nationalised. Instead, the Republic of Austria had been "ripped off" by the Bavarian bank. Former Hypo chief Franz Pinkl - who was appointed by the German bank - had taken an important role in those allegedly illegal actions.
Pinkl and former Bayern LB chief Michael Kemmer are suspected by Austrian police of fraudulent concealment concerning the then-current financial situation of the ailing bank. Pinkl and Kemmer have consistently rejected that allegation. As always in a criminal matter, the presumption of innocence applies.
The Hypo bank has had a turbulent recent history in Austria. In October 2012, a tug of war involving billions of euros broke out between the Bavarian state of Germany and Austria's federal government over the handling of the ailing bank.
Starting in 2008, Hypo's parent company of the time Bayern LB poured three billion euros into the Austrian bank.
In December 2012, experts decided that due to Hypo bank's parlous financial state, the money need not be repaid until the Hypo was properly rehabilitated.
The Bavarian bank said that the Hypo's cancellation of their repayments was "obviously" a breach of law. Later that year, Bayern Landesbank took the case to the EU.
In December, the EU Commission approved state financial aid of about €1.5 billion for the Hypo bank.
The situation around the bank is mired in controversy, with a recent petition urging a parliamentary investigation attracting 49,000 signatures, with an additional 140,000 signatures online.
The Moody's rating agency has downgraded Austrian banks as a result of the recent government decision to penalize creditors of the ailing bank through a "bail-in."
The scandal also led to the imprisonment of Wolfgang Kulterer, former CEO of the Hypo Alpe Adria state bank to a term of six and a half years for embezzlement and fraud.