Sigrún Davíðsdóttir's Icelog

Ripples from charges and investigations

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Following the charges brought by Glitnir’s wind-up committee at a court in New York and an international freezing order on his assets from a court in London Jon Asgeir Johannesson has resigned from the boards of the two companies where he has represented the Landsbanki resolution committee, the supermarket chain Iceland and House of Fraser. Following Johannesson’s conviction in Iceland in the so-called Baugur case in 2008 he was forced to resign from all boards in his Icelandic companies since a conviction bars anyone from being on a board but the Icelandic conviction didn’t seem to affect his foreign activities. The Glitnir charges recently brought against Johannesson in Iceland didn’t seem to have any effect in this direction but it’s unclear if his decision now was a voluntary one or if he was under pressure to resign.

Following the freezing order Johannesson was obliged by the WuC to hand over a complete list of his assets within 48 hours. However, the WuC has declared that it won’t inform publicly whether Johannesson has met this obligation or not. First when Johannesson was presented with the charges in New York Johannesson indicated that he wouldn’t try to defend himself, the cost would be exorbitant. He has now changed his mind and will use all available legal powers to fight Glitnir’s WuP.

Magnus Gudmundsson, ex-manager of Kaupthing and, until recently, of Banque Havilland, was released from custody on Friday as was expected. Afterward, he issued a statement underlining his innocence, the harrowing effect that the case was having not only on him but his family and that he was co-operating fully with the Office of the Special Prosecutor. He pointed out that he had traveled to Iceland on his own accord for the questioning at the OPS.

The last statement could be seen as a message to ex-executive chairman of Kaupthing Sigurdur Einarsson who has been unwilling to travel to Iceland since he couldn’t get an assurance that he wouldn’t be taken into custody. There are rumours that the families and close friends of those who have been put into custody are very upset with Einarsson since his unwillingness to show up for questioning can very well have made life more difficult for the three who were placed in custody. Hreidar Mar Sigurdsson and Ingolfur Helgason were released from custody today. Sigurdsson isn’t allowed to leave the country until next week.

Asked yesterday on Silfur Egils, a political chat show on Icelandic tv, the French-Norwegian ex-magistrator and now French MEP Eva Joly, advising the OSP, said that Einarsson wouldn’t have anything to fear if he was innocent. The fact that Einarsson has chosen not to show up and is now on Interpol’s wanted list doesn’t change the course of the investigation, according to Joly. She was stoic about complaints that custodial sentences and Interpol arrest warrants were too severe but pointed out that many felt an acute discomfort over the treatment of alleged white-collar criminals. Only few identify with drug sellers and thieves but the whole establishment could usually identify with people who are charges with white-collar crimes. (You can watch the interview here; it’s in English but the programme begins in Icelandic.)

But there are more bad news for ex-Kaupthing high fliers. The bank lent in all ISK32bn (now £16m) to 80 key-employees to buy shares of the bank. Twenty of these 80 got ca 90% of these loans – and 50 of these 80 people are still working at Arion, the New Kaupthing. Hreidar Mar Sigurdsson borrowed ISK5,8bn and Sigurdur Einarsson borrowed ISK7,8bn. At the time, these loans were presented as a salary boost to these employes. In hindsight, this looks more like part of the extensive share ‘parking’, alleged to be part of market manipulation. The only collaterals for these loans were the shares themselves but the borrowers gave personal guarantees as well. A few of the employees had been allowed to place the shares in limited liabilities companies.

Shortly before Kaupthing collapsed the board of the bank decided to release these employees from their personal guarantee, thereby underlining that the employees weren’t meant to make any loss on these loans but only to pocket the dividend. The extent of these loans didn’t become public until well after the collapse. The loans have been a bone of contention for a long time, also with the tax authorities, symbolising so much of what was wrong with banking the Icelandic way.

The Kaupthing wind-up Committee has now decided that the employees shouldn’t be released from their personal guarantee. They now have ten days to either repay the loans or renegotiate the terms. The WuC has also declared that it will try to circumvent the right to put the shares into limited liabilities companies meaning that those with companies will also be hit. This will no doubt put many of the employees under severe financial strain since the loans were in many cases far beyond what the salaries of these people justified.

In the Althingi Investigative Commission’s Report it’s clear, from statements from ex-Kaupthing employees that they saw themselves as held hostages by the bank since they were not meant to sell their shares. This underlines the sense of share ‘parking’ by the bank. In the end, the loans that were supposed to enrich these chosen employees might well end up bankrupting them, showing the bank’s cynicism in serving its own interests rather than the interests of its employees.

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Written by Sigrún Davídsdóttir

May 18th, 2010 at 12:42 am

Posted in Iceland

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  1. I asked Palli (Pe1ll Einarsson, one of our top geophysicist and one of those who are aylaws quoted in the media on eruptions and earthquakes) and he’s fairly hopeful it will be a short one. No one really knows, though


    30 Nov 15 at 6:19 pm

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