Sigrún Davíðsdóttir's Icelog

Jon Asgeir Johannesson and his wife have now been served the court papers related to Glitnir’s winding-up committee that had an international freezing order passed on Johannesson at a London Court. The freezing order is part of the WuC’s action to claim back $2bn through a court case in New York, estimated to be the amount that Glitnir Banks lost on loans and favours to ‘a cabal of businessmen led by a convicted white collar criminal’ Johannesson. According to The Guardian Johannesson, who hadn’t been willing to divulge his whereabouts when contacted by Icelandic media, was at one of his two New York flats. This version however doesn’t seem to be the correct one: according to the Icelandic State Broadcaster, Ruv, the court papers were handed over to Johannesson’s lawyers in London today at 1pm. Johannesson will now have 48 hours to hand over a complete list of his assets though the time might be prolonged over the weekend.

Many Icelanders will be curious to know the extent of his assets since he and his family enjoyed more favours than any other living Icelander (in the end Robert Tchenguiz outdid him by loans from Kaupthing only, another story) in the three failed Icelandic banks and in other parts of the Icelandic financial system, most of which has failed. By the end of 2007 he and his family (father, mother, wife) was the biggest debtor to the banks, owing €2,6bn, at the time about a fifth of the country’s GDP.

Johannesson has long claimed that he’s been hounded by political forces connected to the Independence Party that’s ruled Iceland together with the Progressive Party since Iceland became a republic in 1944.* The intriguing fact is that in spite of what Johannesson has called political persecutions, i.a. an investigation that went on from 2002-2008 after which Johannesson was convicted to conditional three months in prison, Johannesson, his family and his closest associates kept on getting loans.

Kaupthing was instrumental in the late 90s when Johannesson was constructing his supermarket chain Bonus with his father and then when his investment vehicle Baugur was floated on the stock market. After buying companies left right and centre, first in Iceland, then in Scandinavia and in the UK, Kaupthing seems to have lost faith Baugur in 2006 when Baugur led a consortium to by the UK retailer House of Fraser. But Johannesson didn’t need to worry because then Landsbanki stepped in to fund the takeover bid. Landsbanki funded the Johannesson’s enterprises lavishly and also his private vanity buys like a chalet in France and the not one but two flats at 50 Gramercy Park, a prestigious NY location.

Although there is no indication that Johannesson ever put a penny into the NY flats – he simply wasn’t in the habit of paying anything himself, even his spectacular wedding in November 2007 left a trail of unpaid bills in Iceland – the Landsbanki resolution committee seems to have granted him free use of the flats he never paid. The ResCom hasn’t been forthcoming with any answers as to the status of the flats (I’ve asked them several times; the answer is that they don’t comment but will in due course). The rumour goes that Landsbanki, in lending Johannesson the $25m to buy the flat, took no collaterals, either because they forgot or didn’t bother. Johannesson is the largest debtor in Landsbanki.

By mid 2007 Johannesson was finally in the position that he had sought since 1998: to be a majority shareholder of a bank, Glitnir. Although his loans already filled page after page in the Glitnir loan book he kept adding to his loans, using ever more crooked ways to hide that his standing with the bank was beyond all rhyme and reason, that all rules in the book were broken, crushed and ignored – and remains to be seen if not the law as well. Glitnir WuC is now trying to claw back assets bought with the looted money.

So far, Landsbanki hasn’t touch a hair on Johannesson’s head. PriceWaterhouseCooper, the administrator of one of Johannesson’s failed UK companies, has kept Johannesson on the board of Iceland and House of Fraser. Kaupthing is struggling to make sense of the fact that the Johannesson family still has ties to Hagar, the holding company that owns their retail empire in Iceland. Glitnir has been the first to take a decisive step to wrest assets, bought for loans that were never repaid and never meant to be repaid, out of Johannesson’s possession. Glitnir does it by simply going for the money, leaving others, i.e. the Office of the Special Prosecutor, to deal with eventual criminal charges.

Over more than a decade Johannesson was allowed to overstep all sensible law of competition and go well over 50% market share in important markets such as food and media. And he still owns a media company in Iceland, though now in his wife’s name, through a murky web of companies. When the Icelandic banks went abroad and netted some of the floods of cheap money filling international money markets he netted the most, through all the banks.

Foreign banks were dying to lend him – only they were clever enough to make margin calls, no later than early spring 2008. At that time, Baugur was de facto bankrupt but the Icelandic banks divided this between them and chipped in – he was too large for them to fail – and, if not merrily they did at least pile more on Johannesson’s already sizeable Icelandic debts. The sad thing is that Johannesson was extremely good at securing funding and equally bad at making sensible use of the money. Nothing of any worth has been built up in Iceland for all this money.

Money was too easy to get, no hard thought put into using it either. Overpaying – paying price way beyond the asking price – was the rule. When I once asked a Baugur executive why they continuously overpaid he explained that time is money and it can sometimes pay to pay more because it saves time… and time is money. Now, I wonder. Interestingly enough it wasn’t just Johannesson who was in the habit of overpaying. All the Icelandic high-flyers and the banks did. Yes, I do wonder why.

Time was money and there was apparently no lack of money to buy time. Plenty of it. In the end, too late, Iceland woke up to the fact that what these ‘viking raiders’ had really been buying all along was debt. Debt that now stays with the Icelanders as those who left them the debt refuse to shoulder their responsibility and are holed up in their never-paid-for abodes far from Iceland.

It’s still a mystery to me, that if Johannesson was, as he claims himself (last in an interview with Bloomberg earlier this week), indeed the victim of a continuous political persecution in Iceland he did jolly well for himself. Who needs friends if being a victim of a persecution brings you all the riches… if not of the world then at least of Iceland?

*An Icelandic friend pointed out to me that naming only these two parties was an over-simplification – and that might be true. There have of course been other parties in power or with influence such as various shades of left/socialist parties and social democrats.

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