Sigrún Davíðsdóttir's Icelog

The beauty of the American court system is the transparency into the cases as they evolve – and right now, it’s the Glitnir Winding-Up Board against the Johannesson Defendants, i.e. Jon Asgeir Johannesson and his wife Ingibjorg Palmadottir. An active business woman in her own right she’s aired her irritation at being seen as her husband’s ‘alter-ego.’ No doubt, this is because her husband is seen as the main culprit but due to the fact that their business interests have become intertwined this is the way American lawyers have chosen to frame the case. After all, it’s difficult to suspect the GWB of sexism: it’s headed by a sure-footed female lawyer, Steinunn Gudbjartsdottir.

Johannesson, his wife and five others are being brought to court in New York as the GWB seeks to get back $2bn claimed to have been looted from the bank by this gang of seven with a strong support of Glitnir’s auditor PriceWaterhouseCooper, Iceland. For the time being, the case centres on Johannesson-Palmadottir and their ownership of three flats in the super-exclusive NY condo 50 Gramercy Park, also mentioned in the international freezing order, confirmed by a UK court on Friday.

The flats have been the centre of some attention lately. In 2006-07 – the time when the folly of the favoured clients of the Icelandic banks reached its climax, the years of buying yachts, jets and other trophy assets – the couple bought not one but three flats at this Ian Schrager-designed condo, 16A, 17A, 18A, for $25m. Two flats were merged, which is why just two flats are often being mentioned. Landsbanki lent the money but either didn’t bother their clients with collaterals or forgot – I’ve repeatedly asked the Landsbanki resolution committee about this case but they decline to comment until this case is over. However, on in the UK court papers it seems that Johannesson has given conflicting information on the financing, claiming at different times that his family financed it or that the financing came from Landsbanki.

Be that as it may, from the NY court document it’s now clear that the couple possesses these three units, now two flats: one flat is now a collateral held by Landsbanki, the other by Glitnir. Palmadottir’s address in the court documents is given as 50 Gramercy Park though in a recent statement she claims to be domiciled in the UK. Johannesson’s address is the same though he also gives a Knightsbridge address and the address of JMS Partners, one of his businesses in the UK, in London’s West End. From the documents it’s also clear that the couple rents one of the NY flats out, collecting a rent of $312.000. According to Palmadottir’s statement her son (from a previous marriage) now lives in the other one. She also confirms earlier news that other inhabitants at Gramercy Park have sued the couple because they hadn’t kept to the high standard of interior decoration expected in this distinguished property (the couple fitted their flat with an IKEA kitchen).

In an article recently, Johannesson refused that he had any assets in offshore islands. According to the NY documents he has millions with the Royal Bank of Canada – interestingly, the bank offers extensive offshore services and is under investigation in Canada for allegedly helping some clients to evade tax. Out of these millions the couple are said to have paid up a loan to the RBC recently of $10m. The GWB claims that these 10m are part of the Glitnir loot. Palmadottir claims that she bought the flats with her own family money, she comes from a wealthy family, and that the flats belong to her except for a 1% belonging to her husband. At the UK court on Friday, Johannesson’s lawyer maintained that Johannesson’s total assets now only amount to £1,1m.

The report of the Althingi Investigative Commission tells a rather different story. Palmadottir, as business partners like Palmi Haraldsson, Magnus Armann, Sigurdur Bollason, Thorsteinn Jonsson, Hannes Smarason and several others were a tightly knit group where assets moved around in an incestuously intimate way – made all the easier because the banks quite often didn’t see these parties as at all related though every Icelander on the street would know that the ties were indeed close. – The NY court documents mention these close ties.

The couple is mainly contesting the jurisdiction of the NY court, claiming that any case against them should be brought in Iceland, the information from subpoena regarding 50 Gramercy Park and from Royal Bank of Canada be revealed and that Glitnir can use any information from the NY court case in either Icelandic or British court.

The GWB claims that the Johannesson transactions made no economic sense for Glitnir. The same counts for so much of the money the favoured few obtained from the Icelandic banks – and so much of these loans wasn’t used to build up any business but was just spent on private assets such as houses, cars, yachts and jets.

Most likely, Kaupthing will be issuing charges later this year, possibly late summer or autumn. The resolution committee has already gathered a lot of material passed on to the Office of the Special Prosecutor. Johannesson was also a big borrower in Landsbanki. Hopefully, the Landsbanki resolution committee will at some point throw light on Johannesson’s relations with Landsbanki – and within Landsbanki there are undoubtedly many interesting stories, indeed whole sagas, waiting to be told of the bank’s relations with its major shareholders father and son Bjorgolfur Gudmundsson and Thor Bjorgolfsson who in addition also had yet another bank Straumur, with yet more stories in addition to the apparent interconnections of the banks and their major shareholders.

There are plenty of new Icelandic sagas in the making…

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