Sigrún Davíðsdóttir's Icelog

‘There is something unreal about this,’ the sharp and witty Justice David Steel said late in the day Friday afternoon, after listening to Glitnir lawyers debating from the morning with lawyers representing Jon Asgeir Johannesson. In the dignified surroundings of Old Bailey his team was trying to quash the international freezing order that the Glitnir Winding-Up Board obtained at the Royal Court of Justice in May. More than once, Justice Steel reminded himself and the others present – mostly lawyers, apart from the black-clad couple Johannesson and Ingibjorg Palmadottir and a couple of their friends – that Johannesson had been the prince of the UK high street challenging the king of retail, Sir Philip Green.

To begin with, Johannesson’s lawyer asked for the hearing to be held in private – the delicate information unavoidably disclosed would be all over the Icelandic papers tomorrow (as a matter of fact the news was out during the lunch break) – but Justice Steel upheld the core British principle of an open court. So I wasn’t thrown out but could sit and listen – and there was a lot to hear.

Johannesson claims that his assets now total only £1,1m: his assets in the UK total £199.000, including three cars – a Rolls Royce Phantom, a Range Rover and an Aston Martin. However, after presenting the list of assets earlier Johannesson has now changed his mind on the Rolls Royce claiming it’s a gift to his wife though he hasn’t produced any documents to support his claim. In London Johannesson lives in a rented property, paying £6.000 a month. From JMS Partners, the company that Johannesson co-owns with House of Fraser chairman Don McCarthy and ex-CEO of Baugur Gunnar Sigurdsson Johannesson draws a £700.000 annual salary – though its operation is rather unclear.

In Iceland, his assets are again three cars, two Range Rovers and a Bentley and then four houses one of which is heavily mortgaged, £15.000 in four bank accounts and shares of no value in several companies, most noteworthy in Gaumur where Johannesson owns 45%. Gaumur’s debt is ISK8bn and seems, according to Justice Steel, in reality insolvent. Earlier, Johannesson had claimed that he co-owned Hotel 101 with his wife but now claims that his wife owns is. He also claims that two properties are hers although the mortgages are in his name. He has £22.000 in a Coutt’s account and some $70.000 in an account with Citigroup.

Justice Steel was intrigued by the fact that a man who was once said to be worth £600m, who had in the years 2001-2008 a monthly expenditure £280.000-350.000 (!) and also had £11m flowing through his Glitnir account in autumn 2008, as the banks were collapsing, now only has a paltry £1,1m worth of asset to show for it out of which 275.000 are in cars. An expenditure on this level couldn’t but leave something more substantial behind thought the judge.

Around the time that Glitnir obtained the freezing order Johannesson had ca £500.000 flowing in and out of his account at Coutt’s (a UK bank for very wealthy individuals) – Johannesson’s lawyer explained, apparently to Justice Steel surprise, that the money stemmed from the sale of his ex-wife’s house, bought by him, and then used immediately to pay off bills that Johannesson hadn’t been able to pay earlier.

Today it transpired that Johannesson and his wife used to own two (not just one as earlier believed) yachts, one of which had been repossessed and sold on by Kaupthing Luxembourg (in reality, Banque Havilland). The interesting point here is that according to Justice Steel no documents have been produced to prove the sale – and the Kaupthing Luxembourg administrators have not been willing to co-operate with Glitnir on this matter. The question left hanging in the air was if the proceeds of the sale really did go to Kaupthing. The other yacht, a Ferretti, was pledged to and apparently repossessed by  Sparbank – a surprising lender if it’s the Danish Sparbank since it’s a small bank.

An additional reason to distrust Johannesson’s list of assets produced was, according to Justice Steel, the fact that Johannesson had been less than forthcoming with information and had then changed his mind on some things without any documents to support what Johannesson then called ‘mistakes.’ Also that he hadn’t been able or willing to produce any overview of his salary at Baugur – only, that a flow of £3-4m had gone through his pockets every year. In all, £30m had been paid to his Glitnir accounts during these years. SWIFT transfers show accounts with Kaupthing Luxembourg, KSF and Royal Bank of Scotland.

Justice Steel had also doubts about the source of Johanneson’s funding, i.a. the loan on the flats in New York where Landsbanki had lent of $25m without any security. It was obvious that his Lordship struggled to understand the logic in this for the bank. And he also struggled to understand the change of ownership in the media company 365 midlar that Johannesson now claims belongs to his wife. Nor could his Lordship understand that someone who didn’t seem to have any assets was engaging lawyers both in the UK and the US. Probing his lawyer on that the lawyer also had difficulties in explaining the importance of a freezing order when there were practically no assets to freeze.

Listening to these and other issues, Justice Steel said he wasn’t assured that Johannesson had given a full and frank disclosure of his assets. In addition, there was the complicated corporate structure that would give ample room to move assets around. The fact that Johannesson had sold the Chalet 101 to his wife while negotiating with Glitnir on how to repay the loan didn’t inspire confidence either. The judge also mentioned what the Glitnir lawyer had said: that Johannesson’s conduct indicated a ‘low standard of commercial morality’ – on the whole there was, according to Justice Steel, a real risk that assets would be disposed of, leading him to renew the freezing order.

In the end, Johannesson’s lawyers had to disclose their bill of whopping £600.000 – Johannesson has to pay all cost, possibly running up to £360.000 but the immediate payment is £150.000. If he doesn’t pay he risks being declared bankrupt.

The freezing order is related to the Glitnir case in the UK against Palmi Haraldsson and Johannesson regarding ISK6bn loan to Haraldsson’s Fons. The basis of that case is that assets were sold at a premium only to extract money from Glitnir for the benefit of the two businessmen and make the bank lose. – No doubt, there is more of amorality and the unreal to come.

*There were no documents handed out in court – I hope the information above is correct but mis-hearing or misunderstanding can’t be ruled out.

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