Sigrún Davíðsdóttir's Icelog

Like Kaupthing’s management the Landsbanki managers had their largest clients and shareholders in mind to the bank’s bitter end. But they seem to have gone to greater lengths when it came to documentation.

Three Landsbanki managers, Halldor Kristjansson, Sigurjon Arnason and Elin Sigfussdottir, met on October 6 2008, when the bank had already been taken over by the FME (the Icelandic financial services authority), for an ‘informal meeting’, according the minutes. Investigation that my colleagues at RUV (the Icelandic State Broadcaster) and I did shows that actually this meeting probably never took place. The minutes was most likely only meant to serve as a documentation for loans that had already been handed out but without the proper process.

According to the minutes the loans are by no means comparable to the sums handed out by Kaupthing (partly wishful because Kaupthing hardly had the money to follow up on the loans). All in all, the Landsbanki managers were documenting loans of ISK117bn (€763m). About ISK70bn (€457m) were loans to companies connected to the bank’s major shareholders, Bjorgolfur Gudmundsson and his son Bjorgolfur Thor.

One loan, of ISK27bn (€176m), was to Samson, owned by father and son, related to guarantees regarding the XL Leisure guarantee that still hung on Eimskip, where Gudmundsson was a major shareholder, after XL went dramatically bankrupt in September 2008.* Other loans were related to Grettir companies, owned by Gudmundsson: one Grettir company got a loan so that another Grettir company could reduce its loans to Landsbanki – a common way of shifting loans around in all the banks since the banks had lent way too much to major shareholders and favoured clients and were trying to hide exposures that exceeded the legal limits to large exposures.

Another loan, documented at this non-meeting, was ISK5,1bn (€33,5m) to a company called Imon, owned by a close associate of Baugur, Magnus Armann. Imon’s role was to buy Landsbanki shares the week before the collapse. The scheme was that Landsbanki, which could no longer buy more of its own shares, then lent Imon funds to buy the shares so the share price wouldn’t be affected by the ongoing sales. The feeling is also that certain people could then sell shares though it’s not clear who possibly profited. Overview of sales in Landsbanki shares these fateful days doesn’t show any major sales, i.e. no big stakes were sold off in single sales. In Iceland Imon has become synonymous with the activities the bank engage in just before the collapse to keep everyone in the dark about the real situation in the banks.

In an earlier log I told the story of Stytta. In the minutes of Landsbanki Oct. 6 meeting there are also loans related to Stytta and shifting of loans so as to hide huge exposures to Palmi Haraldsson, yet another businessman closely associated to Baugur.

The Landsbanki Oct. 6 minutes gives an idea of whom the bank had in mind as the last documents were prepared, in this case after the bank had been taken over. Soon after the collapse of the bank Kristjansson and Arnason resigned but Sigfussdottir was appointed a CEO. This shows that after the bank did indeed collapse someone closely linked to the old bank, its main shareholders and big clients, was running the new bank. The question is how much of the spirit of the old bank lived on in the new bank, the spirit of favouring those already with way too large exposures.

* Bjorgolfur Thor Bjorgolfsson runs a website to clarify his points of view to the Icelandic public but unfortunately this website is only in Icelandic. He maintains that he and his father did not offload the guarantee on to Landsbanki. Others dispute his point of view regarding XL Leisure, the Eimskip guarantee and Samson’s role in the XL Leisure story. The Oct. 6 minutes does mention a loan to Samson related to the XL Leisure guarantee.

Follow me on Twitter for running updates.