The Supreme Court in Luxembourg has now ruled that the documents from Kaupthing Luxembourg, demanded by the Office of the Special Prosecutor in Iceland after house searches in Luxembourg in February last year, can be handed over to the OSP. The documents, mostly found at Banque Havilland that in summer 2009 took over the operation of Kaupthing, are thought to be related to loans, accounts and transactions connected to Kaupthings’ major clients, owners and the bank’s senior management.
The house searches in Luxembourg by the local police are one of the most extensive searches ever done in Luxembourg. Afterwards, the rumour was that the OSP had found documents far beyond what they had hoped for and had their eyes on a lot more than they had originally in mind. The process has been a lengthy one. First, a judge had to review the documents to see if the search warrant applied to them. That took until autumn, as far as I understand. Then it turned out that parties, to whom the documents related, could try to veto the handing over of the documents.
The result was that Banque Havilland, that had earlier said they would try to be as accommodating to the OSP as possible, together the 19 parties (no names have been mentioned but I would be very interested in see a list of these 19 names) asked that the documents shouldn’t be released. Interestingly, Banque Havilland said after the searches that they would cooperate fully with the OSP. The fact that Havilland took a lead in attempting to hinder the OSP to get the documents tells another story. The attempted veto had to go through a county judge, that ruled in favour of the OSP. That ruling was appealed. Today, Banque Havilland and the 19 lost the appeal. Now, the OSP will get the coveted documents in the coming days.
What might the Kaupthing documents contain? Already, the 25.9. 2008 loan overview from Kaupthing, leaked on Wikileaks in summer of 2009, showed that loans to parties with bad credit ratings, against no or insufficient guarantees and collaterals, almost all went through Kaupthing Luxembourg. The report of the Althingi Special Investigative Committee confirmed this.
It seems clear that the most opaque dealings of Kaupthing were dealt with in Luxembourg. Someone familiar with Kaupthing’s operations recently told me that Kaupthing can’t be fully understood without a full insight into the bank’s Luxembourg operations. That’s what the OSP surely knew when the Luxembourg house searches were done last year. It now remains to be seen if some of the senior management of the bank, some of whom were held in custody last year for questioning, will be questioned again in the light of a fuller picture emerging.
For Luxembourg itself, the High Court ruling is of major importance. Lately, I’ve heard that some individuals in Luxembourg are scrutinising certain individuals and companies in order to bring into the open certain allegedly questionable or even criminal activities in the financial sector. It’s now clear that banks can’t hide behind the Luxembourg bank secrecy anymore. Nor should they. Innumerable banks and financial institutions have for decades used Luxembourg to run offshore operations at the centre of Europe. When I was in Luxembourg early last summer I met many locals who weren’t at all happy with the fact that their country had become a synonyme of a place to do dirty deals. The ruling today shows that when a case is supported by sound reasons the Luxembourg High Court agrees.
Follow me on Twitter for running updates.