Sigrún Davíðsdóttir's Icelog

More on Landsbanki’s last hours

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The Landsbanki Winding-Up Board writ against managers and board members of Landsbanki contains further insight into ownership and the bank’s status just before its demise. Here are some excerpts from the writ:

* The assets of father and son, Bjorgolfur Gudmundsson and his son Bjorgolfur Thor, were convoluted and not clearly separated. They had, according to the writ, joint ownership of Grettir, Eimskip and Icelandic Group. As a consequence of Landsbanki’s collapse both father and son became insolvent. Gudmundsson later went bankrupt but his son managed to renegotiate with his creditors.

* This connected ownership led the Icelandic FME to look at the bank’s risk assessment in April 2005. Things moved slowly, FME was even softer than the FSA in the UK, but in February 2008 FME concluded that Bjorgolfsson’s exposure to the bank was not 16.1% as the bank itself claimed but 42.1%, far above the legal limit of 20%. – Interestingly, the bank’s own rules were clear but they were not followed when it came to risk assessment of the bank’s major shareholders.

* According to the WUB, by September 30 2008, father and son did not only control the 41.85% they owned in the bank but had in reality control over 73.38% through shares owned by Landsbanki and Straumur, the investment bank where father and son were also the largest shareholders and where Bjorgolfsson was the chairman.

* The writ claims that Landsbanki was insolvent by October 3 2008, “if not earlier” (an interesting point and whole saga in itself) thus making it illegal for the managers to dispose of money to three entities on October 6.

* The WUB is suing CEOs Halldor Kristjansson and Sigurjon Arnason, Jon Thorsteinn Oddleifsson head of treasury and board members Andri Sveinsson, Kjartan Gunnarsson, Svafa Gronfeldt and Thorgeir Baldursson, in addition to 25 insurers.

* These seven are claimed to have caused damages of total ISK35bn (€219m) to the bank by allowing or not hindering three payments on October 6 when the WUB claims the bank was already insolvent. In addition, ISK11bn is sought from the insurers.

* And who were these three entities that the Landsbanki managers were so hell-bent on paying out large sums of money when it seemed clear that the bank was destined only for a moratorium? These three were the above-mentioned Straumur, a Landsbanki’s money-market fund Landsvaki and MP Bank.

* Half an hour before the Prime Minister Geir Haarde addressed the nation in the afternoon of Oct 6 2008, Straumur asked to draw on a loan line of ISK7.2bn (€44.7m). This loan line had been negotiated in January 2007, as part of a deal where Straumur took on to finance Landsbanki’s off shore companies that apparently were set up for employees’ option though never used. – These offshore companies are an interesting story: controlled by the bank, increasing the two major shareholders’ control. –  According to the loan agreement Straumur could only draw on the loan line on the same day if a request was made before 13:30. Even though the request came much later in the day, Landsbanki paid out the money. The payment was made after the time of the day banks were allowed to make large payments.

* Landsbanki bought bonds, hugely above market price in the preceding days and weeks – on a day where there was literally no market. For some reason, the managers felt a pressing need for these purchases, in total ISK20bn.

* MP Bank demanded to draw on a loan, related to previously negotiated loans, just over ISK7bn (€44m). Landsbanki legal adviser denied the request but an hour later had a change of mind and the loan was paid out at the same time as the Straumur loan.

* Everyone who runs a company knows that an insolvent company is prohibited by law to pay out money. For some reason, the Landsbanki managers thought it vital to pay out money to Straumur, Landsvaki (even more irregular since it was paying way above market price) and MP Bank. There are no doubt still untold stories from Landsbanki’s last hour.

Follow me on Twitter for running updates.

Written by Sigrún Davídsdóttir

January 20th, 2012 at 9:26 am

Posted in Iceland

3 Responses to 'More on Landsbanki’s last hours'

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  1. Nobody has commented so far, how sad.
    Yes, from the information I have you are correct in your assumptions.
    Your people are too busy minding their own asses and trying to maintain an apperanace of integrity to agree with you.
    But you are correct.
    Stay with this, take care of yourself. they will want to hurt you.
    I’m English. I understand and appreciate that you are publishing the truth. My ‘brethren’ need to enlighten themselves. Who knows what will turn out.
    Stay teh course!
    And thank-you.


    1 Feb 12 at 2:36 am

  2. You have allowed comments. That is quite brave.
    I think that your reporting is brave, correct, and going to attract to youself sanctions.
    We’ll see..
    I’m English. I’m Kaupthing IoM. We were abused by your ‘banking elite’,
    Your elites Range Rovers were paid for by our losses.
    It is that basic.
    I want to see this mess cleaned up. I want to see my country, the UK, clean up its backyard as well.
    We can only achieve this by the transparent spread of all information.
    Let’s do it!


    1 Feb 12 at 2:43 am

  3. I agree. There can only be change if there are brave journalists and people who show the courage to voice the truth against the powerful, corrupt and those that make rules and laws to suit their own agendas and make the hard-working, honest people of the world pay.
    Sigrun’s factual, honest and straighforward information is widely read if not widely commented on.

    One thing is for sure… Sigrun is widely applauded for her intelligence and honesty and the genuine concern for the victims of these financial disasters which those in Governments turned a blind eye to.

    To disclose facts some would rather hide, is half way to preventing and protecting the future.

    Iceland deserves protecting, the UK and the rest of the world too.

    Rachael Williams

    19 Mar 12 at 12:38 pm

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