Sigrún Davíðsdóttir's Icelog

The first Surpreme Court ruling in a case of insider trading in Iceland has constituted a clear example: the gain was ISK192m,  €1.2m, the sentence is two years imprisonment. There are two fundamentally significant aspects of this case: it’s the first Supreme Court ruling in a case brought by the Office of the Special Prosecutor – and the man found guilty, Baldur Gudlaugsson (b. 1946), is not one of the thirty or so major players in the collapse of the Icelandic banks but a former permanent secretary (a civil servant) at the Ministry of Finance.

Gudlaugsson is a lawyer, intimately connected to the Independence Party, a personal friend of its former leader David Oddsson and as a board member of many companies a prominent person in the Icelandic business community. Interestingly, there was one Supreme Court judge who thought that Gudlaugsson’s guilt was not clear – his name is Olafur Borkur Thorvaldsson, a relative of David Oddsson and his appointment to the Court in 2003 was hotly disputed.

The law Gudlaugsson is seen to have violated is from 2007. The criminal deeds are clearly defined, Gudlaugsson’s sale of shares in Landsbanki in September 2008, shortly before the bank collapsed was, according to the law, illegal. This law has now stood its test.

The ruling will no doubt be a food for thought at the OSP. The state prosecutor lost his last case in the District Court (a case related to Byr and MP Bank). Remains to be seen what the Supreme Court does in the Byr case. The OSP is probably still testing the legal ground before bringing forth further charges.

At the moment, the question of blame is widely debated in Iceland – and the ruling in Gudlaugsson’s case leads to the sarcastic remark, often heard since the District Court ruling, that  one civil servant, who made a profit of ISK192m, may be the only person to be sent to prison for criminal acts connected to the collapse of the banks. A scapegoat for the infamous thirty who many Icelanders do blame for these events. – It’s an untimely remark: it’s still far too early to tell what the outcome of the present and coming OPS cases will be.

Apart from Gudlaugsson’s case, the debate on blame falls into two categories: there is what could be called the “Flat-Screen Theory of Blame” – and then the theory, according to which the OSP is working, that alleged crimes are committed by certain individuals. Suspicion of criminal doings should lead to an investigation and, depending on the outcome of the investigation, charges should be brought.

The “Flat-Screen Theory” draws its name from an interview with Bjorgolfur Gudmundsson, who together with his son Bjorgolfur Thor, owned 42% of Landsbanki at the time of its collapse.* In the interview, published a few months after the events of October 2008, Gudmundsson pointed out that Icelanders had lived beyond their means, the number of flat-screens sold in Iceland being a case in point. The core of this theory is that everyone is to blame. Jon Asgeir Johannesson recently aired the same idea – no single person did anything wrong or is to blame; in his version, the collapse seemed like a natural disaster. What happened in Iceland, according to the “Flat-Screen Theory,” was a sort of collective madness that ended in a collective collapse.

This theory has a tail to it, now wagged more and more by various prominent lawyers, who happen to be somehow connected to those seen by many to be to blame. The tail is that the OSP investigations and journalism that seeks to unearth what really happened is “witch-hunt” and “rabble’s court.” This also suggests, implicitly and explicitly, that the attempts to unearth criminal deeds and figure out what really happened is now seen by these lawyers as a much greater threat to the wellbeing and the economy of Iceland than the collapse itself.

In general, the OSP seems to enjoy a high level of trust in Iceland though many find it frustrating how long a time the investigations take. It is however pretty clear who adhere to the “flat-screen theory of blame:” it’s mostly those who were part of, or are now connected to, the political and business elites before the collapse.

Eva Joly (who at the time was much maligned by some of those now propagating the “flat-screen theory of blame”) warned that when those in power feel threatened they use infamy and dirty tricks to further their causes. Gunnar Andersen, the director of the Icelandic Financial Services Authority, the FME, is fighting against being driven out of office. The result of his wrestle with the board, which has just produced a third report into his past at Landsbanki, is still unclear. The FME has, incidentally, sent almost 80 cases to the OSP.

The “Flat-Screen” theorists tend to portray a strikingly selective view of events prior to the collapse. A view that bears little similarity to the findings of the April 2010 report of the Althing Special Investigative Committee. Indeed, in addition to belittling or directly undermining the endeavours of the OSP they also throw doubt on the SIC report or just pretend it doesn’t exist by never referring to it.

It’s fair to say that there is a battle raging in Iceland between the “Flat-Screen” theorists and those who think investigations are necessary in order to show that crime doesn’t pay. That battle is fought over who gets to interpret the past. Those who eventually manage to shape the Icelanders’ understanding of events and circumstances up to October 2008 will come to own the present – and eventually the political and financial future of Iceland.

*Landsbanki WUB claims that father and son – through Landsbanki, Straumur and related parties – controlled 73% of shares in Landsbanki and not only the 42% they held. Bjorgolfsson denies this on his website (only in Icelandic).

The Supreme Court ruling over Gudlaugsson is here (only in Icelandic). – There are two Court levels in Iceland: District Court – and – Supreme Court. I have earlier sometimes used High Court and County Court but it’s the same as DC and SC.

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