Sigrún Davíðsdóttir's Icelog

The Office of the Special Prosecutor has charged one of Bakkavor’s owners Lydur Gudmundsson and Bjarnfredur Olafsson, a lawyer at Logos and a previous member of the Kaupthing board. According to Ruv (the State Broadcaster) Gudmundsson is being charged in relation to a move in October 2008 when the ownership of Bakkavor was changed and at the same time an attempt by Kaupthing to recover loans from Exista, either by payment or by taking over Exista shares pledged to Kaupthing, was thwarted. An important part of this move was to secure the ownership of Lydur and his brother Agust over Bakkavoer, the profitable UK food company.

What Gudmundsson planned and Olafsson helped him to execute was to organise a round-about of loans that seemed to be destined for Exista but did indeed not end up there. Gudmundsson, at the time Exista’s director of the board, made it look as if Exista was getting ISK50bn of fresh capital but in reality, on ISK1bn ended in Exista. The money came indeed from a company owned by Exista. What Olafsson did was to send a statement to the tax authorities and the Shareholders’ Directory, claiming that the liquidity had been increased by ISK50bn when that was, according to the OSP, not the case.

Consumers in the UK may not know it but when they buy chilled ready-made food in a UK supermarket it’s pretty likely that the food they buy is produced by Bakkavor, the largest UK producer of chilled ready-made food. Bakkavor isn’t a household name in the UK but its goods are, sold under the brands of various supermarket chains in the UK – and Bakkavoer was owned by Gudmundsson and his brother Agust. These moves in autumn 2008 were made so as to make sure they would hold on to Bakkavoer.

The Gudmundsson brothers have fought ferociously to keep their ownership of Bakkavor. When it seemed, after the collapse, that the brothers were losing their hold on Bakkavoer, the company’s foreign creditors insisted that the brothers would keep on running the company. That was very much against the will of  some of the Icelandic creditors, partly because they felt the brothers had been a bit too clever safeguarding their own interests in Bakkavoer. Recently, one of the Icelandic pension funds sold its shares in Bakkavor in frustration over the brothers’ continued influence there and overt effort to gain control over Bakkavoer again.

It’s interesting to notice that the events in question happened after the collapse of the banks. These events did at the time raise eyebrows, the media claimed that something had been wrong with this transaction and this action has continuously been questioned. The OSP charges will to many confirm a lingering suspicion connected to this action.

This is the eight case brought by the OSP and the first that includes no banker but a major shareholder, in this case in Kaupthing. Exista was the bank’s largest shareholder. Robert Tchenguiz was on the board of Exista but he is in no way connected to this case.

The charges are here, in Icelandic.

*UPDATE: Gudmundsson and Olafsson are charged for breaking laws on shareholding companies. The maximum punishment is two years imprisonment. The OSP also demands that Olafsson will permanently be stripped of his licence to practice law. – The latest additions regard the brothers’ influence on Bakkavoer and their interests there.

UPDATE March 13 2014: Today, Lýður Guðmundsson was sentenced at the Icelandic Supreme Court to eight months in prison five of which are suspended. Ólafsson was sentenced to six months prison, three of which are suspended. See ruling here, in Icelandic.

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