Hvitsstadir, Kaupthing managers and a tale of cosy relationships
Shortly after the collapse of the major part of Icelandic financial system in autumn 2008, widespread irregularities of lending started to surface. Loans to favoured clients were never paid but rolled on, collaterals were weak or insufficient. Financial institutions financed the buying of their own shares, essentially converting their loan book to own capital. And all of this happened through a web of cosy relationships.
An intriguing story that I have only recently unearthed regards an Icelandic company, Hvitsstadir, privately owned by five Kaupthing managers – Sigurdur Einarsson, Hreidar Mar Sigurdsson, Magnus Gudmundsson, Steingrimur Karason and Ingolfur Helgason – set up in 2003 to buy farmland next to a salmon river in Borgarfjordur, ca 150 km from Reykjavik. The entire Hvitsstadir enterprise was financed by loans from two small saving societies, Sparisjodur Myrasyslu and Spron, their business being heavily connected to and intertwined with Kaupthing.
In 2005, Hvitsstadir paid ISK300m for a farm, which earlier owners had bought just over a year earlier for ISK85m. The owners of this farm who pocketed ISK215m from the sale were Palmi Haraldsson and Johannes Kristinsson, who already then were major clients of Kaupthing, not least through their close connection with Baugur and its owner Jon Asgeir Johannesson. In the following years, Haraldsson was the steady companion of Johannesson and Kristinsson was Haraldsson’s companion.
The timing of this farm deal is interesting because at this time the Sterling transaction was in the making. Sterling was a Danish air company, bought and sold between related Icelandic parties, making billions of Icelandic krona for the Baugur sphere and its closest allies, such as Haraldsson and Kristinsson. At the time, the Sterling sales stunned observers both in Iceland and Denmark. It was very difficult to understand why this loss making air company went up in price every few months and absorbed ever more debt until 2008 when Sterling finally sank under its debt.
With the sale of the farm in Borgarfjordur, the duo Haraldsson and Kristinsson pocketed a tidy sum of money, just as the Sterling enterprise took off. Kaupthing was a party to the Sterling saga. The Hvitsstadir saga is interesting because this tiny company exposes the private connection between the Kaupthing managers, major clients of the bank and the two small saving societies. It shows how the duo got a very good deal and consequently money right into their bank account, just when the first chapters of the mysterious Sterling saga were being written.
As to Hvitsstadir, the company continued to buy assets, financed by the saving societies. The loans – bullet loans running for a few years – were never repaid but rolled over or new loans issued to pay off existing loans. Interestingly, the last loan issued to pay up an existing loan was in Decmember 2008, after the collapse of Kaupthing and at a time when both saving societies were experiencing severe problems. The two saving societies went into a technical default few months into 2009.
But in spite of favourable loans the five Kaupthing managers aren’t free of Hvitsstadir. There was a personal guarantee attached to the loans and the five men are now being sued for the repayment of at least one of the Hvitsstadir loans, now just over ISK1bn.
Personal guarantees were widely used in loans to favoured clients in Icelandic banks, apparently to make up insufficient collaterals. It may come as a surprise that personal guarantees were part of the loan obligations on loans that apparently seem to have been set up for not being repaid. The explanation seems to be that the personal guarantees were only for the records, to make the loans look better. Witness statements in several recent court cases indicate that those who took loans with a personal guarantee were told they would never be held accountable, ie the bank in question would never make use of the personal guarantee although they were written into the loan contracts.
The key element in this kind of lending was that it wasn’t for everyone – it was only for those who had the right kind of contacts. Apart from the intriguing contacts between bank managers and their clients, the Hvitsstadir saga exposes the general favours included in these deals: loans that weren’t repaid and personal guarantees that allegedly weren’t meant to be drawn on. These were the typical features of favours in the Icelandic banking system. There is no indication of any illegalities here but Hvitsstadir is an example of a cosy relationship between bank managers, major clients and small institutions closely connected to the bank.
Follow me on Twitter for running updates.
Once again Sigrún you have dug out something that the regulators, prosecutors and other authorities have failed to publish. Regularly more offences of the major banks are brought to light, such as money-laundering, sharp tax practices, mis-selling and so on. Because the UK authorities have chosen not to publish a report on what the banks (large and small) did get up to and what the regulators and the Treasury missed (or concealed), the lessons cannot be learned. So we are condemned to suffer when the same mistakes are made again in the future.
Taxpayers, depositors and management who did the right thing are all entitled to some vengeance and retribution. But we also need it so that the lessons are learned; and that those who think they can defraud taxpayers and depositors are aware that the consequences are serious.
When Lord Sassoon told me in 2009 that the FSA had to be broken up as it was such a hopeless case from top to bottom, I thought he meant the structure had to be broken up so the people could be replaced. I didn’t think he meant the structure had to be broken up but the same useless people transferred across to the Bank of England!!
Tony Shearer
13 Nov 12 at 8:28 am
Thanks again Sigrun for your persistent digging and to Tony for your comments, pertinent as ever.
“Taxpayers, depositors and management who did the right thing are all entitled to some vengeance and retribution.” Indeed they are, but – as one of the victims of the Kaupthing collapse – I have lost any hope I ever had that we will get it. We long ago realised that no-one in high places cares a jot.
If only, if only, some lessons could be learned so that others might be spared the anguish and despair experienced by the likes of the ordinary, law-abiding KSFIOM depositors whose stories still make heart-rending reading at http://www.ksfiomdag.com. But that too seems to be a forlorn hope. With too many vested interests at stake, any changes short of full-blown revolution (which might yet come!) will never be other than cosmetic.
anrigaut
13 Nov 12 at 11:54 am
This blog by Gordon Neave on Ian Fraser’s site pretty much sums up what he neatly calls the ‘mad banker disease’:
http://www.ianfraser.org/illusion-of-unassailability-leads-to-fresh-outbreak-of-mad-banker-disease/
anrigaut
14 Nov 12 at 9:40 am
buy instagram mentions, instagram mentions services , instagram mentions
instagram mentions services
25 Jan 22 at 12:08 am
Thank you for providing me with these article examples. May I ask you a question?
Omar Reigstad
20 Dec 22 at 11:55 pm
Your articles are extremely beneficial to me. May I request more information?
Beatriz Surles
21 Dec 22 at 1:11 am
I do trust all the concepts you’ve presented in your post. They are very convincing and will definitely work. Still, the posts are very brief for novices. May just you please prolong them a bit from subsequent time? Thanks for the post.
Escritório Lixo Zero Aequo Educacional
21 Dec 22 at 12:39 pm
Oh my goodness! a tremendous article dude. Thanks Nevertheless I am experiencing subject with ur rss . Don?t know why Unable to subscribe to it. Is there anybody getting an identical rss downside? Anybody who knows kindly respond. Thnkx
Baixar Cursos Gratis
20 Jan 23 at 10:07 pm
There’s noticeably a bundle to learn about this. I assume you made certain good factors in features also.
Curso Completo de Nosql e Mongodb para Devs Sql Msc Júlio Alcântara Tavares
15 Feb 23 at 11:15 pm
What?s Happening i’m new to this, I stumbled upon this I have found It absolutely helpful and it has helped me out loads. I hope to contribute & aid other users like its helped me. Good job.
curso de árabe online com certificado
16 Feb 23 at 3:30 am
Hey very cool website!! Man .. Beautiful .. Amazing .. I’ll bookmark your web site and take the feeds also?I am happy to find so many useful information here in the post, we need develop more techniques in this regard, thanks for sharing. . . . . .
Oab Xxxii Cers Método Cers de Aprovação Cers
17 Feb 23 at 3:15 pm
Thanks for your content. One other thing is when you are advertising your property yourself, one of the issues you need to be aware about upfront is how to deal with household inspection records. As a FSBO retailer, the key to successfully transferring your property in addition to saving money on real estate agent profits is know-how. The more you know, the smoother your home sales effort is going to be. One area when this is particularly important is information about home inspections.
curso de psicologia valor
20 Apr 23 at 11:41 pm
A lot of thanks for all of your labor on this site. My mother takes pleasure in getting into investigation and it is obvious why. We all hear all concerning the compelling ways you deliver valuable thoughts via the web site and foster response from the others about this article then our child is really studying so much. Enjoy the rest of the year. You’re the one performing a fabulous job.
goldengoose shoes
20 May 23 at 3:59 am
One thing I would really like to say is car insurance canceling is a dreadful experience so if you’re doing the best things as being a driver you simply will not get one. Many people do have the notice that they have been officially dropped by the insurance company they then have to fight to get added insurance after the cancellation. Affordable auto insurance rates are generally hard to get after a cancellation. Understanding the main reasons with regard to auto insurance cancellations can help car owners prevent losing one of the most critical privileges obtainable. Thanks for the strategies shared through your blog.
ana otani
20 May 23 at 11:49 pm
Thanks for revealing your ideas. I’d personally also like to say that video games have been ever before evolving. Better technology and innovations have served create realistic and enjoyable games. These entertainment games were not as sensible when the real concept was being attempted. Just like other designs of technological know-how, video games as well have had to evolve as a result of many decades. This is testimony to the fast development of video games.
Escola Sem Homofobia Mec
21 May 23 at 9:42 am
of course like your web-site but you need to check the spelling on several of your posts. A number of them are rife with spelling problems and I find it very troublesome to inform the truth on the other hand I?ll definitely come back again.
Odisséia Homero
23 May 23 at 4:18 pm
Thanks for the thoughts you have discussed here. Moreover, I believe usually there are some factors which will keep your car insurance policy premium all the way down. One is, to take into account buying autos that are inside the good list of car insurance businesses. Cars which might be expensive are usually more at risk of being snatched. Aside from that insurance policies are also in accordance with the value of your truck, so the higher priced it is, then the higher a premium you have to pay.
rateio dos concursos
23 May 23 at 5:11 pm
Great ? I should definitely pronounce, impressed with your web site. I had no trouble navigating through all tabs and related information ended up being truly easy to do to access. I recently found what I hoped for before you know it in the least. Quite unusual. Is likely to appreciate it for those who add forums or anything, website theme . a tones way for your client to communicate. Nice task..
Material de Concursos
23 May 23 at 7:19 pm
I appreciate, cause I found exactly what I was looking for. You have ended my 4 day long hunt! God Bless you man. Have a nice day. Bye
curso de sinuca online grátis
23 May 23 at 9:30 pm
I think this is one of the most vital info for me. And i’m glad reading your article. But should remark on some general things, The site style is perfect, the articles is really excellent : D. Good job, cheers
Download Cursos Grátis
24 May 23 at 3:06 am
I have recently started a blog, the information you provide on this web site has helped me tremendously. Thank you for all of your time & work.
ana otani
24 May 23 at 5:52 am
I have realized that in cameras, special receptors help to {focus|concentrate|maintain focus|target|a**** automatically. The actual sensors involving some digital cameras change in contrast, while others use a beam with infra-red (IR) light, especially in low lumination. Higher standards cameras occasionally use a blend of both devices and will often have Face Priority AF where the photographic camera can ‘See’ your face and focus only upon that. Many thanks for sharing your opinions on this web site.
curso de corretor de imóveis presencial
24 May 23 at 7:24 am
Thank you for sharing superb informations. Your site is so cool. I am impressed by the details that you?ve on this web site. It reveals how nicely you perceive this subject. Bookmarked this web page, will come back for more articles. You, my friend, ROCK! I found just the info I already searched all over the place and simply could not come across. What an ideal website.
curso de corretor de imóveis gratuitos senac
24 May 23 at 7:52 am
I have observed that in the world nowadays, video games are the latest fad with kids of all ages. Occasionally it may be difficult to drag your children away from the games. If you want the best of both worlds, there are many educational video games for kids. Great post.
Curso Caligrafia Instituto Universal Brasileiro
20 Aug 23 at 5:15 pm
I have discovered that wise real estate agents just about everywhere are warming up to FSBO ***********. They are seeing that it’s not just placing a sign in the front area. It’s really concerning building associations with these suppliers who at some point will become buyers. So, once you give your time and energy to assisting these vendors go it alone — the “Law associated with Reciprocity” kicks in. Good blog post.
cursos rateios
20 Aug 23 at 5:42 pm
One other issue is that if you are in a problem where you do not have a cosigner then you may really need to try to exhaust all of your educational funding options. You can find many funds and other scholarship grants that will give you funds that can help with school expenses. Thanks for the post.
cursos de mecânica automotiva senai
20 Aug 23 at 9:55 pm
Great ? I should definitely pronounce, impressed with your web site. I had no trouble navigating through all the tabs and related info ended up being truly easy to do to access. I recently found what I hoped for before you know it at all. Reasonably unusual. Is likely to appreciate it for those who add forums or something, website theme . a tones way for your customer to communicate. Excellent task..
14 hábitos infalíveis para você emagrecer com saúde mega nz
21 Dec 23 at 9:39 pm
Thanks , I’ve just been looking for information approximately this topic for a while and yours is the best I’ve came upon till now. However, what about the conclusion? Are you certain in regards to the source?
rateio 200 receitas cetogênicas
24 Jan 24 at 9:41 pm