Sigrún Davíðsdóttir's Icelog

One of the most spectacular lending stories from the collapsed Icelandic banks, from Glitnir, comes up in the Reykjavik District Court as oral hearings in the Aurum case start Monday January 7. This is essentially a story how Glitnir’s two main shareholders – Jon Asgeir Johannesson and his long-time business partner Palmi Haraldsson – got a loan of ISK6bn, ca €35.5m, from the bank and ended up getting rid of the loan by selling, for 1 krona, the company where the debt was placed (yes, this sounds crazy but this was Icelandic banking for favoured clients pre-collapse).

Those charged are Johannesson, for  exerting undue influence on Glitnir CEO Larus Welding and Bjarni Johannesson who managed Glitnir’s business relations with Johannesson and his companies. A third Glitnir employee, Magnus Arnar Arngrimsson is also being charged. The charges relate to the three Glitnir employee regard breach of fiduciary duty.

From these ISK6bn it is alleged that Johannsson and Haraldsson each personally got ISK1bn whereas the whole amount was lost to the bank. The loan saga is recounted in an earlier Icelog. Here is further to the charges brought now by the Office of the Special Prosecutor and here is an earlier log on Aurum, also connected to an international freezing order, which the Glitnir ResCom secured against Johannesson in the summer of 2010. Earlier, the Glitnir ResCom brought a case against Johanesson and Glitnir managers for losses caused by the Aurum lending.