Sigrún Davíðsdóttir's Icelog

Now what about Luxembourg and financial supervision?

with 8 comments

Three Kaupthing bankers and the bank’s second largest shareholder were recently sentenced in Iceland to 3 to 5 1/2 years in prison for market manipulation and breach of fiduciary duty. The story behind the case is a share purchase in Kaupthing in September 2008. At the time, all four now convicted – then chairman of the board Sigurður Einarsson, CEO Hreiðar Már Sigurðsson, Kaupthing Luxembourg manager Magnús Guðmundsson and investor Ólafur Ólafsson – were interviewed in the Icelandic media where they underlined the strength of Kaupthing by pointing out that a Qatari investor, al Thani, had bought 5.1% in the bank.

What they failed to mention was that al Thani was not so much risking his own money as Kaupthing money: via an intricate scheme based on a few offshore companies the funds for the share acquisition came from Kaupthing itself. And where was the master plan carried out? In Luxembourg.

Kaupthing subsidiary in Luxembourg was at the centre of the al Thani saga. That was were the idea was brought into action, money into one vehicle and out into another. It is a well known fact in Iceland that most of the banks’ most questionable deals were indeed carried out in Luxembourg. It is an intriguing thought that Luxembourg was time and again chosen at the preferred place for these deals.

In early 2011 I was in Luxembourg and had a meeting at the Luxembourg financial services authorities, Commission de Surveillance du Secteur Financier, CSSF.* I met with a few people in a meeting room. I was on one side of a huge table, four or five people on the other side. Already then it was clear that the Icelandic banks had been doing some rather “inventive” banking in Luxembourg. I presented some of the cases I knew of. On the other side of the table there were only expressionless faces and then I was told that rules and regulations were strict in Luxembourg. Nothing contrary to laws could take place in Luxembourg banks.

In the CSSF 2012 Annual Report its Director General Jean Guill writes:

During the year under review, the CSSF focused heavily on the importance of the professionalism, integrity and transparency of the financial players. It urged banks and investment firms to sign the ICMA Charter of Quality on the private portfolio management, so that clients of these institutions as well as their managers and employees realise that a Luxembourg financial professional cannot participate in doubtful matters, on behalf of its clients.  

“… cannot participate in doubtful matters…” – If only matters were that simple. Now four people have been sentenced to prison in Iceland for participating in doubtful matters that violate Icelandic laws, according to the Reykjavík District Court, but were carried out in Luxembourg, by using Luxembourg expertise and the so very favourable circumstances created in Luxembourg over decades.

A group of Landsbanki Luxembourg clients have for several years been trying to catch the attention of the Luxembourg authorities, a saga that Icelog has reported on time and again. This group had taken out equity release loans at Landsbanki. These clients have asked 1) serious questions about the dealings of Landsbanki Luxembourg before it went bankrupt – such as evaluation of property, calculations on loans breaching the collateral limit, investments related to the loans and how products were sold; 2) serious questions as to how the estate has been run, its misleading information or lack thereof, numbers that did not add up.

None of this has been addressed by the CSSF or other Luxembourg authorities so far. However, the Luxembourg paper Wort has reported that two cases related to Landsbanki Luxembourg are now being investigated, quoting minister of justice Octavie Modert.

So far, and to great cost and immeasurable emotional distress the bank’s clients – mostly elderly citizens living in France and Spain – have been left to battle on their own. In Luxembourg the State Prosecutor issued a press release in support of the Landsbanki Luxembourg administrator – unthinkable in most other European countries – thereby making it look as if the Landsbanki Luxembourg clients were trying to evade paying their debt. – Through court cases in Spain and France the group has made some advances but none of this is taken into any consideration at all in Luxembourg.

One client has shown me a set of calculations regarding one specific loan portfolio. Landsbanki Luxembourg, prior to its collapse, had claimed that this portfolio no longer covered the loan so the borrower was obliged to pay a certain amount in cash as a cover. As far as I could see, the number from the bank was wrong: the client was not in breach and should not have been obliged to pay. I could of course well be wrong. I sent this calculation to someone from Landsbanki Luxembourg with whom I had been in touch and whom I had told of this. I know for certain that this person got the calculation but I never heard back.

Only Luxembourg authorities can access documents regarding the operations of Landsbanki Luxembourg. Although the bank’s managers have been charged with criminal offenses in Iceland (case pending but due in the new year) by the Icelandic Office of the Special Prosecutor as well as being sued in a civil case by the Landsbanki Winding-up Board for misleading reporting Luxembourg authorities have not been willing to listen to well-founded claims by the Landsbanki Luxembourg clients: unanswered questions about the Landsbanki Luxembourg operations before the bank’s demise in October 2008 – as well as the administrator’s operations.

Noticeably, an administrator has the duty to investigate operations, as indeed the Landsbanki Winding-up Board has done. The administrator, Yvette Hamilius and lawyers working for her, have stated in Luxembourg media that everything the administrator has done is according to the law.

In one case that the Landsbanki Luxembourg administrator took to court, the administrator caused delays of, in total, 200(!) days. And on it goes.

The fact that the numerous authorities in Luxembourg, such as the CSSF and the State Prosecutor have either ignored pleas from clients or outrightly sided with the administrator, without any chance of the claims actually being heard or looked at, shows a horrendous lack of care for clients and a sound protection for the financial industry. And everyone can pretend that it is, as Director General Guill points out: that professionalism and transparency is such in the financial sector in Luxembourg that financial players “cannot participate in doubtful matters.”

One way to supervise financial institutions is by box-ticking: to look at each item in its narrow and isolated meaning, never look at connections or behaviour, never try to understand meaning and context. The institutions know this and prepare their material accordingly. Then there is little to fear. One reason why so little was seen and caught before 2008 was this attitude by regulators. Judging from the lack of interest in claims by Landsbanki Luxembourg clients this still seems to be the attitude among Luxembourg authorities. Authorities in Cyprus have announced that banks in Cyprus will be investigated, a little bit is being done in Ireland and the UK. When will Luxembourg follow suit? From anecdotal evidence there have been things going on in Luxembourg that merit investigations.

* See an earlier Icelog report on Luxembourg and the Icelandic banks. – Here is an earlier Icelog on Landsbanki Luxembourg.

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Written by Sigrún Davídsdóttir

December 18th, 2013 at 3:57 pm

Posted in Iceland

8 Responses to 'Now what about Luxembourg and financial supervision?'

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  1. We have seen how Luxembourg has pointed the finger at Iceland for over 5 years and blamed Iceland for the Ponzi’s and Poisons which Luxembourg’s CSSF enables and passes as fit for European consumption, with the backing of judges and lawyers who cannot fail to see what is wrong but who do not speak out about it.

    The CSSF and the ABBL have enabled banking crimes and false accounting through the licensing of toxic schemes that had to run through Luxembourg as no other country would have closed their eyes and their ears so tightly and refused to adhere to the rules other countries in Europe are striving to keep.

    Luxembourg has behaved disgracefully and as much as Iceland has been courageous and exemplary, as much Luxembourg has done quite the opposite.
    This has not gone unnoticed and people are not going to be happy about Luxembourg getting more powerful in Europe through Politicians and members of Luxembourg judiciary who have covered-up crime and yet blamed others for what they re guilty of themselves.

    Enough is enough from Luxmebourg and it is time there was reaction from the E.U.

    The Banking crisis is due to precisely such purposeful negligence from financial centers such as Luxembourg is displaying over the Icelandic bank failures.

    Luxembourg had a significant role to play in the criminality and yet they arrogantly point a finger at Iceland and try to put all the blame on them whilst telling the world they never break the law in the Financial Place and their lawyers only do things within the law?

    We ask, which law?

    If Luxembourg has laws then why are they not in keeping with the laws and ethics of other countries in the EU?

    Jean Claude Juncker and his other cronies have been trying to grab as much power and influence in Europe as possible.

    We see great danger in devious Luxembourg having any power whatsoever that exceeds countries several times their size and importance who are doing their best to adhere to the rules and regulations Luxembourg arrogantly refuses to go by, preferring their own lucrative laxity towards crime in the Financial cesse pitt they say has “no problems”.

    The time has come to say NO to Luxembourg and ‘enough is enough’, to Jean Claude Juncker who prefers to remain in glory but in an opaque, untouchable bubble with a law unto himself.

    We have had enough of this subservience to the arrogance and delinquency which is poisoning Europe and ordinary families who are being abused.

    Alexander Edwards

    19 Dec 13 at 3:38 pm

  2. Alexander Edwards seems to have hit all the nails squarely on their heads!

    Pure negligence on the part of the Authorities in charge of Luxembourg Financial system…CSSF.
    Cronyism may have a hand in what is going on behind the scenes….just look at what went on at the BBC for a starter for ten.

    Jon Howard

    19 Dec 13 at 6:18 pm

  3. Sigrun, you have hit the nail right on the head regarding the elderly victims of the equity release scheme (read scam).
    These victims were clerarly entitled to be protected from the actions of rogue banks and their schemes. When these poor innocents entered into this scheme they all received a letter from Landsbanki Lu stating:
    “ You are hereby informed that Landsbanki Luxembourg has classified you as a retail customer for the securities, foreign exchange and other financial transactions that we undertake for you. This will give you the most comprehensive protection possible”
    If these fine words meant anything whilst the bank was operating(which I very much doubt) they certainly meant precious little once the administrator got her hands on the company. In fact quite the opposite for she appears to have taken the view that the victims can provide her with the means to extort considerably inflated sums that bear absolutely no resemblance to the sums originally touted by the bank when selling the scheme.
    To have been able to have proceeded in this way the administrator must surely have the blessing of the judic iary and the CSSF, for without that the true facts of the case would have been exposed from the beginning. For certain she cannot plead ignorance of the facts as they have been drawn to her attention on numerous occasions both through court action and also by direct communication from the victims. Why has this been allowed to happen ?
    There can be no doubt therefore that we, as victims of this obvious scam, have been severely let down by the very authorities that were set up to protect us.

    Nina Foster

    22 Dec 13 at 7:39 am

  4. Thanks to one of the group of victims of Landsbanki Lu for this factual account.

    The fraudulent activities of Landsbanki Luxembourg and the total ineptitude/apathy of the appointed administrator, Yvette Hamilius, continue unabated with the judiciary and the government of Luxembourg carrying on with business as usual as apparently “there is nothing wrong in Luxembourg”.

    Are they blind or stupid or simply just corrupt?

    In any language of any EU member state, theft is theft and is a criminal offence that should be punished according to the severity of the crime.

    If you transfer funds out of a bank account without authorisation or approval from the account holder, then this is embezzlement/ theft. This is no different from walking into your local bank, producing a gun and demanding the contents of the safe.

    Claus Thede, an ex account manager of Landsbanki and still at liberty in Luxembourg, does not seem to understand this principal, instead he attempts to convince the client that all is well in the liquidation process and the good administrator, Yvette Hamilius is continuing at full speed to resolve all issues.
    Much of the facts of this particular case must be kept confidential at this stage for legal reasons, but we can reproduce actual text between the client and Claus Thede during the latter half of 2013.

    The sum involved is 250,000 euros, which represents the client’s life savings.

    Here are the extracts of the paper trail:

    Client

    I must ask you to try to remember why you purchased these bonds without obtaining my approval. We had a clear understanding that during the difficult market conditions we should remain liquid – hence the large amount of Euros we held in our account.

    For some reason, without contacting me, you used this cash to make this very large and disproportionate purchase of very high risk Landsbanki’s own bonds. The purchase was four times the size of any previous investment, and outside the agreed portfolio!!

    When I discovered the investment I tried phoning you several times, but was informed you were not available. A few weeks later they had no value.

    Claes Thede

    I am trying to remember a transaction that happened 5 years ago. Furthermore I am fully convinced that the Liquidator of the bank, who stands under the supervision of the tribunal, will correct the transaction if it has been made without your consent. The liquidation of the bank has been underway for more than 4 years now with a very good result so far.

    Client

    I appreciate your giving time to try to remember details of something that happened five years ago.

    I agree with your view that the Liquidator should “correct a transaction if it has been made without your consent”.
    She has also an obligation to review all transactions in the six months prior to her appointment. I brought to her attention the transactions that had been made without my consent, but clearly she did not take my complaint seriously.

    Please confirm that she did not even contact you, as a senior Account Manager, to obtain clarification.

    It is becoming more and more apparent that Yvette Hamilius management of the liquidation is questionable.

    Client

    As you can well imagine the use of almost a quarter million Euros in my Euro Account to purchase Landsbanki’s own Bonds totally undermined my Contract with the Bank. Naturally I drew the administrator’s attention to this misuse of the funds, expecting her to investigate the transaction.

    It is now clear from your email that she did not even contact you to obtain an explanation.

    I am faced with a conundrum that on the one hand Yvette Hamilius chose not to investigate this breach of contract; and on the other hand, you have no memory of it:

    Claes Thede

    I wish that I could be of more help to you and I can well imagine your situation. I will however not make a comment on the riddle you present.
    There is an ongoing liquidation and that process has so far showed very good results. The liquidator is experienced and works under the supervision of the tribunal in Luxembourg. I do not know in which order they deal with the matters. An alternative explanation could very well be that your case is further down on the agenda.
    To me it seems that there is little else to do than wait for the liquidator to make a contact.

    Summary

    The bonds illegally purchased were in fact in Landsbanki bonds that they were attempting to sell in the last few weeks of the bank with a promised return of 11%.

    Now either Claes authorised the purchase of these toxic bonds himself and so empty the clients account, or he must certainly know who did. It is no use Claes now claiming the early onset of Dementia, as he cannot remember the small matter of stealing 250,000 euros. If he did not authorise the transaction himself, then as the appointed Account Manager, surely he must be an accessory to the fact as he was tasked with the responsibility of the welfare of the client and his assets?

    Nina Foster

    4 Jan 14 at 5:14 pm

  5. Thank you to Michael for this further piece about mysterious accounting pre and post Landsbanki Lu liquidation that raises important questions that should be answered.

    Yet more evidence of Landsbanki fraud and money laundering

    Since my first piece was published with the above title, more factual revelations are emerging of the deliberate embezzlement and theft from Landsbanki Luxembourg Equity Release clients. A fact that the Administrator, Yvette Hamilius refuses to acknowledge/accept/investigate, thereby making her complicit in the money laundering scams that have been perpetrated and which Luxembourg is in total denial about on the basis that “there is no problem in Luxembourg”.
    Well it stands to reason that there can never be a problem in Luxembourg when they can overlook the actions of despots and crooks throughout the world and greedily continue to line their own fat bulging pockets with no regard for humane, moral or ethical concerns.

    However I digress.

    You will recollect that my previous factual exposure concerned a Landsbanki Luxembourg account manger by the name of Claes Thede, who unfortunately suffers from memory loss. Do not worry Claes; we have it all in writing to prompt your recollections of the facts once your time arrives.

    And here is a surprise; this report also features one Claes Thede!

    Today’s piece is fairly typical of what was going on. The clients concerned are elderly, both pensioners living off small private and UK state pensions. Their major asset being their Spanish property. They decided to take on the Equity Release product in order to release cash to invest further in their property by constructing an extension.
    The bulk of their contract was invested with the 100% owned subsidiary of Landsbanki Luxembourg, Lex Life Insurance.
    They at all times insisted to Claes Thede that they were not risk takers and that their home was their only asset.

    In account review discussions with Claes Thede they complained that they could not understand the complex reporting that they were receiving from the bank. Claes assured them that there was nothing to worry about, as he did not fully understand them himself, but that the bank was doing well.

    In 2007 they were informed by Claes Thede that the Valencia authorities had altered the Inheritance Tax rules and they no longer needed to cover large fees in the event of their deaths. (It has subsequently been ruled by the Spanish Tax authorities that this attempt to avoid death duties is illegal and therefore further proof of fraud).
    He advised them that since they had no dependents they no longer needed the Lex Life policy and they could cash it in and reinvest the money. This money amounting to €497,713.50 was transferred into their Landsbanki account on 18 December 07 under instructions from Claes Thede.

    By telephone in June 2008 Claes Thede advised them that since they had considerable funds in their account, to purchase a bond, LANISL FLOAT 12/09. This was Gilt edged, fail safe and backed by the government.

    The Bond was purchased on 3 July 2008 for the sum of 297,781.25 euros.
    A further €140,000 remained in their current account waiting for something equally gilt edged to invest it in. The Bond after only 3months was worthless and the whereabouts of the €140,000 residing in their account never explained.

    They learnt of the collapse of the bank when their scheduled telephone calls with Claes Thede were returned by the liquidator (6th November 2008) and she stated that Claes Thede had been sent home on ‘Gardening leave’.

    Clearly Claes Thede was patently aware of the negative state of the banks position when this transaction was executed and was all part of the deliberate programme of embezzling as much of clients liquidity as possible in the short time available to them.

    Yvette Hamilius continues with the farcical comments “that there are no problems” in Luxembourg. She refuses to treat these victims as creditors of the bank but some low life scum that should be fed to the wolves, along with the Uncle of the maniac ruling North Korea, Luxembourg’s new best friend.

    Nina Foster

    7 Jan 14 at 7:59 am

  6. On the Landsbanki Victims Facebook site the following letter has been published today which we would like to share with you as it is relevant to this article from Sigrun

    Dear Maitre Hamilius

    We are in receipt of your AR letter dated January 10th 2014.

    We would refer you to all our previous letters when we clearly state that we do not consider that we are responsible for this outstanding amount. We reiterate that we consider that we were the victims of a scam committed by Landsbanki Bank Luxembourg, it’s officers and it’s intermediaries.

    Whilst writing we would also draw to your attention the fact that you are claiming amounts from us that apart from being fictitious come with no detail as to how you have arrived at the sums involved. It appears that you have just plucked these figures out of thin air. It is also notable that you have increased this said sum in eighteen months from 270,000 Euro to over 660,000 Euro.

    We also reiterate our demand that you, as administrator in this liquidation, actively collaborate in the search for the perpetrators of these crimes and to provide effective assistance to the victims of this behavior. To date you appear to have failed to carry out these basic legal requirements of an administrator and as a result have considered that we are debtors when in fact we should be considered as creditors of the bank. We believe that it is your duty to have investigated the history of the selling of this illegal scheme within Europe.

    There has also been a misapprehension that the victims of this scheme were wealthy individuals when in fact with perhaps a few exceptions and with some research it would have become quite clear that nothing could have been further from the truth. The greater majority are retired couples who have fallen victim to a scheme offering them a secured means of additional income with no risk attached, as all the sales literature from Landsbanki Luxembourg stated. You cannot seriously consider that we as individuals would have knowingly entered into a scheme that was of such a high risk that we would eventually lose our homes and all our life savings.”

    We also consider that you as administrator of the Landsbanki Lu estate should at the beginning of the administration have taken all steps to protect our investments with the bank. The bank that was handling all our assets. We understand that as an Administrator it is a legal requirement to ensure that clients funds are protected which would include closing any open positions on the market. You failed to do this and left us with an exposure to currency fluctuations for over 18 months. The result of this was that we were subject to enormous loss for which you are now holding us responsible. I would suggest that this is your responsibility. It surely did not need 18 months to correct this situation.

    Yours sincerely

    Name of victim with held for obvious reasons.

    Nina Foster

    18 Jan 14 at 10:41 am

  7. […] an earlier Icelog on this issue, with links to older coverage on […]

  8. What supervision, when greed comes into the equation then everything else goes out the window. How can these people be trusted ?

    http://www.timesofisrael.com/us-treasury-fines-luxembourg-bank-for-hiding-iran-holdings/

    US Treasury fines Luxembourg bank for hiding Iran holdings
    Clearstream Banking masked the Bank of Iran’s $2.8 billion US securities account, which gave Iran unauthorized access to the US financial system

    Nina Foster

    28 Jan 14 at 10:01 am

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