Sigrún Davíðsdóttir's Icelog

New indictments against Kaupthing managers

with 6 comments

Last week, the Office of the Special Prosecutor initiated criminal proceedings against three Kaupthing managers for breach of fiduciary duty. The managers are Sigurður Einarsson formerly chairman of Kaupthing, its CEO Hreiðar Már Sigurðsson and Kaupthing Luxembourg managers Magnús Guðmundsson.

At stake are loans to four companies, in total €510m, owned by Ólafur Ólafsson, the bank’s largest shareholder, Conservative party donor and at one time a Kaupthing board member Tony Yerolemou and two big clients of the bank, Kevin Stanford and his ex-wife Karen Millen. The loans were used to fund two companies, which traded in Kaupthing’s CDS, in order to encourage a fall in the CDS and reduce the bank’s financing cost. These CDS deals were done in cooperation with Deutsche Bank. None of the clients nor Deutsche are under investigation at the OSP in relation to this scheme.

The loans were issued to BVI companies with little or no other assets than the financial assets, which were being funded. In some cases Kaupthing issued loans to these companies without the knowledge of their owners. According to the claims, the loans were not taken up in the bank’s credit committees nor were credit committees told of previous loans to these companies.

Although there are higher sums at stake in two large market manipulation cases against Kaupthing and Landsbanki managers – cases that consist of actions stretching over some time, this latest case is the largest single case so far and is likely to remain so. So far, all the OSP cases relating to the collapse of the banks are stories already known from the SIC report, published in April 2010 and this CDS case is no exception.

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Written by Sigrún Davídsdóttir

May 12th, 2014 at 10:13 pm

Posted in Iceland

6 Responses to 'New indictments against Kaupthing managers'

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  1. Sigrun,
    Thank you for the update.
    Very sell done the Icelandic prosecutor for keeping going.
    Deutsche were Kaupthing’s corporate fiance adviser, and advised them on their take-over of Singer & Friedlander in 2005.
    Quiet unbelievable that no action has been taken in the UK.

    Tony Shearer

    14 May 14 at 10:10 am

  2. Thanks from me too Sigrun for this update which I’ve reposted on the KSFIOMDAG website.

    Re Tony’s comment, one might wonder who were the Singer & Friedlander advisers who supported that fatal take-over …

    anrigaut

    14 May 14 at 12:01 pm

  3. Once again we see the great Icelandic Prosecutor at work as he gives the message to the world, that no one is too big or powerful for justice .
    In Paris the French Judge Renaud Van Rumbyeke is also giving the message that no one is untouchable as he places the 5th Landsbanki director or manager under Criminal investigation.

    GUNNAR THORODDSEN who follows MORTON JUUL NIELSEN, TORBEN BJERREGAARD JENSEN, VINCENT FAILLY and OLLE LINDFORS, to be put under criminal interrogations in this Criminal case Luxembourg thought was “NO PROBLEM”.
    There are more to follow.
    Landsbanki and Kauphting together and it is interesting to note that neither London nor Luxembourg dare ask any questions and continue to pretend all financial crime can be swept away and forgotten in order to protect the useful pals in trouble!

    Rachael Williams

    14 May 14 at 5:07 pm

  4. There is no mystery that little or nothing is heard from London. There were too many vested interests involved, too many “friends”. After all, who advised the councils/fire services/Tory party etc to place their funds in Iclandic banks ???

    Nina Foster

    14 May 14 at 5:46 pm

  5. Meanwhile in the dear old Isle of Man, the MD of Kaupthing, Singer & Friedlander (IOM) at the time of its collapse has just been appointed as MD of Permanent Bank International (PBI) in the IOM.

    You couldn’t make it up, could you? Presumably the ever- smiling Mr Aidan Doherty is hoping this bank will indeed prove to be rather more “Permanent” than was his previous one! Interesting to note that the IOM Today report avoids the use of the K-word and comments are turned off.

    http://www.iomtoday.co.im/news/business/permanent-bank-has-new-md-in-the-isle-of-man-1-6615052

    anrigaut

    17 May 14 at 9:50 am

  6. Sigrún,

    In your post here regarding new indictments of Kaupthing bank managers you use acronyms most readers do not understand, without translating them. The result is a post most readers are unlikely to comprehend. To help out, here is some translation:

    “CDS” Credit Default Swap. Credit Default Swaps are insurance policies written to insure debts against losses in case of default. The factor that determines the premium is the riskiness of the debt. The more likely a default, calling for a pay-out by the insurer, the more the insurance policy premium. Bank analysts used to use “CDS spread”, the ratio between insured debt amount and premium price amount, set by market agreement between buyer and seller, as a guide to a debt’s, and debtor’s, fiscal health. Unfortunately, for the world’s economy and everyone, CDS were not regulated and were allowed to be bought and sold speculatively, by buyers and sellers with no connection to the original debt. This made CDS spreads manipulatable and usable as market attack tools, to force debtors (like leveraged banks) costs up and margins down (pushing them closer to the illegal-point where their reserve margins would fall below regulator-set limits).

    “BVI” British Virgin Islands. BVI companies are offshore ‘special purpose vehicle’ entities, so they almost always have no assets except what they were created to isolate in the BVI company’s own risk pool only. BVI companies are neutral entities. If they are good or bad or legal or illegal depends on the purpose one is used for. Where a BVI is used to manipulate a bank’s CDS spread, if the use is wrong or right depends on the reason the CDS spread is being manipulated. If the manipulation is to create a false image to, for example, sucker investors, the use is wrong. But if the use is to counter manipulations by other manipulators, who seek to profit by damaging or destroying (deprecating the value of) a bank or other susceptible enterprise, the manipulation is a justified and justifiable defence.

    In the Kaupthing-Deutchebank case the manipulations appear to have been justified defensive actions, because Kaupthing, through its KSF subsidiary in Britain, was under attack in Britain, with a combination of British financial firms and colluding regulatory agencies ranging against it.

    None of the aggressor entities have been charged or taken to account for their aggressions in the case, for which the Icelandic OSP (Office of Special Prosecutor) carrying charges against the defenders for defending is something like a prosecutor charging a woman who has been attacked on the street with assault for having fought back against her attacker.

    RLDogh

    21 May 14 at 11:15 pm

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