Sigrún Davíðsdóttir's Icelog

Landsbanki shareholders seek damages by suing Björgólfur Thor Björgólfsson – and more could follow

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A whole new type of court cases is emerging in Iceland: shareholders are suing in civil cases for damages suffered as the collapse of Landsbanki and Kaupthing wiped out their shareholdings. Three recent Supreme Court decisions have paved the way for class action against Landsbanki’s largest shareholder, Björgólfur Thor Björgólfsson, to test if he was responsible for shareholders’ losses as the bank collapsed 7 October 2008. Those behind the Landsbanki class action intend to sue Kaupthing’s managers for the same reason, i.e. financial losses, based on a criminal case where nine Kaupthing managers have already been sentenced for market manipulation.

“Around thirty men are to blame for the banking collapse” – this is how Vilhjálmur Bjarnason, now member of Alþingi for the Independence party, dramatically described the situation a few weeks after Iceland’s three largest banks failed one after the other from 6 to 8 October 2008.

Bjarnason was himself one of tens of thousands of Icelanders who owned small shareholdings in the Icelandic banks, worthless after these October days in 2008. Some years ago, he was one of the instigators in setting up a group to test if damages could possibly be sought through class action.

Class action – a novelty in Icelandic courts

Nothing like that had ever been tried in Iceland and the path has proven tortuous. Last year, the Reykjavík District Court dismissed the case. The Supreme Court confirmed that decision but at the same time gave the group a direction to test: the Supreme Court pointed out the group’s diverse interests; after splitting the original group into three homogenous groups, according to when they bought the shares, the case was tried again. Again, the District Court threw the case out but the Supreme Court has now ordered the District Court to process the case.

This means that the three groups can now have their case tested.

The thrust of the case is that Björgólfur Thor Björgólfsson, as the bank’s largest shareholder, withheld relevant information that should have been in the bank’s annual accounts for 2005 and onwards. The information relates to loans to related partners, i.e. Björgólfsson and his father and also information regarding control over the bank. Had the shareholders been aware of this, they would not have wanted to invest in the bank.

A case built on the SIC report and witnesses

The case is partly built on the report of the Special Investigative Commission, SIC, published in 2010, which indeed recounts all of this. In addition, the group has sought documents and statements from witnesses in an earlier case, brought for the purpose of gathering evidence. If Björgólfsson will be found to have been in breach he will consequently be forced to pay damages to the shareholders behind the class action.

These attempts by the shareholders to sue Björgólfsson have been followed closely by the Icelandic media. Björgólfsson claims the action is utterly baseless and only a personal vendetta against him. One of the shareholders funding the action is Róbert Wessman, earlier CEO of Actavis. Shortly after Björgólfsson took over Actavis in 2007 Wessman left the company and founded his own generic pharmaceutical company. Wessman and Björgólfsson, who parted on bad terms, were for some years suing and counter-suing each other and as often reported in the Icelandic media there is no love lost between the two businessmen.

Kaupthing managers face action from the same shareholders

In October 2016, Sigurður Einarsson former chairman of Kaupthing, former CEO Hreiðar Már Sigurðsson and seven other Kaupthing managers were found guilty of market manipulation by the Supreme Court (see earlier Icelog). Since the managers have already been found guilty, the three groups behind the Landsbanki class action plan to sue Kaupthing managers personally for damages.

Who exactly will be sued is not clear but it seems highly likely that Einarsson and Sigurðsson will be among those sued.

*Here are the three recent Supreme Court decisions mentioned above: case 447/2017, 448/2017, 449/2017.

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Written by Sigrún Davídsdóttir

August 24th, 2017 at 11:57 pm

Posted in Uncategorised

3 Responses to 'Landsbanki shareholders seek damages by suing Björgólfur Thor Björgólfsson – and more could follow'

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  1. At long last Sigrun… people going after Thor . Now known to be the 85th richest man in the World as stated in the Times rich list… and surprise surprise Daddy is bankrupt…… with all our money no doubt !
    Well let’s hope and pray that the verdict to be given on Monday 28th August in the Supreme Court in Paris… will find Daddy guilty of criminal fraud and money laundering !….. justice we hope for the hell hundreds of us have gone through for nine long years!…
    Thank you Sigrun.

    Julia Paige

    25 Aug 17 at 10:25 pm

  2. Non Sequitur:
    Alas judge decided in favor of Landsbanki Luxembourg against Henrico Macias re equity release.
    Normal vagaries of economic events.
    http://www.boursorama.com/actualites/escroquerie-enrico-macias-perd-son-proces-contre-une-banque-islandaise-20355c56de47087ac0d1da57f31e011c

    Goupil

    28 Aug 17 at 3:07 pm

  3. Thanks for the update Sigrún! In your next post can you tell us about the political situation in Iceland?

    Hallam

    28 Aug 17 at 10:56 pm

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