Sigrún Davíðsdóttir's Icelog

Three and a half year after the demise of Kaupthing Singer & Friedlander, the Financial Services Authority, FSA, has come to the conclusion that KSF breached liquidity rules. It has served the bank, now in liquidation, a so-called final notice.

The FSA finds that KSF had stated it had a £1bn it could draw on at short notice from the mother company. That proved not to be the case. This money wasn’t in hand at all and indeed not available:

“By 29 September 2008 KSFL should have realised that there was a risk that the £1bn value of the Liquidity Transformation Arrangement might not be recoverable in full on an overnight basis, or within 0-8 days.”

Under normal circumstances, KSF would have been fined – and probably fined heavily. But since the bank is in administration there is no functioning body to fine:

“KSFL’s financing arrangement with its parent was an important element of the firm’s survival in times of crisis and this failure alone would have led the FSA to impose a significant financial penalty were it not for the fact that KSFL is in administration.”

This adds a bit to the story of Kaupthing’s last days. KSF said it had £1bn – but it hadn’t. Was the money never there, ia was this just a statement on paper – or had the money gone somewhere else? Sadly, this FSA move leaves some unanswered questions.

The whole saga of Kaupthing’s inter-group transfers is of great interest, such as money going from Iceland to Luxembourg. And then the Kaupthing clients in Isle of Man, left high and dry, would no doubt like to know a bit more how their money was moved to Iceland and where it ended.

Right now, the two brothers, who were the largest owners of Exista, Kaupthing’s largest shareholder, Lydur and Agust Gudmundsson, have suddenly shown up in Iceland with coffers full of money. At least coffers with ISK20bn, £101m, with which they now want to buy back Bakkavor, the food processing company that they lost to creditors post-collapse. Apart from not having money at the time to hold on to Bakkavor they had personal loans for their houses with Kaupthing Luxembourg, now Banque Havilland.

The return of the Bakkavor brothers to the Icelandic business community will be a test case. Are the pension funds, who lost a great deal on bonds from the companies of the two brothers and other raiders, willing once again to do business with those who caused them and the whole nation, some severe harm?

It may come as a surprise that the brothers and other big debtors still have the money to do business. However, both the SIC report, court cases and other investigative material shows clearly that behind the favoured clients, who got loans against weak or no collateral, there was a clever machinery. Loans to buy shares were never paid. Instead, the dividend was for free use – and has no doubt been taken good care of – but the debt migrated to asset-poor companies, which then went bankrupt in due time.

This careful splitting-up of debt and asset isn’t an Icelandic invention but Icelandic bankers and their favoured clients mastered it to perfection. That’s why the post-collapse sequel is about the return of the raiders.

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Today, the Spanish Government formally asked for aid to recapitalise its banks – the word “bailout” isn’t mentioned but that’s what this aid is – and no numbers mentioned either. Even €100bn might only offer the briefest relief. Cyprus’ bid today for the same mostly goes unnoticed. Apparently Russia’s aid to the island isn’t enough. Will the EU keep on throwing good money after bad, without digging out the roots of corrupt banking practices?

Do you remember in 2008 when some British, Irish and American banks were below sea-level and people pointed at Spain and Spanish banks as the example to follow? Those were the days – days of Spanish clever accounting, not of their banks’ rude health. That’s a point made in a clear and insightful article, “The EU Smiled While Spanish Banks Cooked Their Books,” by Bloomberg’s Jonathan Weil.

At the core of the Spanish loan debacle are local banks, the cajas, heavily connected to the construction sector and local politicians, just like in Ireland. The Mahon report uncovers the unhealthy relationship in Ireland in the 80s and the 90s between these two elements: the building sector and politics. A relationship that has a lot to do with the escalating debt of the Irish financial sector, which the EU then forced the Irish state to shoulder. The cajas saga seems to mirror the Irish state of things completely, even down to brown envelopes.

Spain now needs billions to save its banks – €65-100bn, depending on the calculation – the official Spanish bid for a bailout today doesn’t come with a number. At the centre of this salvage project is Bankia – a bank created in 2010 out of several of the worst cajas, with – as is now turning out to be the classic way – far too little write-downs. As if pooling together the worst cases would create a bank in brilliant health.

In the best tradition of the marriage between finance and politics, the role of a chairman was given to a politician, Rodrigo Rato. Rato had an apparent merit, having been the director of the IMF 2004-2007. Why did he resign after only three years, before the end of his term? Apparently, he wanted more time with his family. Quite often, when people in power resign to be with their families, it’s because no one else wants them but dares not say it aloud. The Spanish press is overflowing with stories about corrupt lending to political pet projects like airports that have yet to see an airplane and exorbitant salaries of cajas managers.

There are also cajas in Iceland, small local saving banks, originally set up to serve individuals and small enterprises in the local community, based on small is beautiful in a closely-knit community where the directors are pillars of society. Last year, PriceWaterhouseCooper did a report on one of these local institutions in Iceland – the local saving society in the village of Keflavik, on the Reykjanes peninsula, right in the shadow of the now defunct US base. This report has now been leaked – and it provides a grotesquely clear image of small-town corruption with no small money.

The methods aren’t new –it doesn’t come as any surprise that there were plenty of loans with no or weak collaterals – but the methods are really crude. The CEO lent and then wrote-off loans to his son, not to mention the bank’s staff, local politicians and entrepreneurs with the odd bank CEO among favoured borrowers. And as with the banks: what were the accountants doing?

Like in the cajas, this is the story of how the vision of community service turned to the vision of greedy self-service.

SpKef has now been thrown under the wings of the state-owned Landsbanki, as if Landsbanki were the best place to keep toxic waste, no questions asked. That said, the Office of the Special Prosecutor is no doubt looking at the SpKef operations. SpKef managers seem sitting ducks for a criminal case of breach of fiduciary duties, comparable to the Byr case. But so far, the Government isn’t asking any questions and yet it is putting ISK25bn, €197m, to fill the empty SpKef coffers in an unexplained bailout (and in Icelandic terms, the bailout amounts to the budget contribution to the University of Iceland for two years).

But how come that banks, costing governments in the UK, the US, in Ireland, Greece, Portugal, little Cyprus and now in Spain the earth and the sky aren’t being properly investigated? Is it too complicated? Of course it isn’t. It’s a question of picking and choosing the right topics – such as breach of fiduciary duty, possibly market manipulation and in the small local banks corrupt lending.

A recent court case, studied by Matt Taibbi in a Rolling Stones article, uncovers how major US banks, over a decade, have used tried and tested Mafia methods to rig bond auctions by public authorities, universities and other institutions. It’s an article that merits reading more than once just to fathom the banks’ dizzying arrogance and pure will to cheat. The defense argued ia that the rigged price was just as fair as any other price. Yes, why bother with free competition when only monopoly is deemed to assure the satisfying gains?

Banks in the US and the EU are all profiting from abnormally low interest rates though they aren’t lending. How ironic: it was the unwillingness to lend that triggered the credit crunch in 2007, thought at the time to be a tiny naughtiness by the banks. In the UK, the subsidy to banks has been estimated to amount to £220bn over the last few years. Now, this seems more like a good plan to get capital.

And in case you haven’t noticed: the banks are still not lending but hoarding money against the losses they seem to suspect are looming out there. Understandable, in the light of the latest, from the WSJ:

Regulators and investors are concerned that some European banks are artificially boosting a key measure of their financial health, a worry that is further eroding market confidence in the Continent’s banks.

Such concerns have been building up for more than a year. But they have intensified lately, with a parade of banks announcing that they intend to increase their capital ratios—a key gauge of their abilities to absorb future losses—partly by tinkering with the way they assess the riskiness of their assets. Spanish banks, including Banco Santander SA, are among those that have announced plans to boost their capital ratios …

Does it come as a surprise that in spite of repeated stress tests, the banks might actually not be showing their true colours? No, it doesn’t. In an unnamed central bank a stress test was recently being discussed. Some innocent soul asked why the test didn’t test more severe and realistic circumstances. There was a troubled silence before someone muttered: “Because then they would all fail.”

In Iceland – an interesting measure because of the thorough overview of the banks, the SIC report – it’s clear that bank auditors have questions to answer. Some will be answered in court: Glitnir and Landsbanki have sued their auditors, PwC, for misrepresenting the health of these banks. The rapid expansion of Kaupthing is worryingly similar to Santander’s growth.

Modern society undoubtedly needs banks – but we need banks that do not just serve themselves but society as a whole. We are still waiting and it’s costing us all a lot. It’s not just a euro crisis but a crisis of Western banking under the long, dark shadows of corrupt business practices.

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Scots against separation from the United Kingdom have launched a cross-party offensive against the surge for independence, driven by Alex Salmond and the Scottish National Party. One of those working against the SNP plan is Alistair Darling Labour’s former Chancellor of the Exchequer.

This morning, Darling presented his views on these matters on the BBC Today programme. In the end, Darling said Salmond had run out of ideas in terms of countries to compare an independent and thriving Scotland with. “You will find that Iceland and Ireland with which he used to compare us are now off the list,” said Darling.

Darling might have a case in Ireland but he doesn’t seem to have followed the trajectory of Iceland since the bank doomsday in October 2008, when then Chancellor Darling was quicker to react than Icelandic authorities and put Landsbanki and Kaupthing out of their misery. After much furore in Iceland, Icelanders have come to realise that the Icelandic banks didn’t fail because of Darling’s action driven by British and international envy over the banks’ brilliance. No, the Icelandic banks dug their own grave and are now under investigation in Iceland and the UK.

But that is the past. As a steady trickle of articles show, Iceland is now a favoured example of a country that took a huge hit as its three main banks failed, had its own currency to devalue, wiped out bad debt from the big banks by letting foreign creditors shoulder the losses and is now enjoying an enviable growth rate of 2-3% of GDP. (Here is an earlier Icelog, comparing Ireland and Iceland.)

Iceland isn’t a shining example in all respect but it’s done the national economy and the national psyche a lot of good to let failed banks expire instead of throwing good money at them to hide bad debt. Unfortunately, the UK Chancellor at the time didn’t use his influence to have the operations of banks needing public salvation thoroughly scrutinised – which is why the British know a whole lot less about the operations of the banks they are supporting than Icelanders do of their failed banks.

*Here is an interview with Darling on his dealings with the Icelanders in autumn 2008, excruciatingly unflattering for the Icelandic authorities at the time but largely supported by the SIC report.

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For those who hope that the authorities know what they are doing when it comes to investigating financial fraud it’s been an excruciating experience to follow the SFO investigation into the Tchenguiz brothers’ relationship with Kaupthing. Regarding Vincent, all went wrong at the SFO that could go wrong. The SFO must be reviewing it all in detail, ia how documents already with the SFO, showing that Vincent wasn’t fooling Kaupthing with his collaterals, came to be ignored by the SFO – Kaupthing did indeed know the bank couldn’t enforce the collateral to achieve the full value of the collateral on a short term basis.

It’s crystal clear that the SFO went about all this completely in the wrong way, in Vincent’s case. After much confusion the SFO is now satisfied there is nothing there to investigate. What remains is Robert’s relationship with Kaupthing, still under investigation. His loans went from just over a billion euros to €2.2bn in one year – the fatal year when no banks were lending, ie from end of 2007 until the collapse of the bank in Oct. 2008.

As to the Kaupthing managers, the question is why the bank was willing to lend Robert Tchenguiz, as so many of its main clients, against no or poor collaterals and, time and again, to expose the bank to excessive risk whereas the favoured clients were completely, or mostly, sheltered from any risk. Some would say that such lending is a breach of a manager’s duty, on behalf of a bank’s shareholders, to take into account the interest of the bank – and not just the interest of a few favoured clients, who in some cases also were among the bank’s shareholders.

These stories are all laid bare in the Icelandic SIC report, cases involving this type of lending are being pursued by the Office of the Special Prosecutor in Iceland (now with one case ended and two bankers sent to prison for 4 1/2) years. Not only Kaupthing but also Landsbanki operated in this way – both banks operated in the UK: these are not Icelandic stories, except that the banks were Icelandic – these are international stories.

And yet and yet, other countries such as the UK – not to mention Luxembourg where the core of the shadiest Icelandic operations were carried out – seem to be utterly complacent. That said, not much is being done to investigate lending by the three bust Irish banks and the Spanish cajas – but that’s another story for another day.

*See an earlier Icelog on the Tchenguiz judicial review, SFO, Kaupthing and Tchenguiz and here, for further logs on this topic.

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Reykjavik District Court acquittals last autumn in the Exeter case were a major blow to the Office of the Special Prosecutor. Thursday June 7 the High Court came to a radically different conclusion. Jon Thorsteinn Jonsson, ex-chairman of the board of Byr, a saving society and Byr’s CEO Ragnar Gudjonsson were sentenced to 4 1/2 years in prison, guilty of breach of fiduciary duty. The case of the third banker, CEO of MP Bank Styrmir Thor Bragason, was sent back to the District Court. Following this ruling, Byr must be considering if to sue these men for damages.

This ruling will have a major impact on other cases to come – it’s clear that there are other cases of breach of fiduciary duty in the Icelandic financial system before the collapse of the three major banks in autumn of 2008. This also means that the law related to this issue is robust enough for the court to rule on. And it means that there will be other bankers who now will be contemplating on earlier deeds and possible ramification.

It also shows the Icelandic authorities are serious about bringing cases related to the banks to court. And the latest ruling is a severe blow to the District Court. Interestingly, the District Court judge who acquitted the three bankers is the same who acquitted Jon Asgeir Johannesson and others in the Baugur case in 2005.

What was the Exeter case about? Read about it here, on the Exeter case as Icelandic banking in a nutshell, about bankers who abused their position to save themselves and their friends from losses  – and here, on the earlier ruling. And here is the High Court ruling, in Icelandic only.

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On my visit to Dublin last week, I got to visit Tithe an Oireachtais, the Irish Parliament. A wonderful building, a beautiful blend of old and new. The same goes for the paintings on the walls, former presidents and prime ministers, some still alive and kicking, others gone to other pastures.

The paintings of previous Taoiseach, prime ministers, hang along an oval gallery, a passage into the House of Represantatives. Just recently, the Mahon report, 14 years in the making, was published. It showed quite clearly that in the 80s and the 90s, the period covered by the report, Ahern was receiving corrupt payment. Other cases show that Ahern didn’t really improve later in life.

But what is Ahern doing now? Like so many previous PMs – Tony Blair being a prime example – Ahern knows that in distant countries being a bit of a rogue does much less harm than the “ex-PM” title does good. So Bertie Ahern is now opening doors in China for Irish business men.

But Ahern is still hanging on the wall in the Irish Parliament – not being able to explain how you finance buying a flat is just nothing – and there is also the grand painting of Charlie Haughey. These paintings are a daily reminder to the Irish MPs that being a bit of a rogue doesn’t seem to do any harm in Irish politics. Brown envelopes? Never mind. Is that the message the Irish want to spread around?

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This is really the question Lord Justice Thomas and Justice Silber have to answer when they rule on the judicial review granted into the arrest of Vincent and Robert Tchenguiz, house searches and raids conducted by the Serious Fraud Office. The brothers are testing separate reviews – their cases are different – and the answer won’t necessarily be the same for both of them.

In the UK media much has been made of the SFO’s blunders in its investigation of the brothers’ connection with Kaupthing, which also touches key Kaupthing characters like the bank’s chairman Sigurdur Einarsson. The SFO has already acknowledged certain mistakes and excused to Vincent – the part concerning Robert hasn’t been touched upon. This hasn’t sheltered the SFO from being taunted by the media and rumours swirl that the investigation will be called off.

James Eadie QC, representing the SFO, introduced his skeleton last week by underlining the complex structure of the Robert Tchenguiz companies. There was R20, a counsel to the Tchenguiz Discretionary Trust and yet also somehow owned by the TDT and then there are companies administrating the TDT, also advised by R20. The Tchenguiz Family Trust, owned by Vincent, is a separate entity and yet somehow connected as well. When Kaupthing collapsed, Robert owed €2bn to Kaupthing – a staggering 25% of Kaupthing’s loan book had been lent to Robert.

Eadie pointed out that three fundamentals are a necessary prerequisite to normal banking:

1)    Loan-to-value ratio, ie the collaterals have to cover the lending

2)    Internal processes for proper lending; the lending has to be properly dealt with

3)    No lending to insolvent companies

In Kaupthing, Eadie claimed, all these three fundamentals were broken. Robert got an unsecured loan of €155m from Kaupthing. The bank put aside normal processes used in relation to other borrowers. Eadie said that Oscatello was insolvent in December 2007, the bank knew it and still it kept pouring loans into this Robert Tchenguiz company.

In addition, Eadie mentioned that Tchenguiz had removed valuable collaterals and replaced them with assets worth a whole lot less. – Incidentally, there are examples from other favoured clients of the Icelandic banks who got away with this, meaning that when certain companies went bust, the creditors got the junk and the favoured clients have kept their valuable assets.

Justice Thomas didn’t much want to accept that this was a complicated case under investigation. It could very well be seen as a case where a bank thought it was in its interest to keep lending, hoping for better times to come, because a bankruptcy would be too heavy for the bank to bear (though he didn’t mention that a bank shouldn’t get into such a situation in the first place). The key question was, according to Justice Thomas, whether the decisions were commercially legitimate and sound.

Eadie accepted Justice Thomas’ explication but stuck to his own version, pointing out that it was in no way in the bank’s interest to keep on lending, over the many months after December 2007, when nothing indicated that Oscatello could be saved – and when the normal fundamentals of banking were so completely set aside.

Eadie mentioned briefly that Kaupthing managers also had investments with Robert Tchenguiz. This point merits some attention. When the managers were dealing with Robert Tchenguiz investments they weren’t only dealing with a client with whom the bank had co-invested. They were dealing with a client with whom they personally had invested.

As the SIC report shows, the managers took out loans with Kaupthing, invested in at least one investment company, Kaupthing Capital Partners II. This company invested in Somerfield and Laurel, together with Tchenguiz, in Jane Norman, Mosaic Fashion and Booker with Baugur/Jon Asgeir Johannesson and in companies with Agust og Lydur Gudmundsson and Olafur Olafsson, respectively the bank’s largest and second largest shareholders.

As to how the key employees saw their participation in these investments there is this very illuminating email in the SIC report (vol. 3, p81), dated December 12 2006, from Kaupthing Luxembourg manager Magnus Gudmundsson and Kaupthing Singer & Friedlander manager Armann Thorvaldsson to Sigurdur (Siggi) Einarsson and Kaupthing’s CEO Hreidar Mar Sigurdsson:

“Hi Siggi and Hreidar

Since Armann has discussed this with you we (the association of loyal CEOs) have talked about it between us and came to the following conclusion about our shares in the bank:

1. We, each of us separately, set up a SPV where we put all of our shares and loans.

2. We take an additional loan up to 90% LTV which means we will immediately take out some cash.

3. We get permission to lend more if the KB shares go up to what amounts to 90% LTV up to course 1000. Meaning that if the share price goes above 1000 we won’t be able to borrow more.

4. The bank makes no margin calls against us and would shoulder any theoretical losses, if they occurred.

We are interested in using some of this money to put into Kaupthing Capital Partners.

Best regards,

Magnus and Armann”

This explains how the managers of the bank saw their own personal loans from the bank – no risk for them, all risk on the bank – and this money were partly used to invest, ‘risk-free,’ with the bank’s major clients – and in some cases, the bank’s major shareholders. This raises the question to whom these and other Kaupthing managers were loyal and if Eadie’s definition of normal banking fundamentals were entirely followed here.

The loans to Oscatello – one of the underlying reasons for the SFO investigation – follow the abnormal banking practices in Kaupthing. Looking at only one loan, one might think that yes, Kaupthing was hoping the tide would turn as it poured money into Oscatello – but there are certainly are questionable sides to this lending. Sides, which characterised Kaupthing’s relationship to all its favoured clients.

Another aspect of this interesting relationship comes to light when the favoured clients bought big stakes. In February 2007 much was made of Exista’s invasion into the Finnish insurance market as it starting buying into Sampo, where it ended up owning 20%. But there was a prelude to Exista’s Sampo acquisition, as explained in the SIC report (vol. 2, p. 175):

In March 2006 Kaupthing consented to a loan agreement to finance acquisition of just over 10% in the Finnish insurance company Sampo. The buyer was Exafin BV. It’s beneficial owner, behind a series of some companies, was the Tchenguiz Family Trust.* According to the agreement the American bank Citibank lent to buy shares in Sampo. Half of Exafin’s total capital contribution of EUR100m came from Tchenguiz Family Trust but the other half came from Kaupthing, through its subsidiary Isis, as participation lending. In addition, Kaupthing gave Citibank a mixture of options and a guarantee, which obliged Kaupthing to place a collateral if the value of the shares fell below a certain level. This guarantee had to be met at least once because in July 2006, after a fall in Sampo’s shares, Kaupthing agreed to an addition to the guarantee, which it then placed with Citibank. By then, the total guarantee placed by Kaupthing was EUR360m. In February 2007 Exista bought Exafin BV from companies owned by the Tchenguiz Family Trust. At the same time, the loan from Isis was paid back but the other part of the loan remained unchanged. This meant that Citibank kept financing the shares but it was still Kaupthing’s obligation to pay out the guarantees in case Citibank made a margin call due to a falling share price. To lessen the risk on Kaupthing, Exista placed a guarantee for the margin calls. In this way, Kaupthing could turn to Exista for the guarantee it had placed. 

As can be seen from this, Robert Tchenguiz had, quite extraordinarily bought Sampo shares before Exista started buying them. Quite handily, Exista just bought the Tchenguiz company which owned the shares. To complicate things further, it was also around this time that Robert Tchenguiz took place on the Exista board. And luckily for the instigators of these dealings it was Kaupthing – and not the clients – that, again, shouldered the risk.

The SFO picked a tiny little piece to investigate out of the whole Kaupthing story. But even this tiny bit raises some serious questions. The judicial review isn’t about the guilt of Vincent and Robert Tchenguiz but only if the SFO supplied the correct information when it got the warrant from a judge before the Tchenguiz brothers and seven others were arrested in March 2011 and their private premises and offices searched.

James Eadie kept emphasising that it was important to look at the whole picture, not just the tiny bits the Tchenguiz’ lawyers were complaining about to undermine SFO’s whole rationale. It will be interesting to see what conclusion the judges reach – and if the SFO sticks to its investigation or not.

*James Eadie presented the Tchenguiz Family Trust as belonging to Vincent Tchenguiz. According to the SIC report this company was however involved, on part of Robert, in the Sampo deal. This may indicate that the dividing lines between the brothers’ assets are more fluid than they present them – or that they have changed since this happened. Yet another possibility is that the SIC report got it wrong but it’s right to keep in mind that the SIC had access to Kaupthing documentation regarding these transactions. 

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I’m in Dublin again – was here in December 2010 just as the effect of Ireland’s bank bailout had forced Ireland to be bailed out by the EU and the IMF. And the UK, which has staunchly refused to be drawn into the eurozone debacle, did add to the bailout package.

An organisation, Claiming Our Future, is organising an event tomorrow, on “Reinventing Our Democracy” – as the title says, to discuss these issues and the way forward for Ireland. The same attempts have been going on Iceland, in particular related to writing a new constitution, a process that’s still not finished.

The spirit here seems rather bleak. Not much optimism, as often is when unemployment is high – 14% here at the moment – and not much change in sight. This is a country where privately held debt – accumulated by bad banking and unsound speculation – was allowed to migrate over to the public sector.

But how about writing down this debt? The leading political parties aren’t too keen on it. Isn’t that just for countries who in reality are bankrupt? For countries in a really horrid situation like Greece?

Maybe – but why look at it so negatively? Is Ireland safe and sound over the worst? No, I don’t think so. There are rumours of a second unavoidable bailout looming. The pain has increased when the unsustainable situation isn’t solved but only mended. Then things drag on, the situation again gets unsustainable and yet another bailout is negotiated. It is very costly not to solve the real problems.

Greece has already restructured its private debt. Why shouldn’t Ireland consider doing the same?

*Last night, I was on a panel at a political chat show here, Tonight with Vincent Browne. You can watch it here – in the first bit the focus is on Iceland and Ireland. Then the discussion moved to EU.

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There has been a lively discussion on Icelog regarding Landsbanki, Luxembourg. For all of you interested in that matter, I strongly advise you to read it. I will take a better look at it myself in the coming days but here are a few issues touched upon:

Regarding Landsbanki operations:

The valuation that Landsbanki made of the properties – and then sudden drop in value just before the bank failed, is commented on by Sharon, a real estate agent in this area in France where many of the houses are.

Money was taken from accounts to buy Landsbanki bonds, even though the clients had it in writing that no investments were to be made without their approval.

Information of risk sent to clients after the loan was issued.

Serious lack of information and documentation, in addition to the questionable valuation, when the bank claimed the “security ratio” (the ratio between the loan and the collateral) had fallen and the clients was obliged to pay in order to address the shortfall.

Promises were made to make money available to clients but it seems that no money was forthcoming from Landsbanki – at least for some clients – already from July.

After the administrator took over:

In spite of investigations by the failed banks’ Icelandic resolution committees, ia Landsbanki’s ResCom, into the banks, the administrator in Luxembourg seems not to have undertaken any investigation, or at least that hasn’t been made known to clients.

Information from administrator to former clients on what they supposedly owe the bank does in many cases differ greatly from what the clients themselves see as possible but they don’t seem to be getting any explanation as to why there is this great difference.

—

These comments show that both regarding Landsbanki’s own operations and then the operation of the administrator there are serious issues to be addressed. There seems good reasons to question some legal aspects of the loans themselves – and then the administrator seems to have done a questionable job of dealing with the equity release loans. All this has been to a great distress for the clients involved.

For further information, here is an earlier Icelog on the nature of the equity release loans and Luxembourg.

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No, they didn’t. The story that Kaupthing managers stayed at Robert Tchenguiz’ house has done the rounds in both the UK and the Icelandic media. It sprung from a remark James Eadie QC, SFO’s barrister, made at the Wednesday hearing in the judicial review of Robert and his brother, Vincent. I certainly understood Eadie’s words to mean that Kaupthing managers had been living at Robert Tchenguiz house. However, I didn’t make use of this remark since I couldn’t quite see why the managers should have stayed with Robert – they had pretty nice houses themselves – and I wanted some further proof of this bizarre choice of abode.

Thursday morning, this story was on print the Telegraph. First thing at the hearing Thursday morning Eadie brought this article to the attention of  Lord Justice Thomas, who presides over the case, saying he had no intention to create a misunderstanding. He hadn’t meant that the Kaupthing execs had literally been staying at Robert Tchenguiz’ home, only that they lived in the vicinity of Tchenguiz, in Mayfair. Lord Macdonald, representing Robert, said that he and Eadie had found it entirely plausible that the execs had preferred Mayfair to Reykjavik.

This little incident and exchange of comments made the Lord Justice chuckle, adding that he had no intention of investigating this little matter any further.

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