Sigrún Davíðsdóttir's Icelog

In August 2017, French prosecutors lost their criminal case against ex Landsbanki chairman of the board Björgólfur Guðmundsson* and eight former employees of Landsbanki Luxembourg. These nine were charged in relation to the bank’s equity release loans. The prosecution won an appeal and the case is now in court again at Palais de Justice, expected to run into June.

Over the last few decades, equity release loans have wrecked havoc for borrowers in many countries. Like FX loans (see Icelog here), they have been a wandering financial curse. When circumstances change, bankers claim they could not have known – a hollow claim given the history of these loans.

The Landsbanki equity release lending saga has now been running for over a decade, closely followed on Icelog for the last few years (an overview here; link to earlier coverage here). This is a saga in three chapters:

1 The Landsbanki Luxembourg lending – how the loans were sold (an interesting aspect, given that banks all over Europe have lost FX lending cases due to EU consumer directives); the (unrealistically high?) evaluation of the properties used as collaterals; was there ever a viable plan in place in the bank to properly invest that part of the loan that was suppose to pay for the payout part; how credible and trustworthy was the bank’s information to customers? Given that Landsbanki was in dire straits when it started selling these loans it is also of interest what the bank’s purpose was with the loans: just another financial product or a product to save the bank? – This chapter is part of the criminal case in Paris.

2 The administration of Landsbanki Luxembourg has raised many and serious questions that Luxembourg authorities have so far been utterly unwilling to consider. The administrator, Yvette Hamilius, accuses the borrowers of simply trying to avoid paying. In 2012, the Luxembourg prosecutor Robert Biever issued a statement in her favour, without ever having investigated the case; an interesting if scary example of how the justice operates in the Duchy that depends on banking for its good life. – However, as earlier recounted on Icelog, the borrowers have a very different story to tell, of misleading and conflicting information on their loans and then an unwillingness on behalf of the administrator to engage with them and answer their questions. – Interestingly, Landsbanki Luxembourg has recently been losing in civil cases in Spain where equity release borrowers have brought the estate to court, mainly on the ground of consumer protection (see ERVA for various moves in Spain).

3 The sole creditor to Landsbanki Luxembourg is LBI., the estate of the failed Landsbanki Iceland. LBI has no direct control over Landsbanki Luxembourg but as seen from its webpage, it follows the case closely. The assets in Luxembourg are now the only assets left for LBI to distribute to its creditors. The question is if the administrator’s hard line against the borrowers, with the accruing legal cost and the clock ticking in eternity, really is in the interest of Landsbanki Luxembourg’s sole creditor.

This time there is a formidable presence on the borrowers’ legal team. Originally Norwegian, Eva Joly studied law in France. She was appointed an investigative judge in the early 1990s, famous for taking on the great and the not so good in major corruption case, where dozens of people, who never expected to see the inside of a prison cell, ended up just there. Joly, an MEP since 2006, cooperates with her daughter, Caroline, also a lawyer.

It remains to be seen how things progress this time in the Paris court room at the grandiose Palais de Justice.

*Together with his son Thor Björgólfsson, Björgólfur Guðmundsson was the largest shareholder of Landsbanki; father and son owned just over 40% of the bank but in reality, controlled over 50% of the bank since ca. 10% of the bank’s shares were in several offshore companies, controlled by the bank itself. This is one the many things exposed by the 2010 report by the Icelandic Special Investigative Commission. Guðmundsson was declared bankrupt following the banking collapse, his son is still one of the wealthiest people on this planet.

Follow me on Twitter for running updates.

The long-winding saga of the Landsbanki Luxembourg equity release loans is now in a French court in Paris, i.e. the alleged mis-selling. However, as the oral hearings brought out so clearly, other angles of this case have been ignored, i.e. the bank’s potential mismanagement of clients’ funds and the very questionable handling of the Landsbanki Luxembourg administrator. These last two issues have left so many clients frustrated and at their wit’s end.

A court case at the Palais de Justice, part of the spectacular Palais de la Cité on the Îsle de la Cité in the heart of Paris, is a grand spectacle to behold. Or at least that was my impression last week as I sat through two afternoons of oral hearing in the penal case against Landsbanki Luxembourg bankers and Landsbanki’s chairman Björgólfur Guðmundsson, the only one of the accused who was not present.

Apart from the three judges and the prosecutor there were the thirty or so lawyers fluttering around in their black cloaks with white bands around the neck. The lawyers were defence lawyers for those charged, lawyers for some of the witnesses and then there were lawyers related to civil cases connected to this case.

The case, brought by a prosecutor after an investigation led by Justice Renaud van Ruymbeke, centres on alleged mis-selling of equity release loans, as explained in an earlier Icelog. Oral hearings are scheduled until May 24, but the hearings were taking longer than expected and extra days to be added. The judgement can be expected in autumn.

French borrowers got contract in English, foreigners in French

The involvement of the very famous French singer Enrico Macias in the Landsbanki Luxembourg case has secured the attention of the French media; Macias took out an equity release loan of around €35m and his losses amount to €9m.* On the first day of the oral hearings, 2 May, Macias sat in court surrounded by his black-cloaked lawyers. On the second day of the hearings when Macias was questioned I counted nine lawyers apparently part of his entourage.

Macias was questioned back and forth for ca. three hours, no mercy there for this elderly gentleman, by the very astute and sharp judge. Only at one point, when one of the defence lawyers had probed Macias’ story did the singer lose his patience, crying out he had lost his wife and his house because of this bank. The judge reminded him that the charges were serious and the nine men accused had the right to defend themselves.

When Macias’ contract was brought up during the questioning an interpreter was called to assist. It turned out that Macias’ contract was in English. Some of the foreign borrowers were in court – German, English, American etc. It turns out that the foreign equity release borrowers all seem to have a contract in French. One told me he had asked for a contract in English and been told he would get it later; he didn’t.

Intriguingly, there seems to be a pattern here as I heard when I spoke to other borrowers: Landsbanki Luxembourg gave the foreign borrowers, i.e. non-French, a contract in French but the French borrowers, like Macias, got a contract in English.

“Produit autofinancé”

Much of the questioning centred on the fact that Landsbanki Luxembourg promised the borrowers the loans were “auto-financed.” To take an example: if the loan in total was for example €1m, the borrower got 20-30% paid out in cash and the bank invested the rest, stating the investment would pay for the loan. Ergo, Landsbanki promised the borrowers they would get a certain amount of cash for free, so to speak.

The judge asked the various witnesses time and again if that had not sounded to too good to be true to get a loan for free. As Macias and others pointed out the explanations given by the bankers and the brokers selling the loans seemed convincing. After all, these borrowers were not professionals in finance.

This line of questioning rests on the charges of alleged mis-selling. Other questions related to information given, who was present when the contracts were signed, validity of signatures etc.

The dirty deals in Luxembourg

The operations of the Icelandic banks have been carefully scrutinised in Iceland, first in the SIC report, published in April 2010 and later in the various criminal cases where Icelandic bankers and some of their closest collaborators have been prosecuted in Iceland.

There is one common denominator in all the worst cases of criminal conduct and/questionable dealings: they were conducted in and through Luxembourg.

All of this and all of these cases are well known to authorities in Luxembourg: Luxembourg authorities have assisted the investigations of the Icelandic Special Prosecutor, i.e. enabled the Prosecutor to gather information and documents in house searches in Luxembourg.

These cases exposing the role of Luxembourg in criminal conduct are all Icelandic but the conduct is not uniquely Icelandic. I would imagine that many financial crooks of this world have equally made use of Luxembourg enablers, i.e. bankers, lawyers and accountants, in financial shenanigans and crimes.

The Landsbanki questions Luxembourg has ignored

As I have pointed out earlier, alleged mis-selling is not the only impertinent question regarding the Landsbanki Luxembourg operations. There are also unanswered questions related to management of clients’ fund by Landsbanki Luxembourg, i.e. the investment part of the equity release loans (and possibly other investments) and, how after the bank’s collapse in October 2008, the bank’s court appointed Luxembourg administrator Yvette Hamilius has fulfilled her role.

As to the management of funds, some borrowers have told me that after the collapse of Landsbanki Luxembourg they discovered that contrary to what they were told the bank had invested their funds in Landsbanki bonds and bonds of other Icelandic banks. This was even done when the clients had explicitly asked for non-risky investments. As far as is known, Luxembourg authorities have neither investigated this nor any of the Icelandic operations with one exception: one case regarding Kaupthing is being investigated in Luxembourg and might lead to charges.

The latter question refers to serious complaints by equity release borrowers as to how Hamilius has carried out her job. Figures and financial statements sent to the clients do not add up. Hamilius has given them mixed information as to what they owe the bank and kept them in the dark regarding the investment part of their loans. Icelog has seen various examples of this. Hamilius has allegedly refused to acknowledge them as creditors to the bank.

On the whole, her communication with the clients has been exceedingly poor, letters and calls ignored and she has been unwilling to meet with clients. One client, who did manage to get a meeting with her, was seriously told off for bringing his lawyer along even though he had earlier informed her the name of the person he would bring with him.

Hamilius, on the other hand, claims the clients are only trying to avoid paying their debt. She has tried to recover properties in Spain and France, even after the bankers were charged in France. One of many remarkable turns in this case (see here) was a press release issued Robert Biever Procureur Général d’Etat – nothing less than the Luxembourg State Prosecutor – in support of Hamilius in her warfare against the equity release clients.

The court case at the imposing Palais de Justice in Paris gives an interesting insight into the operations of Landsbanki Luxembourg. As to management of funds prior to the bank’s collapse and the administrator’s handling of her duties Luxembourg has, so far, only shown complete apathy.

*I picked these numbers during the hearings but French media has reported different figures so I can’t certify these are the correct figures.

Follow me on Twitter for running updates.

Equity release loans are a dangerous product to offer to all and sundry and that’s exactly what happened to those who took out such loans with Landsbanki Luxembourg – mostly elderly property owners in France and Spain. In addition, there are suspicions as to how the bank managed the investment part of the loans. In 2015 this  led to charges against Björgólfur Guðmundsson, Landsbanki’s chairman of the board and (together with his son Björgólfur Thor Björgólfsson) the bank’s main shareholder, as well as Gunnar Thoroddsen manager of Landsbanki Luxembourg and other employees. The case is coming up in a Paris Court now on Tuesday, scheduled to run through May.

Icelog has earlier reported on the sorry saga of the Landsbanki Luxembourg equity release loans. The borrowers, elderly non-Icelandic owners of properties in Spain and France, have been fighting the administrator of Landsbanki Luxembourg, Yvette Hamelius as well as trying to attract the attention of Luxembourg authorities to what the borrowers allege to be criminal offences committed by the bank prior to the collapse and lack of attention by the administrator.

As reported earlier on Icelog: The authorities in Luxembourg have shown a remarkable lack of interest in this case and certainly the borrowers have been utterly and completely shunned there. The most remarkable and incomprehensible move was when the Luxembourg state prosecutor, no less, Robert Biever Procureur Général d’Etat sided with the administrator as outlined here on Icelog. The prosecutor, without any investigation, doubted the motives of the borrowers, saying outright that they were simply trying to avoid to pay back their debt.

However, French authorities have taken the case seriously. After investigation, a French judge, Renaud van Ruymbeke, took on the case and then passed his findings on to a French prosecutor. In August 2015 Landsbanki managers, i.a. Gunnar Thoroddsen and Björgólfur Guðmundsson, as well as some foreign Landsbanki staff (see here) were charged with breeching the French penal code, risking both fines and up to five years in prison.

The case starts on Tueday. The oral hearings are, as far as I know, scheduled for 2, 3, 9, 10, 15, 16, 17, 22, 23 and 24 May at Tribunal de grande instance de Paris. I plan to report on the on-going proceedings.

Follow me on Twitter for running updates.

Twelve clients of Landsbanki Luxembourg have placed a complaint in a French court against the bank, now in administration, and its administrator Yvette Hamilius.

This is the culmination of a struggle over many years where a group of Landsbanki Luxembourg’s clients, who took out equity release loans with the banks, have been claiming that in spite of overwhelming evidence, i.a. criminal charges in Iceland, about the bank’s operations Hamilius has done nothing to investigate these matters. In addition, the clients claim she has harassed and intimidated them.

Further, not only has she taken no notice of charges brought in France last September by Justice Renaud van Ruymbeke against the bank, its directors and employees but has indeed chosen to discredit them publicly in Luxembourg media. As reported in the Luxembourg paper PaperJam, the complaints against Hamilius also concern money laundering since the charges in the van Ruymbeke case refer to fraud.

The saga of Landsbanki Luxembourg, its equity release loans, its other operations, the behaviour of the bank’s administrator and the unwillingness of the Luxembourg financial regulator, Commission de Surveillance du Secteur Financier, CSSF, to investigate both the bank’s operations and then the administrators  is a long and sad saga, which has often been brought up on Icelog (see earlier blogs here).

It can’t be said often enough – and I say it yet again – that it is impossible to understand the operations of the Icelandic banks without scrutinising their Luxembourg operations. Given the fact that managers and employees of all the three largest Icelandic banks have been investigated in Iceland and in some cases sentenced to prison and given that almost without exemption Luxembourg figures in these cases it is incomprehensible that the CSSF has not taken up a single case related to these banks.

The CSSF has recently set up a new office to protect the interests of depositors and investors. This may sound like good news, given the tortuous path of the Landsbanki Luxembourg clients to having their case heard in Luxembourg; CSSF has so far been utterly unwilling to consider their case. Interestingly, it’s the magistrate ruling on the Landsbanki administration Karin Guillaume who has been chosen to fill this post. As pointed out in PaperJam Guillaume has been under a barrage of criticism from the Landsbanki clients due to her handling of their case, which somewhat undermines the no doubt good intentions of the CSSF.

In addition, there is of course now the insight via the Panama leak into the operations of other banks in Luxembourg. When will the authorities in Luxembourg acknowledge that the many stories of financial malfeasance in the Duchy are a huge and ugly stain on this pretty little state at the heart of Europe? And when will other European countries bring enough pressure on the Duchy to confront the facts of the financial sector in Luxembourg: part of it is placed exactly there full well knowing that nothing seems sordid enough to wake the CSSF up to this disgraceful reality.

Follow me on Twitter for running updates.

After a French investigation, Landsbanki Luxembourg managers and Björgólfur Guðmundsson, who together with his son Thor Björgólfsson was the bank’s largest shareholder, are being charged in relation to the bank’s equity release loans. These charges would never have been made except for the diligence of a group of borrowers. Intriguingly, authorities in Luxembourg have never acknowledged there was anything wrong with the bank’s Luxembourg operations, have actively supported the bank’s side and its administrator and shunned borrowers. The question is if the French case will have any impact on the Luxembourg authorities.

In the years up to the Icelandic banking collapse in October 2008, all the Icelandic banks had operations in Luxembourg. Via its Luxembourg subsidiary, Landsbanki entered a lucrative market, selling equity release loans to mostly elderly and retired clients, not in Luxembourg but in France and Spain (I have covered this case for a long time, see links to earlier posts here). Many other banks were doing the same, also out of Luxembourg. The same type of financial products had been offered in i.a. Britain in the 1980s but it all ended in tears and these loans have largely disappeared from the British market after UK rules were tightened.

In a nutshell, this double product, i.e. part loan part investment, was offered to people who were asset rich but cash poor as elderly people and pensioners can be. A loan was offered against a property; typically, 1/4 paid out in cash and the remainder invested with the promise that it would pay for the loan. As so often when a loan is sold with some sort of insurance it does not necessarily work out as promised (see my blog post on Austrian FX loans).

The question is if Landsbanki promised too much, promised a risk-free investment. Also, if it breached the outline of what sort of products it invested in when it invested in Landsbanki and Kaupthing bonds. This relates to what managers at Landsbanki did. In addition, the borrowers allege that the Landsbanki Luxembourg administrator ignored complaints made, mismanaged the investments made on behalf of the borrowers. Consequently, the complaints made by the borrowers refer both to events at Landsbanki, before the bank collapsed and to events after the collapse, i.e. the activities of the administrator.

The authorities in Luxembourg have shown a remarkable lack of interest in this case and certainly the borrowers have been utterly and completely shunned there. The most remarkable and incomprehensible move was when the Luxembourg state prosecutor, no less, Robert Biever Procureur Général d’Etat sided with the administrator as outlined here on Icelog. The prosecutor, without any investigation, doubted the motives of the borrowers, saying outright that they were simply trying to avoid to pay back their debt.

However, a French judge, Renaud van Ruymbeke, took on the case. Earlier, he had passed his findings on to a French prosecutor. He has now formally charged Landsbanki managers, i.a. Gunnar Thoroddsen and Björgólfur Guðmundsson. Guðmundsson is charged as he sat on the bank’s board. He was the bank’s largest shareholder, together with his son Thor Björgólfsson. The son, who runs his investments fund Novator from London, is no part in the Landsbanki Luxembourg case. In total, nine men are charged, in addition to Landsbanki Luxembourg.

According to the French charges, that I have seen, Thoroddsen and Guðmundsson are charged for having promised risk-free business and for being in breach of the following para of the French penal code:

“ARTICLE 313-1

(Ordinance no. 2000-916 of 19 September 2000 Article 3 Official Journal of 22 September 2000 in force 1 January 2002)

Fraudulent obtaining is the act of deceiving a natural or legal person by the use of a false name or a fictitious capacity, by the abuse of a genuine capacity, or by means of unlawful manoeuvres, thereby to lead such a person, to his prejudice or to the prejudice of a third party, to transfer funds, valuables or any property, to provide a service or to consent to an act incurring or discharging an obligation.

Fraudulent obtaining is punished by five years’ imprisonment and a fine of €375,000.

ARTICLE 313-3

Attempt to commit the offences set out under this section of the present code is subject to the same penalties.

The provisions of article 311-12 are applicable to the misdemeanour of fraudulent obtaining.

ARTICLE 313-7

(Act no. 2001-504 of 12 June 2001 Article 21 Official Journal of 13 June 2001)

(Act no. 2003-239 of 18 March 2003 Art. 57 2° Official Journal of 19 March 2003)

Natural persons convicted of any of the offences provided for under articles 313-1, 313-2, 313-6 and 313-6-1 also incur the following additional penalties:

1° forfeiture of civic, civil and family rights, pursuant to the conditions set out under article 131-26;

2° prohibition, pursuant to the conditions set out under article 131-27, to hold public office or to undertake the social or professional activity in the course of which or on the occasion of the performance of which the offence was committed, for a maximum period of five years;

3° closure, for a maximum period of five years, of the business premises or of one or more of the premises of the enterprise used to carry out the criminal behaviour;

4° confiscation of the thing which was used or was intended for use in the commission of the offence or of the thing which is the product of it, with the exception of articles subject to restitution;

5° area banishment pursuant to the conditions set out under article 131-31;

6° prohibition to draw cheques, except those allowing the withdrawal of funds by the drawer from the drawee or certified cheques, for a maximum period of five years;

7° public display or dissemination of the decision in accordance with the conditions set out under article 131-35.

ARTICLE 313-8

(Act no. 2003-239 of 18 March 2003 Art. 57 3° Official Journal of 19 March 2003)

Natural persons convicted of any of the misdemeanours referred to under articles 313-1, 313-2, 313-6 and 313-6-1 also incur disqualification from public tenders for a maximum period of five years.”

As far as I know the scale of this case makes it one of the largest fraud cases in France. As with the FX lending the fact that the alleged fraud was carried out in more than one country by non-domestic banks helps shelter the severity and the large amounts at stake.

Again, I can not stress strongly enough that I find it difficult to understand the stance taken by the Luxembourg authorities. After all, Landsbanki has been under investigation in Iceland, where managers have been charged i.a. for market manipulation. – Without the diligent attention by a group of Landsbanki Luxembourg borrowers this case would never have been brought to court. Sadly, it also shows that consumer protection does not work well at the European level.

Follow me on Twitter for running updates.

As reported earlier on Icelog, the French investigative judge Renaud van Ruymbeke is conducting an investigation of Landsbanki Luxembourg activities in France regarding the bank’s equity release loans. With the investigation ongoing it was assumed that the bank’s liquidator Yvette Hamilius would suspend recovering assets by sending bailiffs to the bank’s customers in France.

This however has not been the case as the Luxembourg Paperjam reports (yet again by Véronique Pujoul who has followed this case diligently) and Icelog has heard. Lawyers for the clients are now asking if this could be seen as both harassment from the administrator and also constitute a contempt of the French Courts with an ongoing investigation where charges have been brought.

Icelog has earlier reported extensively on this saddest part of the Icelandic banking collapse saga. What is truly shocking is the utter and complete disregard Luxembourg authorities have shown the clients who have at length described their dealings with the bank and administrator, i.a. conflicting messages from the administrator on outstanding debt. Part of the scheme were investments, which the clients have questioned as they got more understanding of them as well as being kept in the dark about the administrator’s handling of the investments.

Instead, the Luxembourg state prosecutor has, without any investigation, placed himself firmly on the side of the administrator by claiming that the clients were only trying to evade paying back their loans. This behavior by a public prosecutor in a European country is utterly inconceivable.

Although investigations into the banks are ongoing in Iceland, with serious charges and severe prison sentences, Luxembourg has done nothing to investigate the Icelandic operations in Luxembourg, i.a. that of Landsbanki. Yet, the Icelandic investigations show that in many of the worst cases, such as in the so-called the al Thani case, the schemes were partly planned and carried out in the Icelandic banks in Luxembourg. In many cases, the alleged and proven criminal wrongdoings by the Icelandic banks could not have been done without their Luxembourg operations. Yet, Luxembourg ignores the banking problems in its own front yard.

Follow me on Twitter for running updates.

Icelog has followed the sad case of Landsbanki Luxembourg equity release loans for some years now. Those who took these loans in the years up to the collapse of the bank in October 2008 have for years been fighting for an investigation into these loans – in terms of the soundness of the original scheme, Landsbanki’s handling of the investments that were supposed to finance the loans, Landsbanki’s alleged breach of investing terms by investing in Landsbanki and Kaupthing bonds and then the whole handling of the bank’s administrator Yvette Hamilius.

After investigating these claims the French investigative judge van Ruymbeke opened an investigation. Following his investigation chairman of Landsbanki board Björgólfur Guðmundsson, Landsbanki Luxembourg manager Gunnar Thoroddssen, seven employees of the Luxembourg bank and the estate of Landsbanki Luxembourg, represented by Hamilius have now been charged with fraud and various other offenses.

Many other banks have settled equity release loans out of Luxembourg but not Landsbanki. This case is yet another example of the lax client protection there is in Europe when it comes to banking – another is FX loans, which I wrote about in my last blog (also on Fistful of Euros).

It takes long time to handle complaints; to begin with the authorities tend to shrug off any allegation of a bank’s mishandling, even now after so many cases of banks’  rather inglorious and harmful behaviour. What is so galling about the Landsbanki Luxembourg case is that most of the clients were elderly and/or retired people. For those who have been struggling to find clear answers regarding those loans the last step in France is a step in the right direction.

*See here for some earlier Icelogs on the investigation and the Landsbanki Luxembourg saga.

Follow me on Twitter for running updates.

Justice Renaud van Ruymbeke has today ruled in favour of former clients of Landsbanki Luxembourg, as already reported in Le Quotidien Luxembourg and the French La Tribune. Justice van Ruymbeke had previously charged three non-Icelandic former Landsbanki employees of fraud. Now he has ruled that Landsbanki Luxembourg cannot enforce collaterals placed against the equity release loans. If this turns out to be the end of the Landsbanki Luxembourg cases against those who placed French assets as collaterals this will surely be of huge interest to those with assets in Spain, where some former LL clients have managed to halt the enforcement by going to court.

The crux of the matter is that as some other foreign banks in Luxembourg Landsbanki used its Luxembourg operation to issue equity release loans, sold to clients in France and Spain on questionable grounds, where the client is effectively both a borrower and an investor: part of the loan is paid out in a lump sum, typically 20-25%, the rest was invested by the bank.

As Icelog has already written about several times there are grave questions unanswered regarding these loans: Icelog has seen documents that show there are good reasons to doubt the soundness of the issuance of the loans and of the investments done by Landsbanki Luxembourg before it collapsed. After the collapse the administrator has, contrary to i.a. Landsbanki administrators in Iceland, apparently been unwilling to scrutinise the Landsbanki Luxembourg operations although clients have come forward with well reasoned and well motivated arguments about the loans. In addition, information has been unclear, communication poor and clients have not been acknowledged as having been both debtors and investors.

An incredible part of this long saga is the fact that the Luxembourg state prosecutor issued a press release in favour of the administrator, without having at all investigated the matter. The fact that a state prosecutor can issue such statements is a scary indication of the state of justice in this tiny country that because of its monumentally, relative to population, big financial sector has become holden to the interests of this same sector.

The Landsbanki Luxembourg clients have been fighting a heroic battle. These loans were mostly sold to elderly people and sadly some of the clients have died during these years of battling an unyielding justice system in Luxembourg where even getting a lawyer in a case, non-favourable to the state and/or the financial sector, seems to be a hindrance to seeking justice. It therefore comes as no surprise that a step towards victory for the clients has been taken not in Luxembourg but abroad, in France.

PS Here is an article on the events today, from AFP but it concentrates on just one case, that of the singer Enrico Macias.

Follow me on Twitter for running updates.

“… when it comes to unified European financial  sector it only works for banks, facilitating cross-border operations. For clients and consumer protection this sector has as many holes as a Swiss cheese. A food for thought: if cross-border operations only work for banks and not for clients they should not be allowed.”

As often mentioned earlier on Icelog a group of Landsbanki Luxembourg clients have been trying to attract the attention of Luxembourg authorities as to the nature of the bank’s operations and to the handling of the bank’s administrator of their cases. Contrary to Icelandic authorities and the Landsbanki winding-up board, busy investigating the bank in Iceland and charging/suing its managers, Luxembourg – the tiny country dwarfed by its towering financial sector – has shown no appetite for any such undertaking.

Now there are two new and very different developments which might be of interest for the Landsbanki clients, all of whom are foreigners, mostly elderly people, with properties in France and Spain. Labour MP Huw Irranca-Davies has drawn attention to the Rotschild bank, which also sold equity release products, causing default and loss of property, to a similar group of clients. And creditors in the long failed Luxembourg bank, Bank of Credit and Commerce International, BCCI also, like the Landsbanki Luxembourg clients, think that Luxembourg authorities are difficult to deal with.

MP Irranca-Davies raised the equity release issue in a House of Commons debate and had some harsh words for the Rotschilds: “… you have badly deviated from your core values, badly served your brand and reputation, badly served people who regarded themselves as your clients – not the clients of some intermediaries as they claim – and who are now facing penury after investing in products which your name, Rothschilds, your integrity, your values were used as a key selling point.”

Interestingly, conservative Treasure minister offered to raise the matter with counterparts in Spain and Guernsey. Should he do that someone should tell him not to leave out the Landsbanki Luxembourg cases since they also concern equity release loans.

One aspect of the equity release loans is that they have been sold by banks not operating in the country where the products have been sold. Rothschild, Landsbanki and several Scandinavian banks, all active in this business, sold the products to people in Spain and France, not from their operations there but from their Luxembourg operations. An interesting aspect, which has created a sort of vacuum around these operations: when the clients felt they had things to complain about Luxembourg authorities have not really listened as the products were not sold there; and authorities in France and Spain have so far not really taken the issue seriously since the banks were operating abroad.

This case has shown that when it comes to unified European financial  sector it only works for banks, facilitating cross-border operations. For clients and consumer protection this sector has as many holes as a Swiss cheese. A food for thought: if cross-border operations only work for banks and not for clients they should not be allowed.

For anyone following the world of finance for some decades BCCI is a familar name. The bank was operating – yes, in Luxembourg for two decades from the 1970s. Founded in Luxembourg in 1972 by a Pakistani financier, Agha Hasan Abedi, it eventually failed in 1991 after financial regulators in several countries feared it was badly regulated.

It took years to get the Luxembourgians to act but when they did it turned out that its operations were not only mundane lending and borrowing but money laundering and other criminal activities. One interesting aspect, in light of development in the three failed Icelandic banks is that the BCCI administrator, Deloitte, sued the bank’s auditor, Ernst & Young. The case never came to court but was settled for $175m in 1998.

All of this has turned into a long saga, which quite remarkably is still ongoing. The latest is that some of its creditors are now fighting authorities in Luxembourg, claiming it is blocking money from creditors. Though the BCCI creditors certainly with deeper pockets than the Landsbanki clients, they are no less upset and do not intend to drop their case any time soon. One of them is dr. Adil Elias, whose story has earlier been told by the WSJ.

Quite intriguingly the two gropus – the Landsbanki Luxembourg victims and the BCCI creditors – have one  thing in common: both had cases ruled on right up to Christmas in Luxembourg and in both cases those complaining lost. Maybe a coincidence – or this is the time Luxembourg courts feel is the best time to rule on “unruly” bank clients ready to take on Luxembourg authorities.

*See an earlier Icelog on this issue, with links to older coverage on Icelog.

Follow me on Twitter for running updates.

Icelog has earlier dealt extensively dealt with the saga of the Landsbanki Luxembourg equity release loans. As pointed out there seem to be good reasons to question both how Landsbanki dealt with its customers before its demise in October 2008 and then later how the administrator has allegedly dealt with these loans, as well as ignoring questions regarding the Landsbanki Luxembourg operations.

The clients, mostly elderly people, have shown great resilience in drawing attention to questions seeking answers but the authorities in Luxembourg have not been too keen in taking up the issues raised by the group. One of many remarkable events was when the Luxembourg Prosecutor went out of his way to issue a press release defending the administrator, i.a. by throwing doubt on the victims’ motives, though he did not publish any tangible proof for these allegations.

As reported earlier, the group has now sought legal assistance and is seeking ways how best to proceed with their claims. The group has now open a website with all relevant information, contact details etc.

Follow me on Twitter for running updates.