Sigrún Davíðsdóttir's Icelog

Icelandic authorities recently vetoed the sale of land in the Icelandic inland to a Chinese billionair, Huang Nubo. That case is indeed still milling on. The latest is that the adjacent municipalities are exploring the possibility of buying the land, with a loan from Nubo, to rent it out to Nubo.

But it’s not only in Iceland that Chinese investment is met with some skepticism.

This week, the High Court in New Zealand halted a planned sale of dairy farms to Chinese investors. The reason for the ruling is that the High Court claims the New Zealand government overstated the economic benefits the Chinese investment would bring when it allowed the sale some 16 months ago. The ruling isn’t prohibiting the sale per se but puts onus on the government to review the evaluation with stricter criteria. The court case was brought by some Australian farmer and a banker who were outbid by the Chinese investor.

It’s all familiar to Icelanders: the supporters of the sale say it brings much needed foreign investment into the dairy sector that’s anything but prosperous. Those against it says it runs against Australian interests to sell farmland. Quite interestingly the buyer in spe is a company run by a property developer called Jiang Zhaobai. As in the case of Nubo’s company property in China is notoriously difficult to evaluate.

*Previous Icelogs on the Nubo sale are here and here.

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A good way to inspire trust is to make sensible plans and stick to them. In November last year the Icelandic Central Bank outlined a plan to work towards the abolition of the capital control. According to the CBI’s press release, “the Central Bank of Iceland will hold foreign exchange auctions in which it will purchase foreign currency in exchange for Icelandic krónur to be used for domestic investment, provided that the investment remains in Iceland for a long-term commitment period… The Central Bank’s aim with the transactions is to facilitate the removal of the capital controls without causing major exchange rate or monetary instability or jeopardising financial stability.”

This plan, built on a liberalisation strategy announced March 25 2011, was clear-cut, straight and simple, aiming at financial stability. The theory was that this would gradually make the offshore rate and the onshore rate converge, in the sense that the offshore rate would approach the onshore rate.

The CBI badly needs foreign currency and an auction last summer was a failure. The only buyers were Icelandic pension funds – not terribly prudent of them to be selling off foreign assets – but they were clearly under pressure to step in.

But now it turns out that the CBI only has a plan until it conjures up another one. In a daily note (in Icelandic) on Feb. 3 the financial analysts at Islandsbanki pointed out that after a failed auction last summer and a most remarkable deal at the end of last year with an unknown foreign seller the bank was still short of €130m.

In this unexpected and inexplicable deal, the CBI bought Icelandic sovereign bonds for ISK18bn, €111m – and paid for it in foreign currency. As is scarily obvious, this deal, not a trivial one in terms of size, goes completely against the bank’s plan from last year.

At an auction on Feb 15 the bank intends to buy €100m from pension funds and from foreigners wanting to invest in Iceland, by making use of the so called 50/50 way: foreigners (not Icelanders) can use offshore ISK as half of any investment made in Iceland; the rest has to be in foreign currency.

So far, the 50/50 way hasn’t aroused much interest and the pension funds might be squeezed again. It could even be argued that the funds’ foreign assets will be used to finance the deal with this mysterious seller. A seller who was deemed to be of such importance that he got paid in foreign currency that that bank is sorely lacking.

At a press conference recently, CBI governor was asked about this deal. He claimed it was an entirely regular affair, it had been a good offer but the bank would not give any information on the mysterious buyer; such information was never public. – According to rumours, CBI staff had no inkling of the deal until it was done. It seems that in accordance with a tried and tested Icelandic management style, the CBI governor didn’t much confer with staff regarding this move.

The question is how anything can be a good offer if you are selling what you really need more of, not less? And when part of the cost is diminished trust? Whose offer was so good that the governor gladly accepted to ignore the bank’s policy?

After this event it is only fair to say that the CBI has a plan to abolish the capital controls but it doesn’t stick to it. Its course towards abolishing the controls isn’t straight but crooked. So much for the vital need of a central bank to be seen as trustworthy.

*If anyone has information on this mysterious deal and who was lucky enough to sell ISK assets to the CBI against currency I would love to know.

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The Investigative Committee on Pension Funds, ICPF, sat up at the behest of the Icelandic Association of Pension Funds, LL, had a hard act to follow, producing a report that would be as thorough and informative as the Special Investigative Committee. The SIC was set up by the Icelandic Althing to investigate the collapse of the Icelandic banks. In short, the ICPF hasn’t addressed the issues nearly as sharply and comprehensively as many had hoped for.

To be fair, the ICPF didn’t have the same wide access to material and sources as the SIC since it was working on behalf of the LL and not Althing. However, that doesn’t excuse the lack of sharp questions and focus on the relevant topics. With a sharper focus and a clear definition of the most relevant issues a lot more could have been squeezed out the available material.

About eight out of 32 Icelandic pension funds hold around 70% of the funds’ assets. Consequently, it would have been relevant to focus on these seven funds and scrutinise their activities. Instead, all the funds are dealt with more or less evenly.

The report focuses on the losses made, in total ISK480bn, almost €3bn. The assets of the funds now amount to ISK1.909.498.621. These numbers are interesting but they are not new and could already be gauged from stats available from the Central Bank. What is of great interest – and unfortunately not dealt with adequately in the report – is 1) why the funds were in general so sloppy when it came to covenants, an issue previously underlined on Icelog – and 2) why the funds took part in currency deals from which the funds incurred heavy losses, ISK36bn, €222m.

As to topics mentioned but not really dealt with is that commissions paid to funds abroad can’t be read from the funds’ financial statements. It would be interesting to know why that is the case – and to whom the commissions were paid. The reasoning behind many investments is quasi non-existent. It would be interesting to know why and what that says about decision-making at the funds.

Abnormally weak guarantees and covenants – and extended loans

An interesting case in point is when Kaupthing brokers sold a ISK1bn worth of bonds, €6m, for Bakkavor – whose major shareholders were two brothers, Agust og Lydur Gudmundsson who incidentally were also Kaupthing’s largest shareholders. These bonds were not secured by any operations and were used as a take-over fund for Bakkavor. The funds that bought these bonds bought the risk of shares at the price of bonds. A fabulous deal for Bakkavor and a truly lousy deal for the bondholders, the pension funds.

Also lacking here were clauses related to changes in relevant parameters such as capital. There were simply no proper covenants that would trigger a repayment of the loan in case there were significant changes affecting the status of the bond issuer. Neither the pension funds nor the banks showed any interest in more strict covenants.

This is all the more interesting when one keeps in mind that the banks did indeed operate abroad where pension funds would never have looked at such bonds. The question is why there was this difference? And who made the decisions on behalf of the pension funds? Were their fund managers too inexperienced? And is this way of doing things still thriving?

Because of these weak covenants the holding companies like Exista, Baugur and the other usual suspects could sweep up money from the pension funds. This practice has led to grotesque losses for the funds.

Out of total losses for the funds of ISK480bn, 90bn, €555m, stem from losses of corporate bonds and ISK100bn, €62m stem from bonds from financial institutions. Losses from shareholding amount the ISK199bn, €124m.

Losses related to the different business spheres are interesting: 44% of losses relate to Exista and related companies such as Exista, Kaupthing’s main shareholders, in total ISK171bn, €105m; 20% of the losses relate to the Baugur sphere, Glitnir’s main shareholders from mid 2007, or ISK77bn, €47m. For some reason, losses related to Landsbanki’s main shareholders Bjorgolfur Thor and his father Bjorgolfur Gudmundsson are not calculated but according to Visir (the media website owned by Jon Asgeir Johannesson of Baugur fame) losses attributed to the Bjorgolfsson’s sphere amount to ISK74bn, €46m.

An example of the report’s lack of perspicacity is its treatment of prolonged loans. It’s simply pointed out that increasingly new bonds, which were due, like bullet loans, on a single date, paid the bonds. This hid the fact that the bond issuers could not repay their loans. Again, this is only pointed out but there is no analysis as to why this practice became so prevalent and if this is still the case.

Incidentally, this trend follows what was happening at the banks: that the favoured borrowers were lent money to repay their loans, thus hiding the fact that they couldn’t or wouldn’t pay.

It’s already been pointed out on Icelog how the banks lent to holding companies, in reality turning them into banks without the risk management. By buying bonds from these companies, the pension funds did their part to make this possible.

The currency hedges

One of the issues, which expose the close ties between the banks and the pension funds, are the forex deals. Instead of holding on to their foreign assets, many pension funds actually sold their foreign currency towards the end, when the banks were seriously short on currency. The funds were led into believing that betting on a rising ISK was a wise thing to do because they had foreign assets they should be hedging. This view didn’t take into account that the foreign assets were in themselves hedged the Icelandic assets.

There was also a painful shortage of settlement provisions in the contracts concluded by the pension funds with the banks on management or purchase of currency hedges. International contracts on currency hedges usually have so-called ISDA terms and conditions, which describe in detail how they are to be dealt with in the case of flawed assumptions on the part of the contracting parties.

It is quite clear that the funds were easily swayed by the banks into these disastrously bad deals. Here, a much greater digging is needed. Why did the pension funds agree to these deals? Who convinced them? Was this really in the interest of the pension funds? What was the motivation – and last, but not least, what there the relations between fund managers at the pension funds and the banks?

Iceland is a small society and personal relations run back and forth there, as in other small societies. There are plenty of rumours and stories about pension fund managers and fund employees being wined and dined and pampered home and abroad by the banks and the companies from whom they bought bonds. Unfortunately, this aspect isn’t explored.

As said earlier, only a handful of the funds hold the largest part of the Icelandic pension funds’ assets. Each fund had perhaps two or so fund managers – in total, 10-20 people were the key people during the last few years before the collapse of the banks. It wouldn’t have been overly complicated to map their relationships to the banks, check on “revolving doors” etc. But that wasn’t done and consequently the whole saga isn’t told in this report.

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Last week, Deutsche Bank announced what analysts have called a catastrophic loss, for the last quarter of 2011. Greek debt isn’t good for Deutsche but the largest bit to swallow is an impairment of €407m related to the bank’s interest in Actavis. In total, the losses in the corporate investments division were €722m, making it clear that the losses stemming from Actavis account for over half of these losses. In comparison, losses stemming from impairments on Greek sovereign bonds amounted to mere €144m. These losses mark the end of Josef Ackerman’s reign at the bank, not quite the numbers he would like to end on.

Actavis was built up by Bjorgolfur Thor Bjorgolfsson who in 2007 took the company off the market. That move was financed by Deutsche that has, since the late 90s, showed great faith in Bjorgolfsson’s ventures by financing a number of his moves.

After the collapse of Landsbanki in Octobe 2008 Bjorgolfsson struggled to maintain ownership of Actavis. Here is how Deutsche describes its interest in Actavis after the bank completed the restructuring of its loans to Actavis (making it clear that the ownership is through a Luxembourg company):

Actavis. On November 24, 2010, Deutsche Bank completed the restructuring of loans it held with the Icelandic generic pharmaceutical group Actavis Group hF. (“Actavis”).

The restructuring resulted in Deutsche Bank continuing to provide both senior and subordinated debt financing to Actavis as well as a new Payment in Kind (“PIK”) financing arrangement. The terms of the subordinated financing arrangement resulted in Deutsche Bank having an equity method investment in Actavis Equity S.à r.l. (“Actavis Equity”), a 100 percent holding company of Actavis.

The terms of the subordinated financing arrangement give Deutsche Bank certain noncontrolling rights, consents and vetoes over certain financial and operating decisions of Actavis Equity. In addition, the terms of the subordinated financing arrangement subordinate repayments of amounts owing where the borrower is unable to pay its debts or on the sale of Actavis Equity or its subsidiaries. The effect of these rights and restrictions resulted in the treatment of the subordinated financing arrangement as equity for accounting purposes.

The terms of the PIK financing arrangement also provide for the subordination of amounts owed to Deutsche Bank (in the form of interest or repayment premium) under such arrangements where the borrower is unable to pay its debts or on the sale of Actavis Equity or its subsidiaries.

The carrying value of Actavis, which reflects the subordinated financing arrangement, is based on its financial position to September 30, 2010 adjusted to take into account transactions after that date.

The Actavis head quarter is no longer in Iceland but in Zug. The CEO is Swiss and out of the 15 top managers 6 are Icelandic.

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The Icelandic pension funds suffered heavy losses around and after the collapse of the Icelandic banks and consequently the Icelandic financial system. Today, an investigative committee published a report of 700p, on various aspects of the pension funds (a summary in English). In total, the committee calculates that losses during 2008-2010 amounted to ISK480bn, almost €3bn.*

Interestingly, the Association of Icelandic Pension Funds had earlier done its own investigation, of a few pages, concluding that the funds had done remarkably well. The new report paints a darker picture. More on the findings later.

*The number is corrected from an earlier version.

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Sean Quinn, who four years ago was Ireland’s richest man, has been forced into bankruptcy by his largest creditor, Anglo Irish. The man who over the years amassed a debt of €2bn with Anglo Irish now declares that his assets are worth only £50,000.

Similar losses have happened to the Icelandic billionaires. In the summer of 2010 the Glitnir Winding-Up Board sought a freezing order on the assets of Jon Asgeir Johannesson, the bank’s largest debtor. At the trial, Justice Steel was intrigued by the fact that a man who once was said to be worth £600m, who had in the years 2001-2008 a monthly expenditure £280,000-350,000 (!) and also had £11m flowing through his Glitnir account in autumn 2008, as the banks were collapsing, only had a paltry £1,1m worth of asset to show for it. The judge felt that such a substantial expenditure couldn’t but leave behind more substantial assets and confirmed the freezing order.

In the case of Quinn, Anglo is pursuing a case against him in Cyprus, thinking that Quinn and members of his family have conspired to move assets beyond the bank’s reach. Quinn speaks of a “vendetta” against him. Similar complaints have also been heard in Iceland from those pursued by WUBs.

It’s interesting to compare Quinn and other who go bankrupt leaving behind mountains of debt with stories from earlier decades and centuries about people doing everything to pay off their debt because their honour depended on it. Towards the end of the 19^th Century, Mark Twain lost money on attempts to develop a new type of a printing machine and the company went bankrupt. Although the debt wasn’t in his name Twain toured Europe for some years, giving lectures to a paying audience and publishing as he could, until he had paid off his debt.

Now a days some of those who got astronomically rich quickly and equally lost their fortune in a short time, are unperturbed to use their meagre assets to hire lawyers to defend themselves from the creditors. It’s as if using all means to avoid paying one’s debt has become the natural thing to do – instead of using all one’s possible means to pay it back.

But before it comes to bankruptcy, there are ways to siphon assets off. This was done in the Iceland – not only in the banks but also in the smaller financial institutions such as the building societies. The basic way is to use a cluster of companies as a centrifuge where, in the course of a few years, debt and asset is split apart: the debt stays in certain companies, the assets migrate elsewhere. When things go badly, the debt-ridden companies go bankrupt, little or nothing is left for the creditors whereas assets, bought with the help of loans, have been spirited away.

There are three basic ways to split apart debt and assets. One is to pay out dividends. Secondly, to buy assets from related parties – at whatever price that suits you – and thirdly, to lend money to related parties, not bothering about collaterals or security of any sort. In all three cases the debt doesn’t disappear but the assets bought are beyond the reach of creditors.

In addition, the Icelandic lenders lent exorbitant amount of money into holding companies such as FL Group, Exista, Samson, Baugur and Milestone, which in turn lent the money on to related parties, paid out dividends or did in other ways split apart debt and assets. By lending money into these holding companies, the companies turned into banks with no risk management.

The three main banks in Iceland all lent to big borrowers who used these methods. But not only the big lenders lent in this way. The building societies lent much smaller amounts to a number of people, often related to the managers or to the board members in such a way that the borrowers could split apart assets and debt.

One example that I have looked as it a cluster of six related companies. Debt was split from assets and debt by paying dividends and by buying assets of doubtful value. After a few years, the debt was in one company that went bankrupt after 2008. No assets were there to speak of. What however troubled the borrowers in this case was that at some point they were obliged to take on a personal guarantee of ISK50m (€310,000) though not much for a debt of more than ISK200m.

During 2007 and 2008, some of the big Icelandic borrowers were forced to accept a personal guarantee since the banks found it increasingly difficult to justify little or no collateral in their accounts. Magnus Thorsteinsson, who together with Bjorgolfur Thor Bjorgolfsson and his father got rich in Russia during the 1990s and bought the newly privatised Landsbanki in 2002, was sued by the Landsbanki WUB in 2010 to enforce a personal guarantee.

During the trial, Thorsteinsson claimed that yes, he had accepted a personal guarantee but only because the Landsbanki managers had promised it would never been enforced. The WUB begged to differ, Thorsteinsson couldn’t pay and went bankrupt in Iceland. He has now returned to St Petersburg where he got rich in the 1990s.

In trials related to his Oscatello pledge, Vincent Tchenguiz – a major client of Kaupthing though dwarfed by his brother Robert – has claimed that Kaupthing never intended to liquidate this collateral. Quinn has spoken of a similar treatment by Anglo: he put up collaterals that the bank had given him verbal assurance would never be liquidated.

A source familiar with large bankruptcy cases says it is quite common that people in these large cases make claim of this type. From a source familiar with Kaupthing it seems though to be the case that, as is so often seen in the Icelandic bank deals, Kaupthing had given its favoured clients reasons to believe that collaterals would not be liquidated.

A prerequisite of splitting apart assets and debt is a willingness on part of the lender to accept weak or no collaterals, to lend into a cluster of companies and to turn a blind eye as to how the loans are used.

Ordinary mortals can’t get loans like these. By these lending practices, the Icelandic financial institutions (and Anglo Irish?) created a two-tier system: on one hand the normal loans with careful scrutiny of lenders; on the other, the abnormal loans for the chosen few who could split apart debt and assets. In the case of the really big lenders, with a vast system of off shore companies, it’s a kid’s play to get the assets well beyond the reach of any WUB – just as Anglo is experiencing in Cyprus, which interestingly has traditional ties to wealthy Russians.

There are many examples of companies amassing enormous debt, then going bankrupt with return to creditors is 1-5%. This is happening with many Icelandic companies. Where did the assets go? It takes a lot of work to trawl through transactions to find the invoices to companies, which have been paid high sums of money for consultancy though there is no employee to carry out the consultancy. Or to find sales contract for worthless assets.

And it doesn’t only take a lot of work: it also takes expertise to recognise the signs. An accidental hiker who sees a trail in the snow, can’t necessarily distinguish between the trail of a rabbit and a hare. The experienced hunter can.

Once money has been channelled out of sight and reach of WUBs and authorities such as tax authorities it isn’t trivial to get the money back into the country of origin, let’s say Ireland or Iceland. One way is through back-to-back loans. A man called Midas has borrowed – or rather been lent money – beyond all rhyme and reason. He has used a part of these loans to buy assets, pay dividend and with time these assets ended up in Panama.

In the end, Midas has to declare himself bankrupt but luckily for Midas his creditors don’t know about the assets in Panama. Midas doesn’t want to pay more of his debt than strictly necessary and he has lawyers working for him to keep the creditors away. How can Midas pay his lawyers when he has no money?

Midas is lucky. His friend Croesus has a company in Cyprus. Midas sends £1m to Croesus’ company. In London, Croesus “lends” £1m to Midas who can then pay his legal team there. To his creditors Midas points at how lucky he is to have such a good friend as Croesus, willing to lend him money. There isn’t much the creditors can do against this sign of pure friendship.

Midas is of the new breed of rich men. Unlike Mark Twain, Midas doesn’t see it as a matter of honour to repay his debt. On the contrary, he sees it as a matter of pride that he was clever enough to channel money off shore before things turned nasty. And clever enough to have such understanding lenders. The question is if the creditors to the financial institutions run by these understanding lenders are equally understanding of the fact that managers have not only lent beyond rhyme and reason but also lent in such a way that the creditors get much less than if the managers had been really tough on collaterals. Isn’t that called a breach of fiduciary duty?

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The Landsbanki Winding-Up Board writ against managers and board members of Landsbanki contains further insight into ownership and the bank’s status just before its demise. Here are some excerpts from the writ:

* The assets of father and son, Bjorgolfur Gudmundsson and his son Bjorgolfur Thor, were convoluted and not clearly separated. They had, according to the writ, joint ownership of Grettir, Eimskip and Icelandic Group. As a consequence of Landsbanki’s collapse both father and son became insolvent. Gudmundsson later went bankrupt but his son managed to renegotiate with his creditors.

* This connected ownership led the Icelandic FME to look at the bank’s risk assessment in April 2005. Things moved slowly, FME was even softer than the FSA in the UK, but in February 2008 FME concluded that Bjorgolfsson’s exposure to the bank was not 16.1% as the bank itself claimed but 42.1%, far above the legal limit of 20%. – Interestingly, the bank’s own rules were clear but they were not followed when it came to risk assessment of the bank’s major shareholders.

* According to the WUB, by September 30 2008, father and son did not only control the 41.85% they owned in the bank but had in reality control over 73.38% through shares owned by Landsbanki and Straumur, the investment bank where father and son were also the largest shareholders and where Bjorgolfsson was the chairman.

* The writ claims that Landsbanki was insolvent by October 3 2008, “if not earlier” (an interesting point and whole saga in itself) thus making it illegal for the managers to dispose of money to three entities on October 6.

* The WUB is suing CEOs Halldor Kristjansson and Sigurjon Arnason, Jon Thorsteinn Oddleifsson head of treasury and board members Andri Sveinsson, Kjartan Gunnarsson, Svafa Gronfeldt and Thorgeir Baldursson, in addition to 25 insurers.

* These seven are claimed to have caused damages of total ISK35bn (€219m) to the bank by allowing or not hindering three payments on October 6 when the WUB claims the bank was already insolvent. In addition, ISK11bn is sought from the insurers.

* And who were these three entities that the Landsbanki managers were so hell-bent on paying out large sums of money when it seemed clear that the bank was destined only for a moratorium? These three were the above-mentioned Straumur, a Landsbanki’s money-market fund Landsvaki and MP Bank.

* Half an hour before the Prime Minister Geir Haarde addressed the nation in the afternoon of Oct 6 2008, Straumur asked to draw on a loan line of ISK7.2bn (€44.7m). This loan line had been negotiated in January 2007, as part of a deal where Straumur took on to finance Landsbanki’s off shore companies that apparently were set up for employees’ option though never used. – These offshore companies are an interesting story: controlled by the bank, increasing the two major shareholders’ control. –  According to the loan agreement Straumur could only draw on the loan line on the same day if a request was made before 13:30. Even though the request came much later in the day, Landsbanki paid out the money. The payment was made after the time of the day banks were allowed to make large payments.

* Landsbanki bought bonds, hugely above market price in the preceding days and weeks – on a day where there was literally no market. For some reason, the managers felt a pressing need for these purchases, in total ISK20bn.

* MP Bank demanded to draw on a loan, related to previously negotiated loans, just over ISK7bn (€44m). Landsbanki legal adviser denied the request but an hour later had a change of mind and the loan was paid out at the same time as the Straumur loan.

* Everyone who runs a company knows that an insolvent company is prohibited by law to pay out money. For some reason, the Landsbanki managers thought it vital to pay out money to Straumur, Landsvaki (even more irregular since it was paying way above market price) and MP Bank. There are no doubt still untold stories from Landsbanki’s last hour.

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Tina C is quite a character, created by the English comedian Christopher Green. But Green and Tina are ambitious, they want to understand the financial crisis so Tina, the American country and western singer, set out to talk to people, for a programme on BBC radio 4. She had heard about the crisis in Iceland and asked me to join her in a hot tub to explain it all to her. And that’s what I did, in a few words.

Here is the programme’s website – and here is the programme on Iceland (for the next 7 days). The programmes are short, Tina has a limited capacity for the depression, especially a global one and it’s all short and relatively simple, with some Tina music.

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The Landsbanki Winding-Up Board is suing the top management of the bankrupt bank, board-members and insurers for damages caused by not stopping the bank’s operations on October 3 2008 when, according the the WUP, the bank was de facto bankrupt. In total, the WUB claims the damages amount to ISK45bn (€282m).

Those who are sued are CEOs Sigurjon Arnason and Halldor K Larusson, board-members Andri Sveinsson, Kjartan Gunnarsson, Svafa Gronfeldt and Thorgeir Baldursson, in total for £89m, in ISK, euros and dollars. In addition, 25 companies that insured the bank’s management are being sued by the WUP to pay together with these indivivuals, in total £91m. In addition, Jon Thorsteinn Oddleifsson, who was head of treasury, is sued for ISK11bn (€69m). Bjorgolfur Gudmundsson, the bank’s chairman, who, together with his son Bjorgolfur Thor, was the bank’s biggest shareholder, is not being sued. He is bankrupt and consequently unable to pay any damages.

The claims are based on money going out of the bank on its last day of operation October 6 2008, in total ISK35bn (now €219m). This money went onto the accounts of MP Bank, Straumur and Landsvaki, one of Landsbanki’s own money market funds. The dates are important because this means that according to the WUB the bank was already bankrupt when the British authorities closed down the bank.

The claims have beein presented to those who are being sued but have not yet been made public. It’s likely that the claims contain quite a bit of interesting information on the bank’s ownership. Father and son owned 41.5% in Landsbanki at the time it collapsed but the feeling is that they did in effect control a much larger part of the bank.

According to the SIC Report at least 12.5% of the bank’s shares were held in Landsbanki’s own offshore companies, controlled by the bank. The companies was apparently to hold employee option but were never used for that purpose. Other entities owned by the bank might have owned shares in the bank, in addition to shares owned by Straumur Investment bank, where father and son were the major shareholders and the son chairman of the board.

A group of small investors in Landsbanki, who are preparing to file a private suit against Bjorgolfur Thor, might find some interesting ammunition in the WUB claims.

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Tim Ward QC in London has been selected to act on behalf of Iceland in the pending Icesave case at the EFTA Court. He will work with an Icelandic team, under the auspice of the Ministry of Foreign Affairs.

Ward has a tough case ahead of him, also in explaining to his Icelandic colleagues, and later to the nation, the course and nature of this case. Objectively seen, ESA has a strong case and Iceland’s possibilities of winning the case seem limited. Remains to be seen.

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