Illugi Gunnarsson, the Minister of Education and Cultural Affairs, has been having a rough few weeks as questions have been raised over several unusual financial and property transactions and his connection to the geothermal energy company Orka Energy. Despite calls for resignation from some commentators, Illugi continues to enjoy the full confidence of the Prime Minister and Minister of Finance, the leaders of the governing coalition.
Stonewalling and unanswered questions
Since the matter first came to light in the media, early spring, Illugi has vehemently denied any wrongdoing. In a recent interview with the local newspaper Fréttablaðið he did, however, admit it was a mistake to refuse to answer questions from media. Illugi has been under intense fire for having stonewalled media, leaving several crucial questions unanswered.
At the heart of the controversy are unusual financial transactions between Illugi and Orka Energy and Haukur Harðarson the principal shareholder and chairman of the board of the company as Fréttablaðið reports, and a personal friend to the minister.
Questions were raised after Illugi went on an official visit to China in March of this year. Representatives of Orka Energy went along on the trip, including Haukur. The Icelandic National Broadcasting Service has reported that Haukur has previously been criticized for having advocated that Icelandic investment companies, he had connections to, should bribe Spanish officials.
Longstanding relationship and personal financial troubles
Illugi worked for Orka energy in 2011 when he took an unpaid leave of absence from parliament while his work for money market fund Sjóður 9 in the lead-up to the financial crash was being investigated by the Special Prosecutor. The fund, which was operated by the failed bank Glitnir, lost significant amounts after having invested heavily in the bonds of the failed banks and related investment companies. The fund received a large bailout from the government.
In 2013 Illugi sold his apartment to an investment company OG Capital, which he himself owned. Then he sold the company to Haukur, who now owned Illugi’s apartment.
The manner in which these transactions were completed was highly unusual, according to the local newspaper Fréttablaðið. Illugi and his family then rented the apartment from Haukur.
Illugi has told reporters that the reason he sold the apartment was that he, and his family, were facing financial troubles after the banking crisis of 2008. However, official documents show his financial troubles began at least in 2007.
Unusual property transaction and unexplained transfers
Explanations from Illugi regarding payments he received from Orka Energy seem confusing to many commentators and he has yet to give any explanation of one large payment of 1.2 million ISK (9,400 USD/8,400 EUR) he received in 2012.
His stonewalling of reporters and steadfast refusal to address any questions until very recently has also been criticized. This silence is made more problematic by the fact that Illugi initially denied that he had any financial connections to Orka Energy.
The local newspaper Stundin, which has covered the case intensely since it first came to light, has recently argued there are further questions regarding Illugi's former financial dealings, and questions of political favoritism. The chairman of the board of a Savings & Loans where Illugi received a large loan was appointed to the board of directors of the Icelandic National Broadcasting Company by Illugi.
Fighting for his political life from a weakened position
Although Illugi has denied any wrongdoing, and appears to enjoy the full support of his fellow cabinet members, some, including Kristján Þór Júlíusson the Minister of Health, have pointed out his position has been weakened significantly. Kristján Þór and Illugi are both members of the conservative Independence Party.
The chairman of the Independence party, Bjarni Benediktsson, the Minister of Finance, has argued there are no indications Illugi did anything wrong by bringing his friend Haukur with him on the visit to China.
The local news site Kjarninn has argued Illugi is effectively fighting for his political life.
A conflict of interest and fundamental questions of ethics
Vilhjálmur Árnason, professor of philosophy at the University of Iceland and one of the authors of the 2009-2010 Special Investigation Commission report on the collapse of the banking system, told the Icelandic National Broadcasting Service that Illugi’s problems boil down to a simple conflict of interest.
“I think that we have lost sight of the crux of the case, which is a conflict of interest. He is faced with financial difficulties like so many others, and finds a solution to these problems, which is completely understandable, in the case of a regular citizen, but this puts him in a position, where he, as a government minister, is facing a clear conflict of interest.”
The question boils down to Illugi being financially dependent upon a businessman whom he owes favours. Vilhjálmur argues that this raises the question “what kind of politics we want?”:
“We must ask ourselves, for example, what if all government ministers were in this kind of a position, where they were somehow financially dependent upon somebody else?”
Illugi Gunnarsson, the Minister of Education and Cultural Affairs, has been having a rough few weeks as questions have been raised over several unusual financial and property transactions and his connection to the geothermal energy company Orka Energy. Despite calls for resignation from some commentators, Illugi continues to enjoy the full confidence of the Prime Minister and Minister of Finance, the leaders of the governing coalition.
Stonewalling and unanswered questions
Since the matter first came to light in the media, early spring, Illugi has vehemently denied any wrongdoing. In a recent interview with the local newspaper Fréttablaðið he did, however, admit it was a mistake to refuse to answer questions from media. Illugi has been under intense fire for having stonewalled media, leaving several crucial questions unanswered.
At the heart of the controversy are unusual financial transactions between Illugi and Orka Energy and Haukur Harðarson the principal shareholder and chairman of the board of the company as Fréttablaðið reports, and a personal friend to the minister.
Questions were raised after Illugi went on an official visit to China in March of this year. Representatives of Orka Energy went along on the trip, including Haukur. The Icelandic National Broadcasting Service has reported that Haukur has previously been criticized for having advocated that Icelandic investment companies, he had connections to, should bribe Spanish officials.
Longstanding relationship and personal financial troubles
Illugi worked for Orka energy in 2011 when he took an unpaid leave of absence from parliament while his work for money market fund Sjóður 9 in the lead-up to the financial crash was being investigated by the Special Prosecutor. The fund, which was operated by the failed bank Glitnir, lost significant amounts after having invested heavily in the bonds of the failed banks and related investment companies. The fund received a large bailout from the government.
In 2013 Illugi sold his apartment to an investment company OG Capital, which he himself owned. Then he sold the company to Haukur, who now owned Illugi’s apartment.
The manner in which these transactions were completed was highly unusual, according to the local newspaper Fréttablaðið. Illugi and his family then rented the apartment from Haukur.
Illugi has told reporters that the reason he sold the apartment was that he, and his family, were facing financial troubles after the banking crisis of 2008. However, official documents show his financial troubles began at least in 2007.
Unusual property transaction and unexplained transfers
Explanations from Illugi regarding payments he received from Orka Energy seem confusing to many commentators and he has yet to give any explanation of one large payment of 1.2 million ISK (9,400 USD/8,400 EUR) he received in 2012.
His stonewalling of reporters and steadfast refusal to address any questions until very recently has also been criticized. This silence is made more problematic by the fact that Illugi initially denied that he had any financial connections to Orka Energy.
The local newspaper Stundin, which has covered the case intensely since it first came to light, has recently argued there are further questions regarding Illugi's former financial dealings, and questions of political favoritism. The chairman of the board of a Savings & Loans where Illugi received a large loan was appointed to the board of directors of the Icelandic National Broadcasting Company by Illugi.
Fighting for his political life from a weakened position
Although Illugi has denied any wrongdoing, and appears to enjoy the full support of his fellow cabinet members, some, including Kristján Þór Júlíusson the Minister of Health, have pointed out his position has been weakened significantly. Kristján Þór and Illugi are both members of the conservative Independence Party.
The chairman of the Independence party, Bjarni Benediktsson, the Minister of Finance, has argued there are no indications Illugi did anything wrong by bringing his friend Haukur with him on the visit to China.
The local news site Kjarninn has argued Illugi is effectively fighting for his political life.
A conflict of interest and fundamental questions of ethics
Vilhjálmur Árnason, professor of philosophy at the University of Iceland and one of the authors of the 2009-2010 Special Investigation Commission report on the collapse of the banking system, told the Icelandic National Broadcasting Service that Illugi’s problems boil down to a simple conflict of interest.
“I think that we have lost sight of the crux of the case, which is a conflict of interest. He is faced with financial difficulties like so many others, and finds a solution to these problems, which is completely understandable, in the case of a regular citizen, but this puts him in a position, where he, as a government minister, is facing a clear conflict of interest.”
The question boils down to Illugi being financially dependent upon a businessman whom he owes favours. Vilhjálmur argues that this raises the question “what kind of politics we want?”:
“We must ask ourselves, for example, what if all government ministers were in this kind of a position, where they were somehow financially dependent upon somebody else?”
