As Icelanders celebrate the ten-year anniversary of the 2008 crash the last criminal case against the former bankers and pre-2008 corporate Vikings, is being heard in the Reykjavík District Court. Hreiðar Már Sigurðsson, the former CEO of Kaupþing, the largest of the Icelandic banks, and Guðný Arna Sveinsdóttir, the former Chief Financial Officer of the bank are charged in a case which revolves around a loan the bank gave to Hreiðar.
12-15 months in prison for former bank CEO
Hreiðar is charged with breaches of fiduciary duty and insider trading, while Guðný Arna is charged with being accessory to Hreiðar's crime of breaching fiduciary duty. This is the fifth criminal case against Hreiðar Már who has already been sentenced to seven years in prison for various financial crimes committed in the lead-up to the 2008 financial crash.
The prosecution has asked that Hreiðar be sentenced to 12-15 months in prison. Guðný Arna has not been charged previously in a criminal case connected to the crash. The prosecution has demanded she be sentenced to 6-9 months.
A 7 million dollar loan
In August 2008 Hreiðar Már received a 572 million ISK loan, equivalent to 7 million USD at the exchange rate at the time, from the bank. The prosecution alleges the loan was granted to a holding company owned by Hreiðar Már without going through the proper channels within the bank and without adequate collateral. Hreiðar is charged with having exercised options for shares in Kaupþing on the same day as the loan was granted, buying shares in the bank for 246 million ISK, which he then sold immediately to the holding company at the prevailing market price. The sale price was 572 million ISK. Hreiðar is charged with having pocketed the difference.
Hreiðar is charged with insider trading, because as CEO he was fully aware of the fact that the real value of the shares was only a fraction of the prevailing market price, since this price was artificially high, due to the systematic market manipulation of the share price of Kaupþing, orchestrated by Hreiðar Már and other top managers at the bank. The market manipulation has already been proven in court.
Unjust charges, miscarriage of justice
The defense has argued that the charges are fundamentally unjust. Hreiðar's defense lawyer has argued that his defendant has already been sentenced to more than the maximum six years for financial crimes, and that it would be a gross miscarriage of justice to add even further to his sentence. According to Icelandic law the maximum for financial crimes is six years, except in cases where the criminal activity is systematic or where the defendant made a living off financial crime.
The defense argued that in 2005 the board of the bank had agreed that future loans to employees to buy shares in the bank would be automatically approved and did not need to go through the same channels and scrutiny as other loans, a defense the prosecution dismissed as outlandish and contrary to fact. The defense also argued that Hreiðar Már did not personally benefit from the loan, since the difference Hreiðar Már is accused of having pocketed went to pay capital gains taxes. The prosecution countered this argument by arguing it made no difference how the profits were used.
Jailing, rather than bailing out the bankers
On October 10 2018 the Icelandic state was forced to take over Kaupþing bank after its collapse. Rather than bail out the bank, Kaupþing was allowed to go into bankruptcy. The other to major Icelandic banks, Glitnir and Landsbankinn received the same treatment. The decision to allow the banks to go into bankruptcy was one of necessity, rather than choice, as the total assets of the banks were 8-14 times the GDP of Iceland. The banks were simply too big to bail out, rather than too big to fail.
In the past 10 years the top managers of the banks and some of the investors and financiers, the so-called Corporate Vikings, have been found guilty of a variety of financial crimes and misdeeds. According to analysis by the local business weekly Markaðurinn the tally now stands at 36 top bankers and financiers having been sentenced to a combined 96 years in prison. In addition to the case of Hreiðar Már and Guðný Arna several cases are still awaiting appeal.
As Icelanders celebrate the ten-year anniversary of the 2008 crash the last criminal case against the former bankers and pre-2008 corporate Vikings, is being heard in the Reykjavík District Court. Hreiðar Már Sigurðsson, the former CEO of Kaupþing, the largest of the Icelandic banks, and Guðný Arna Sveinsdóttir, the former Chief Financial Officer of the bank are charged in a case which revolves around a loan the bank gave to Hreiðar.
12-15 months in prison for former bank CEO
Hreiðar is charged with breaches of fiduciary duty and insider trading, while Guðný Arna is charged with being accessory to Hreiðar's crime of breaching fiduciary duty. This is the fifth criminal case against Hreiðar Már who has already been sentenced to seven years in prison for various financial crimes committed in the lead-up to the 2008 financial crash.
The prosecution has asked that Hreiðar be sentenced to 12-15 months in prison. Guðný Arna has not been charged previously in a criminal case connected to the crash. The prosecution has demanded she be sentenced to 6-9 months.
A 7 million dollar loan
In August 2008 Hreiðar Már received a 572 million ISK loan, equivalent to 7 million USD at the exchange rate at the time, from the bank. The prosecution alleges the loan was granted to a holding company owned by Hreiðar Már without going through the proper channels within the bank and without adequate collateral. Hreiðar is charged with having exercised options for shares in Kaupþing on the same day as the loan was granted, buying shares in the bank for 246 million ISK, which he then sold immediately to the holding company at the prevailing market price. The sale price was 572 million ISK. Hreiðar is charged with having pocketed the difference.
Hreiðar is charged with insider trading, because as CEO he was fully aware of the fact that the real value of the shares was only a fraction of the prevailing market price, since this price was artificially high, due to the systematic market manipulation of the share price of Kaupþing, orchestrated by Hreiðar Már and other top managers at the bank. The market manipulation has already been proven in court.
Unjust charges, miscarriage of justice
The defense has argued that the charges are fundamentally unjust. Hreiðar's defense lawyer has argued that his defendant has already been sentenced to more than the maximum six years for financial crimes, and that it would be a gross miscarriage of justice to add even further to his sentence. According to Icelandic law the maximum for financial crimes is six years, except in cases where the criminal activity is systematic or where the defendant made a living off financial crime.
The defense argued that in 2005 the board of the bank had agreed that future loans to employees to buy shares in the bank would be automatically approved and did not need to go through the same channels and scrutiny as other loans, a defense the prosecution dismissed as outlandish and contrary to fact. The defense also argued that Hreiðar Már did not personally benefit from the loan, since the difference Hreiðar Már is accused of having pocketed went to pay capital gains taxes. The prosecution countered this argument by arguing it made no difference how the profits were used.
Jailing, rather than bailing out the bankers
On October 10 2018 the Icelandic state was forced to take over Kaupþing bank after its collapse. Rather than bail out the bank, Kaupþing was allowed to go into bankruptcy. The other to major Icelandic banks, Glitnir and Landsbankinn received the same treatment. The decision to allow the banks to go into bankruptcy was one of necessity, rather than choice, as the total assets of the banks were 8-14 times the GDP of Iceland. The banks were simply too big to bail out, rather than too big to fail.
In the past 10 years the top managers of the banks and some of the investors and financiers, the so-called Corporate Vikings, have been found guilty of a variety of financial crimes and misdeeds. According to analysis by the local business weekly Markaðurinn the tally now stands at 36 top bankers and financiers having been sentenced to a combined 96 years in prison. In addition to the case of Hreiðar Már and Guðný Arna several cases are still awaiting appeal.
