Iceland Sentences Four Ex-Bank Bosses for Fraud in Massive Banking Scandal
Background
In a landmark verdict, four former bosses of Iceland’s failed bank Kaupthing have been sentenced to prison terms ranging from three to five years for their role in a massive fraud scheme.
The Fraud Scheme
The accused were charged with hiding the fact that a Qatari investor, Sheikh Mohammed Bin Khalifa Bin Hamad al-Thani, purchased a 5.1% stake in Kaupthing using funds lent illegally by the bank itself. This move was touted as a confidence booster for the bank just weeks before it collapsed under the weight of massive debts in 2008.
Consequences
The collapse of Kaupthing and other Icelandic banks brought the country’s economy to its knees, causing widespread devastation. The court found that the fraudulent activities had influenced the bank’s share price and deemed the loans provided for the deal illegal.
Sentences
- Hreidar Mar Sigurdsson, former chief executive, received a five-and-a-half-year sentence.
- Sigurdur Einarsson, former chairman of the board, was handed down a five-year term. These sentences are the heaviest ever imposed in Iceland’s history for financial fraud.
- Olafur Olafsson, one of the majority owners, was sentenced to three years.
- Magnus Gudmundsson, former chief executive of the Luxembourg branch, received a three-and-a-half-year term.
Legal Costs
The four were also ordered to pay their own legal costs, which amount to millions of pounds.
The Deal
According to reports, the charges state that the deal involved first depositing a loan from Kaupthing bank into shell companies in the British Virgin Islands before it was transferred to a Cypriot-based company owned by Olafsson and Sheikh al-Thani. The money was then moved to another firm also owned by al-Thani, and eventually ended up back at Kaupthing to pay for the shares.
Key Players
- Hreidar Mar Sigurdsson: former chief executive of Kaupthing
- Sigurdur Einarsson: former chairman of the board of Kaupthing
- Olafur Olafsson: one of the majority owners of Kaupthing
- Magnus Gudmundsson: former chief executive of the Luxembourg branch of Kaupthing
- Sheikh Mohammed Bin Khalifa Bin Hamad al-Thani: Qatari investor who purchased a 5.1% stake in Kaupthing
The Verdict
The verdict is seen as a major blow to those responsible for Iceland’s financial crisis, which had far-reaching consequences for the country’s economy and people.
Next Steps
- The special prosecutor, Olafur Hauksson, said that the deal had significant implications for the bank’s share price.
- There is still another, larger case against Kaupthing Bank pending, which is expected to come to court in January.