It’s big news in Iceland. A bunch of bankers have been sentenced to terms of between three and five and half years for their part in a banking scam, part of the financial lunacy that preceded the 2008 crash when the three main banks went belly up over a matter of a few weeks.
Hreiðar Már Sigurðsson, Kaupthing’s former chief executive, was handed a five and a half year term, while former board chairman Sigurður Einarsson gets five years. One of the bank’s main owners, Ólafur Ólafsson, has been given three years and the former chief executive of the Luxembourg branch of Kaupthing, Magnús Guðmundsson, is sentenced to three and a half years. That’s seventeen years between the four of them, the harshest punishments ever handed out in Iceland in a fraud case. It’s understandable, as the scope of the and the sheer volume of dosh involved in the case has no parallel in Iceland.
The scam they ran involved a member of the Qatari ruling Al-Thani family, under which Sheikh Mohammed Bin Khalifa Hamad Al-Thani bought a 5% stake in the bank, with money lent by the bank itself and routed through the British Virgin Islands, Cyprus, passing through several companies’ books before going back to Kaupthing in payment for the shareholding. The whole thing was designed to lift confidence in and boost the share price of the bank with the illusion that a heavyweight figure had put a substantial investment into Kaupthing, which collapsed under the weight of its debts only a few weeks later.
It has taken a while, more than two years of careful investigation, to get this far. The office of the special prosecutor, set up by the last government that came to power in the wake of the crash and cut back by the present government when it took over earlier this year, has been working doggedly on this stuff for years. Many Icelanders had wondered what the hell was going on as not a great deal had happened, but now something finally has.
The response on social media, which is everywhere in Iceland’s supremely wired society, has been glee, tempered with foreboding – although that may well simply reflect the nature of my own social media buddies. There have been plenty of people who fervently hope that the four suits as part of their fall from grace get to spend the entire terms behind bars alongside the roughest of Iceland’s prison population. The delight is partly due to the arrogance of these people when the going was good; the helicopters, villas, yachts, the second and third homes in London and New York, the opulent cars and all the rest of the conspicuous consumption that these men took care to flaunt as part of their rise to wealth and power. Not everyone was taken in during the boom years and there were many who privately shook their heads and wondered how long the shopping spree could continue, although it wasn’t a great idea to say these things out loud.
The foreboding is because the sentences were handed down by a lower court. It’s inconceivable that there won’t be appeals – one of the four had already announced he would appeal within a few hours. Everyone firmly expects that the sentences will be softened, shortened or suspended – even quashed on some technicality. After all, these people are Iceland’s financial elite and are wealthy enough to have the top lawyers at their beck and call. So watch this space. It’ll be interesting to see if Iceland does manage to breathe some truth into that colossal myth that has been doing the rounds on the internet that ‘Iceland jailed the bankers.’ On the other hand, the supreme court could possibly even choose to extend the sentences to the six- and four- year terms that the prosecutor in the case had demanded for these four men. It’s an interesting thought, but it’s unlikely to happen. As has been gloomily pointed, the old boys’ club of Iceland’s ‘elite’ in business, government and the judiciary tends to look after its own.
But on a cheery note, Ólafur Hauksson, the special prosecutor, has been quoted as saying that a bigger case against Kaupthing is in the works and this will come to court in January. So there may be more fireworks to come.