Iceland court forces Kaupthing debt prince to pay back billions

Ingvar Vilhjalmsson, the former director of the market trade division at Iceland’s (now bankrupt) Kaupthing Bank, now needs to repay the bank’s estate around ISK 2.6 billion (EUR 16.36 million) in loans which had effectively been written off.

Vilhjalmsson took the massive loans in the years running up to Kaupthing’s demise in order to buy shares in the bank. The Reykjavik District Court yesterday ruled that he must pay the money back.

The resolution committee of Kaupthing’s bankrupt estate started the case last December, calling on the court to reverse a decision made by the bank’s board just before it went bust to transfer ownership of seven loans granted to Vilhjalmsson. The resolution committee called on the court to cancel the bank’s decision to allow his personal debts to transfer to his private limited company.

The bankrupt bank also asked the court to make Vilhjalmsson pay some ISK 3.4 billion in interest.

DV reports that Ingvar Vilhjalmsson transferred his ISK 3 billion share in Kaupthing over to his limited company just days before Kaupthing collapsed in autumn 2008. He also transferred ownership of two luxury houses to his wife and his mother at around the same time.

Unsurprisingly the limited company formerly known as Ingvar Vilhjalmsson efh. and then renamed to K08, soon went bankrupt under the weight of its debts. Today K08 owes over ISK six billion.

The company’s debts are due to so-called bullet loans taken by Vilhjalmsson to buy shares in Kaupthing. According to the company’s 2009 report it held ISK 3 billion in Kaupthing shares — now totally worthless. With the exception of bank president Hreidar Mar Sigurdsson and chairman Sigurdur Einarsson, no Kaupthing employee borrowed more from the bank to buy its own shares.

Yesterday the Reykjavik District Court granted Kaupthing administrators’ wish that the debts be returned from K08 back to Vilhjalmsson himself. He is now legally responsible to pay the bank ISK 2,642,617,028 kronur (EUR 16,624,415 and 12 cents).

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