Catco Vín runs an alcoholic drinks plant in Borgarnes and used to be owned by Ölgerðin Egill Skallagrímsson. Among the drinks it produces is the now world-recognised Reyka vodka brand.

The sale price of the company is not public knowledge. Magnús Arnar Arngrímsson, an economist and the company’s new CEO told DV that the plan is to increase exports of spirits made with Icelandic water; especially Martin Miller gin which is quickly gaining a foothold in the British market.

DV has received tip-offs that Lárus Welding, the former director of Glitnir bank who is under criminal investigation following the bank’s collapse, has been involved in the sale of Catco Vín. Magnús confirmed that Lárus has acted as an adviser on behalf of Malcolm Walker; but said that he did not put any money into the deal himself. Magnús and Lárus are good friends who began work at Glitnir Bank around the same time. Magnús ended up as head of investment banking at Glitnir and also worked at its successor, Íslandsbanki after the crash.

Ólafur Þór Hauksson

Iceland’s Special Prosecutor into the banking crash has formally charged Lárus Welding, the former CEO of now-bankrupt Glitnir Bank. Charges were also brought against another banker, Guðmundur Hjaltason.

Lárus Welding and Guðmundur Hjaltason were presented with the charge sheet from the Special Prosecutor just before the weekend, RÚV reported last night. The charges apparently relate to the investigation into the Svartháfur holding company – and not to Vafningur ehf; although Vísir.is had both versions of the story on its website at the same time.

More charges are considered likely against other people and the two charges so far are because Glitnir loaned ISK 10 billion to Svartháfur early in 2008 just a day after changes of ownership at Svartháfur left Werner Ívar Rasmusson, the father or Karl and Steingrímur Wernersson at Milestone, as one of the key owners.

Meanwhile in the other case, Vafningur was loaned large sums of money in the immediate lead-up to the banking crisis; including ISK 30 billion (EUR 187.5 million at today’s rate, but worth more at the time) from the Sjóvá insurance company and from Glitnir in February 2008. The loans were taken to refinance a large foreign loan which holdings companies owned by Milestone and Einar and Benedikt Sveinsson had taken out with the American bank Morgan Stanley.

Sjóvá was owned by Milestone at the time and Special Prosecutor Ólafur Þór Hauksson and his team conducted an extensive search at the offices of Sjóvá, Milestone and others in July 2009. The charges now being brought against Lárus and the other man are built on evidence collected at that time.

Lárus Welding has twice been interrogated by the Special Prosecutor’s team; first last November and secondly at the beginning of this month, when he was held in custody. Interestingly the case he was being questioned for this month is apparently not connected to the charges brought against him this week.

Editor’s note: If this article seems confusing, that is because the story itself is confusing. The web of overlapping business ownership in the lead-up to the crash seems to be one of the main reasons so many financial crimes could take place unchallenged. This comes from an EFTA Surveillance Authority report: “Sjóvá is one of Iceland’s leading insurance companies. The company was taken over by Glitnir Bank (Glitnir) in 2003 and its operations were merged with those of the bank. In 2005, the financial group Moderna/Milestone Finance bought 66.6% of Sjóvá’s shares from Glitnir and acquired full ownership as from 2006. Sjóvá’s operations were then separated from those of Glitnir.

The interrogations come in the wake of the arrest of former Glitnir CEO Lárus Welding and two of his former colleagues earlier this month.

Special prosecutor Ólafur Þór Hauksson and his team have been investigating breaches of the law in the run up to the Icelandic banking crash for three years and many of the cases under investigation are directly or indirectly related to the three major fallen banks, Glitnir, Landsbanki and Kaupþing.

Ólafur told RÚV’s Kastljós current affairs programme that several cases relate to alleged money laundering, when funds were transferred between accounts between undefined individuals or companies.

He said that although some of the money laundering cases potentially relate directly to the banks, his office’s use of phone tapping has stopped since the practice became public knowledge and the subject of national discussion. Evidence gathered that way simply dried up once people guessed their phones were tapped. Following the News of the World phone tapping revelations in the UK, Ólafur confirmed that phone taps were not used against people not directly under investigation.

Ólafur Þór still expects his 90-strong team of investigators will be able to finish their investigations in 2014; but warned that 2012 will be extremely busy.

Ólafur Þór Hauksson

Lárus Welding, the former CEO of now-defunct Icelandic bank Glitnir, is one of three people arrested and remand in custody yesterday as part of the Special Prosecutor’s investigation into Glitnir’s working methods before the 2008 banking crash.

RÚV quotes what it calls ‘reliable sources’ as saying that a court has already approved the Prosecutor’s request for custody while the investigation continues and that Lárus has therefore been put behind bars for a period not shorter than seven days.

At least three were arrested yesterday in connection to the investigation into the trade in Glitnir and FL Group shares before the collapse. Embezzlement is among the suspected crimes committed. Between ten and twenty people were also interrogated yesterday as part of the Special Prosecutor’s surprise actions. Special Prosecutor Ólafur Þór Hauksson told media the investigation is very extensive.

“We have opened several new cases this morning and started interviewing people today. The actions began at around 07.00 this morning (Wednesday) and are ongoing,” Ólafur said.

The actions in the Glitnir investigation yesterday are connected to a total of ten separate cases — nine of which began yesterday. The investigation is broadly about Glitnir’s systematic purchase of its own shares and its dealings with FL Group shares. Loans provided to several different parties in 2007 and 2008 are under investigation — loans amounting to ISK 37 billion (EUR 229.2 million at today’s rate — but more at the time).

Investigators suspect many large cases of embezzlement and violations of laws governing share trading, financial companies, accounting and bookkeeping.

The Special Prosecutor took on the investigation on the recommendation of both the FME national financial regulator and the Glitnir Bank resolution committee. It is thought that the interrogations which began yesterday will continue for several days.

60 investigators took part directly in yesterday’s operation.

The debts were related to a collection of loans which Glitnir collateralised through the Luxembourg central bank before the 2008 banking crisis swept Reykjavík.

When the Icelandic banking system collapsed, the Central Bank of Luxembourg insisted that Glitnir’s Luxembourg subsidiary had to keep its end of the bargain. To avoid the central bank taking the loans over itself (which were granted by Glitnir Luxembourg to various large Icelandic companies) a contract was made that allowed Glitnir five years to pay its ISK 173 billion debt with the central bank (over one billion euros).

The deal stopped the Central Bank of Luxembourg taking over the loans and selling them on to potentially-aggressive investors. The purchasers of the loans could have made life very difficult for the Icelandic companies in their debt.

“The holders of the loans would likely have called in the loans to Icelandic companies that were in violation of loan agreements after the collapse,” said Kristján Óskarsson, CEO of Glitnir in Iceland. “It is difficult to foresee the consequences if this had happened; but since we got this agreement, we were able to work with these companies and help them through their difficulties in most cases,” Kristján told RÚV.

Now, three years after the agreement was made, all the ISK 173 billion of debt has been paid back in full. As well as this, Glitnir spokesmen say that other creditors will likely see ISK 213 billion in returns while they would not have got a single króna if the Luxembourg central bank deal had not been made.

The Enterprise Investment Fund of Iceland is owned by 16 independent pension funds.

N1 is Iceland’s biggest oil company, with service stations around the country. N1 has been in the news recently due to its financial difficulties.

The Enterprise Investment Fund intends to create a new company with Islandsbanki and several other N1 shareholders. The new company would then hold a majority stake in the oil firm and could guide its future course.

A statement from the Enterprise Investment Fund did not mention how much the stake in N1 will cost; the statement says that will depend on N1′s operational profit/loss for 2011.

N1 lost around ISK 12 billion (EUR 74.9 million) last year, according to the company’s annual report.

The French company plans to take over food processing business Alfesca, which currently counts the Icelander Olafur Olafsson among its biggest shareholders, DV reports.

Olafsson’s company, Kjalar Invest B.V. owns 40 percent of Alfesca. Alfesca is heavily endebted to Glitnir bank.

Despite its debt burden Alfesca is doing well, and has been doing all through the difficult last three years. According to company accounts for 2010, Alfesca had ISK 62 billion more in assets than in debt and made a profit of ISK 5.7 billion, or EUR 35 million in the accounting year July 2009-July 2010.

Lur Berri has a 50 percent stake in the company and now wants the rest as well — hoping to become sole owner. Olafsson told Vidskiptabladid that financing for the deal has been delayed because of current market turbulence.

“This is all being done co-operatively. It suits us to leave the company and settle with Glitnir and Lur Berri wants to expand. In that regard the best interests of both parties are the same,” Olafsson said. He would not say the price Kjalar hopes to get for its stake.

Iceland’s FME financial regulator and the special prosecutor into the banking crash are both investigating the old banks and sources claim that plenty of evidence is coming to light on how Kaupthing and Glitnir worked together.

The banks apparently bought their own shares from the market in small batches until they reached permitted limits. Then, RUV reports, they sold those shares to each other in large batches. For example, on 6th September 2007 Kaupthing bought 1.5 billion kronur of Glitnir shares from Glitnir Bank itself. In the same minute, Glitnir bought Kaupthing shares from Kaupthing for the same amount.

Both removed their own shares from their books and were therefore free to start the game all over. In this way the banks fooled the markets and held up their share prices and investigators believe the practice was carried out at the request of the banks’ top people.

The first of the cases will take place in Reykjavik and is the resolution committee of Glitnir Bank which is still pursuing Jon Asgeir, along with his close associates Palmi Haraldsson, Gudny Sigurdardottir, Larus Welding, Magnus Arnar Arngrimsson and Rosanart Mar Torfason.

Five minutes later in the next courtroom Landsvaka hf. will have its case heard against Jon Asgeir, Palmi Haraldsson, Magnus Armann and Thorsteinn M. Jonsson.

The third case Will take place at the Reykjanes District Court and is Jon Asgeir Johannesson’s case agains RUV journalist Svavar Halldorsson. It is exactly a week since Palmi Haraldsson lost his case against the same journalist — although the decision is being appealed.

The committee hopes to pay out a total of ISK 3,600 billion (EUR 22.2 billion), according to RUV.

Over 4,000 disputes have been received by the resolution committee over stated claims and 183 cases went to court in Iceland. Now with the cases settled, committee chairman Steinunn Gudbjartsdottir says that the issue of who is and who is not classified as a priority claimant has been cleared, which means money can start being paid out.

She told RUV that the expected court ruling next week over so-called wholesale loans will impact the bankruptcy proceedings at Glitnir, and also at Landsbanki.