Mass grave of skeletons spewing forth from Kaupthing’s closet

img_4756_871129Kaupthing Bank loaned its staff a total of ISK 47.3 billion (in the region of USD 640 million at the time) solely to buy its own shares in 2006 alone. This comes from the tabloid DV newspaper which claims to have a complete copy of the Kaupthing 2006 loan book in its possession. The newspaper reports, among other things, that Kristjan Arason, then head of commercial banking was granted ISK 893 million in so called ‘bullet loans’. Arason is the husband of former Independence Party Minister of Education Thorgerdur Kartin Gunnarsdottir.

Helgi Sigurdsson, the bank’s chief lawyer also took a loan to buy shares to the value of around ISK 450 million at the same time as a private brief was issued assuring the bank’s owners that everyone’s personal responsibility for share-buying loans would be written off if it became necessary. In an interview with the newspaper, he said that he wasn’t behind the brief about the loan write offs, although admittedly he was responsible for the brief in his role as head lawyer.

In similar news on at the end of February, it was revealed that the former Kaupthing Director, Hreidar Mar Sigurdsson established a company in his own name and took a loan to buy shares in the bank. The loan added up to around ISK 3.5 billion and is a ‘bullet loan’ with a payment date in 2011.

Another intriguing deal has become apparent and caused yet more exasperation: It seems the former head of the board at Kaupthing, Sigurdur Einarsson found a foolproof way to build himself an immense summerhouse without any personal risk.

He established an entire company to be responsible for the building of the luxury second home. Therefore, all responsibility for the project’s success or failure would fall on the company and not him. This was clever as the project in 2007 when there was already a strong possibility that property prices would decrease, making the final house worth less than expected.

So here’s the fun part: Einarsson made sure he was personally the company’s longest-standing and largest investor – and therefore the priority claimant if it went under. He invested ISK 218 million in the project before taking a 200 million loan from VIS, a company owned by Exista, which was Kaupthing’s largest stakeholder. SPRON was also tapped for 76 million Japanese yen. All loans were secured with the house itself as collateral.

Now that the project has actually fallen through with the house half completed, it will likely go to auction. Sigurdsson and representatives of VIS and SPRON will all be present and the probable winner will be Sigurdsson himself, because any bid he enters up to the value of ISK 218 million will go directly back to him to cover the money the failed company owes him as priority claimant on its bankrupt estate.

THAT, dear friends, is how to obtain a half completed luxury 840 square metre summerhouse ‘compliments of the house’.

(Photo courtesy of Olafur  Kr. Olafsson)

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