Iceland Special Prosecutor brings criminal charges against former Glitnir Bank CEO

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 Ví 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.

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