Icelandic bank executives sentenced to jail

justice.thumbnailFour former big names of Icelandic failed bank Kaupthing have been sentenced to prison by a court in Reykjavík yesterday for their involvement in market abuses related to a stake taken in the bank by Qatari sheikh Mohammed Bin Khalifa Bin Hamad al-Thani just weeks before its collapse in 2008.

The four men sentenced are Hreiðar Már Sigurðsson, Kaupthing’s former CEO; Sigurður Einarsson, former chairman; Magnús Guðmundsson, former CEO of the bank’s branch in Luxembourg; Ólafur Ólafsson, Kaupthing’s second largest share-holder  at the time.

The men received sentences ranging from five-and-a-half to three years in prison in what is by far the largest case brought against executives Iceland’s failed banks by the nation’s special prosecutor following the 2008 financial meltdown.

Weeks before the bank collapsed, it announced that the Qatari sheikh had bought over 5% of its shares in a move which was seen as a confidence boost for Kaupthing. However, charges stated that the deal was a complex deceiving scheme, in which a loan from Kaupthing was deposited into shell companies in the British Virgin Islands before the money was sent to a company based in Cyprus called Choice which was owned by one of the defendants and the sheikh. From there, the money was moved to another company, before finally making its way back to Iceland to pay for the shares.

Ólafur Hauksson, special prosecutor for the case, said the loans granted by the bank to pay for the shares served the only purpose of boosting the bank’s shares. None of them were standing in court yesterday, and it is expected that they will appeal.